New Delhi [India], 22 July : In a blow to Indian National Congress, Income Tax Appellate Tribunal (ITAT), Delhi Bench, has upheld a tax demand of Rs 199.15 crore for the assessment year 2018-19, rejecting the party's claim for exemption under Section 13A of the Income Tax Act.
The ITAT found that Congress violated two critical conditions under Section 13A, which governs tax exemptions for political parties. The tribunal noted that Congress filed its income tax return on February 2, 2019, missing the mandatory extended deadline of December 31, 2018, as specified under Section 139(4B). Despite Congress's argument that the filing was within the general time limit under Section 139(4), the ITAT emphasised that compliance with the specific deadline is non-negotiable for claiming Section 13A exemption.
The party received cash contributions totalling Rs 14.49 lakh from various donors, with individual donations exceeding the permissible limit of Rs 2,000 under Section 13A provisions. While Congress provided donor names and PAN details--mostly from its own elected MLAs and MPs--the tribunal ruled that the cash payment method itself violated the law.
The bench, comprising Judicial Member Satbeer Singh Godara and Accountant Member M. Balaganesh, stated that Section 13A represents a special exemption that must be applied with strict adherence to all conditions, with any breach rendering the entire exemption invalid.
The tribunal dismissed Congress's attempt to distinguish between "voluntary contributions" and "donations," noting that the party itself made no such differentiation in its records or Election Commission filings.
Additionally, the ITAT rejected the party's plea that only surplus funds after expenses should be taxed, instead ruling that once Section 13A exemption is denied, all voluntary contributions become taxable income.
Beyond the primary tax demand, the tribunal also upheld additional financial penalties including interest charges under Sections 234A, 234B, and 234C totaling over R 35 crore, plus a Rs 10,000 fee under Section 234F for delayed filing.
This brings the total financial liability to approximately Rs 234 crore, representing a substantial burden for the opposition party.
Congress had previously appealed to the CIT (Appeals) but was unsuccessful, with that appeal being dismissed in March 2023.