Tax exemptions: Supreme Court notice to govt on Congress appeal

The Supreme Court on Monday issued notice to the Centre on an appeal filed by the Congress party against a Delhi high court ruling that political parties that fail to disclose complete audited accounts will not get the benefit of tax exemptions under Section 13A of the Income-Tax Act.

Section 13A of the Act allows political parties exemptions under heads including “income from house” and “income from other sources” only if three conditions are fulfilled — they keep detailed books of accounts, declare voluntary contributions in excess of '20,000 and get their account books audited.

A Bench of Justices Kurian Joseph and Rohinton Nariman issued notice after hearing senior counsel Mohan Parasaran appearing for Congress party.

He said the high court had ruled that failure to satisfy the conditions will make voluntary contributions taxable and said it is with a view to placing a check on the financial transactions of political parties that the proviso to Section 13A was enacted.

In this context, the object of Section 13A of the Income-Tax Act will be defeated if the requirements of the proviso thereto are held not to be mandatory. The counsel said the matter required examination by the apex court.

In its appeal, the Congress party said it was denied exemption from paying income tax for the assessment year 1994-95 for the assessed income of '25.12 crores, though such an exemption has been allowed upto the Assessment year 2014-15. Though there was substantial compliance of Section 13A of the Income Tax Act, the Congress party was denied exemption on account of procedural formalities that have been complied with subsequently.

It said that the task of consolidating the accounts of all its state units was a Herculean task as such an attempt was being made for the first time.