Congress lost its appeal before the Income Tax Appellate Tribunal over a Rs 199.15 crore tax demand. ITAT denied the exemption due to late filing and violation of donation rules.
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NEW DELHI: The Income Tax Appellate Tribunal (ITAT) has dismissed the Indian National Congress party’s appeal against a tax demand of Rs 199.15 crore for the financial year 2018–19. The Tribunal made it clear that political parties must strictly follow rules to claim tax exemptions, and even small violations can lead to major tax consequences.
The main issue was that the Congress party filed its income tax return on February 2, 2019, which was after the allowed extended deadline of December 31, 2018 for that assessment year.
Because of this, the party’s claim for tax exemption under Section 13A of the Income Tax Act was rejected.
“The assessee’s return filed on 02.02.2019 is not within the ‘due’ date to make it eligible for the impugned exemption,”
-ruled the bench consisting of Judicial Member Satbeer Singh Godara and Accountant Member M Balaganesh.
In its return, Congress had declared nil income after claiming exemption for all of its ₹199.15 crore receipts under Section 13A. However, since the return was filed late, the entire amount was treated as taxable income.
During the scrutiny process that started in September 2019, the Assessing Officer found that Congress had accepted Rs 14.49 lakh in cash donations, with each donation exceeding Rs 2,000. This clearly violated the rule under Section 13A(d), which was added by the Finance Act, 2017, requiring political donations above Rs 2,000 to be received only through proper banking channels like cheques or online transfer.
Congress had received a total of Rs 199.15 crore and spent Rs 197.43 crore, with a small surplus of Rs 1.71 crore. But because of the rule violations, the income tax officer denied the full exemption and taxed the entire amount.
The Commissioner of Income Tax (Appeals) supported this decision in an order passed on March 28, 2023, which led Congress to challenge it in the Appellate Tribunal. However, in 2024, the ITAT had already rejected Congress’ request for interim relief.
In its latest decision, the Tribunal clearly stated that tax exemption rules must be followed strictly and cannot be bent for political parties.
“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.”
Congress had tried to argue that Section 139(4) allows for a delayed return filing within the same assessment year, just like charitable trusts under Section 12A.
However, the Tribunal disagreed, pointing out that the law specifically refers to the “time allowed under that section”, and political parties must meet the original deadline as per Section 139(1).
“The legislature has incorporated the statutory expression therein as ‘within the time allowed under that section’ i.e. section 139(1) as well as u/s 139(4) than section 13A 3rd proviso.”
On the issue of cash donations, the Tribunal noted a clear breach of legal conditions. The assessment report had found multiple cash donations above the Rs 2,000 limit.
“As per section 13A(d) of the Act, donation in excess of Rs. 2,000/- is mandatorily be received through a/c payee cheque/draft or through electronic mode and therefore donation in excess of Rs. 2,000/- received in cash violates provisions of clause (d) of first proviso to section 13A of the Act,”
-the Tribunal’s order stated.
Congress had also requested that at least its expenses should be deducted from the income if full exemption was not allowed. However, the Tribunal rejected that too, referring to a 2016 Delhi High Court ruling in a similar case involving the Congress itself.
“We thus conclude that given the fact that the assessee has been held to have violated section 13A 3rd proviso in not filing its return within the prescribed ‘due’ date, its impugned netting claim also deserves to be declined in very terms…the assessee’s impugned netting claim also deserves to be declined in very terms. Ordered accordingly.”
- The Congress party was represented by Senior Advocate PC Sen, along with Advocates Prasanna and N Bhalla.
- The Income Tax Department was represented by Advocates Zoheb Hossain, Vipul Agrawal, and Sanjeev Menon.
CASE TITLE:
INC ITAT JUDGMENT – 21-07-2025
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