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ITAT dismisses Cong’s ₹199-cr exemption plea
The bench said the assessee did not meet conditions required for availing tax exemption under the Section 13A as it did not file its return within the prescribed ‘due’ date
The Income Tax Appellate Tribunal (ITAT) has dismissed the Congress party’s appeal against a ₹199.15 crore demand for the assessment year 2018-19 because the party could not file its returns within the prescribed due date, a key condition to enjoy a tax exemption.
A two-member bench of the ITAT on Monday rejected the Congress’ claim for tax exemption under Section 13A of the Income-Tax Act, 1961. According to Section 13A, the income of political parties is exempt from tax, provided they meet certain specific conditions.
The bench said the assessee did not meet conditions required for availing tax exemption under the Section 13A as it did not file its return within the prescribed “due” date.
The Congress filed its return on February 2, 2019, which according to the assessing officer, was way beyond the due date for availing the tax exemption for its income accrued in the financial year 2017-18.
“We thus conclude that the assessee’s return filed on 02.02.2019 is not within the ‘due’ date to make it eligible for the impugned exemption,” the bench said in its order. HT has reviewed a copy of the order.
“There would be hardly any dispute between the parties that the assessee; a political party, is granted exemption under section 13A of the Act subject to certain conditions enumerated therein; and, one of them is the third statutory proviso thereto (inserted by the Finance Act, 2017 w.e.f. 01.04.2018) that a return has to be furnished in accordance with the provisions of sub-section 139(4B) of the Act, ” the ITAT order said.
“There would be again no quarrel that section 139(4B) of the Act envisages the authorized person of such a political party to ‘furnish a return of such income in the prescribed form and verified in the prescribed manner’ and ‘all the provision of this Act, shall, so far as may be, apply as if it were a return required to be furnished under sub-section (1)’. We further deem it appropriate to observe that section 139(1) of the Act in explanation 2 prescribes the “due” date for various categories of persons; all upto 31st October of the concerned assessment year, as the last day only,” it added. According to the order, the Congress missed the deadline and filed its return on February 2, 2019.
A Congress leader requesting anonymity said they will study the order and take further action. “We can go to the higher courts,” the leader said.
The controversy had arisen after the Congress had said it was unable to operate its accounts on February 13 and 14 last year, which was subsequently lifted after it approached the ITAT on February 14. The party had also moved the Delhi high court seeking a stay on the IT notice for recovery of over ₹105 crore outstanding tax for assessment year (AY) 2018-19. The high court, however, dismissed the plea, remarking that the Congress party fell in deep slumber and stood reawakened in January 2023 when a demand notice came to be raised.
Tax experts said even as political parties enjoy tax exemption on their specific incomes under Section 13A, they are also subject to scrutiny. The income-tax exemption is available to only registered political parties subject to certain conditions, as mentioned in Section 13A, they said, requesting anonymity.
The conditions include keeping and maintaining books of accounts and other documents to enable tax officials to trace income of such political parties, they said. An eligible political party seeking tax exemption must also get its books of account audited by a chartered accountant and must also file returns within the due date, they added without going to any individual case.
