I-T tribunal rejects Congress’ appeal seeking income tax exemption on Rs 199 crore donations

The Congress party filed its return on February 2, 2019 declaring "nil" income after claiming section 13A exemption of Rs.199,15,26,560, the report said

The Income Tax Appellate Tribunal (ITAT) dismissed an appeal by the Indian National Congress seeking income tax exemption for the income of ₹199.15 crore during the assessment year 2018-19. The tribunal noted that Congress had filed the returns late, LiveLaw reported.

The party had opposed the Income Tax Department’s notice, which asked it to pay tax on income of over Rs 199 crore, claiming that the amount came from donations and should be exempt from tax. It was found that the ITAT party failed to file its tax returns by the due date.

The IT tribunal upheld the decision of the tax authorities, ruling that the party must pay income tax on the donations received during that financial year.

It rejected the party's claim for exemption on the ground that there was a violation of the conditions in Section 13A of the Income Tax Act. The returns were filed late, it noted.

The “due” date for the exemption was 31st October, 2018.

Calling for a strict interpretation of the exemption clause, the ITAT observed that "the moment there is violation of such a “due” date, section 13A 3rd proviso gets attracted, so as to result in denial of exemption to the political party concerned,” the report said.

It referred to the Delhi High Court's judgment which held that "no deduction can be allowed with respect to the expenditure incurred by the political party for any purpose whatsoever if it fails to comply with the basic requirements of section 13A of the Act."

The Congress party filed its return on February 2, 2019 declaring "nil" income after claiming section 13A exemption of Rs.199,15,26,560, the report said.

The party contended that since the return was filed on February 2, 2019 much before the last date of filing of return on March 31, 2019 under Section 139(4) of the Act, the disallowance made and sustained is not in accordance with law.

However, the IT tribunal rejected the argument, saying that the return filed after the "due date" cannot be accepted.

According to LiveLaw, the bench of Satbir Singh Godara (Judicial Member) and M Balaganesh (Accountant Member) said in the order that Section 13A has to be strictly complied with.

Citing the Supreme Court’s landmark decision in 2018 Commissioner Vs. Dilip Kumar & Co case, it said that they settled the issue that it is not liberal but stricter interpretation only in a taxing statute which has to be employed in an exemption claim.

“That being the case and in light of the fact that even section 139(4B) has stipulated filing of return within the “due” date i.e. required to be furnished u/s 139(1), we are of the considered view that the above former clause in fact restricts any further liberalism herein as clearly incorporating the expression of “due” date; and, therefore, the moment there is violation of such a “due” date, section 13A 3rd proviso gets attracted, so as to result in denial of exemption to the political party concerned,” the order said.

“We thus conclude that the assessee's [Congress party] return filed on 02.02.2019 is not within the “due” date to make it eligible for the impugned exemption,” the tribunal said.