The New Delhi ITAT yesterday denied deduction benefits with respect to expenditure incurred by Indian National Congress (appellant) as it has failed to comply with basic requirements of Section 13A of the Income Tax Act, which provision lays down tax exemption to the political parties on voluntary contributions received by them. The relief was essentially denied owing to failure of the appellant in filing its return before the due date prescribed under Section 139(1).
The Division Bench comprising Satbeer Singh Godara (Judicial Member) and M. Balaganesh (Accountant Member) referred to Section 139(4B) which stipulates filing of income tax return within the due date as per Section 139(1), and observed that the moment there is violation of such due date, 3rd Proviso to Section 13A gets attracted resulting in denial of exemption under Section 13A. The Bench added that when the appellant has been held to have violated 3rd Proviso to section 13A by not filing its return within prescribed due date, its netting claim also deserves to be declined.
In this case, the appellant, namely, Indian National Congress, had filed its return declaring Nil income after claiming Section 13A exemption of Rs. 199.15 crores, which came to be disallowed for the precise reason that the appellant had not filed its return on or before the “due” date under section 139(4B). In addition, the donations received by the appellant were also held as violative of 1st Proviso to Section 13A. This assessment being upheld by the CIT(A), led to filing of present appeal before the ITAT.
The ITAT clarified that so far as an interpretation of an exemption provision in a fiscal statute is concerned, Section 13A has to be strictly complied and it is not a liberal but stricter interpretation only in a taxing statute, which has to be employed in an exemption claim. That being the case, and since section 139(4B) has stipulated filing of return within the “due” date i.e., required to be furnished u/s 139(1), the former clause 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, 3rd Proviso to Section 13A gets attracted, resulting in denial of exemption to the political party concerned.
Thus, the appellant’s return not filed within the “due” date makes it eligible for the concerned exemption, and so far as Section 13A exemption claim violates clauses (b) and (d) of the 1st proviso thereto; is concerned, given the fact that return was a time-barred one, the ITAT rejected the same.
Lastly, as far as the claim of appellant seeking to assess itself on “netting” basis after claiming the corresponding expenditure, the Tribunal found that the jurisdictional high courts have already settled 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. Hence, the Tribunal dismissed the appeal and answered in favour of the Department.
Appearances:Â
Senior Advocate P.C. Sen, a/w Advocates Prasanna and N. Bhalla, and CA L.M. Garg, for the Appellants
Advocates Zoheb Hossain, Vipul Agrawal, Sanjeev Menon, and ACIT Purvi Nanda, for the Respondents
