2020 (1) TMI 1734 - AT - Income Tax

Disallowance u/s 80GGC - donation to two political parties - HELD THAT - In the instant case the bank statement filed by assessee showing payment made does not show complete picture of the name of the bank and other vital details. Therefore we are unable to place reliance on such incomplete bank statement at present. Secondly summon issued to one political party appears to have return back without service. The other political party has not proved the factum of the receipt of donation. Pertinent to say a political party is an organized group of people meant to play crucial role in facilitating governance policy making etc. and consequently in defining the way of life of common citizen on continued basis. It is hard to imagine that such parties registered with Election Commission and so essential to our democratic form of Government would not abide by declared law of country and would seek an escape from providing vital information on contributions received under enquiry. Such leeway to a registered political party would to be fatal and would set a bad example to the society at large. Therefore we consider it just and equitable to restore the issue back to the file of the AO for de novo examination in accordance with law after making suitable enquiry with political parties as may be considered expedient and after providing proper opportunity to the assessee. Not granting credit for double taxation relief - As per the assessee the revised return filed by the assessee to claim double taxation relief u/s 90 in respect of foreign income by way of salaries and offered for taxation in India appears to have not been taken note of by both the lower authorities - HELD THAT - Under these circumstances we set aside the action of the lower authorities on this point as well and remit the matter back to the file of the AO for determination of the issue afresh in accordance with law after providing proper opportunity to the assessee for substantiation of his claim.

Summary

ISSUES:

Whether donations made to political parties qualify for deduction under section 80GGC of the Income Tax Act, 1961.Whether the disallowance of donations under section 80GGC was justified despite the assessee furnishing evidence of payment and genuineness.Whether the failure of political parties to respond to summons under section 131 affects the claim of deduction under section 80GGC.Whether the revised return claiming credit for Double Taxation Relief under section 90 was properly considered by the assessing authorities.

RULINGS / HOLDINGS:

The court held that the disallowance of donations under section 80GGC could not be upheld at this stage because the assessee had furnished proof of payment, but the evidence was incomplete and the political parties did not cooperate fully; thus, the matter was remitted to the Assessing Officer for de novo examination after proper enquiry and opportunity to the assessee to substantiate the claim.The court emphasized that "a political party is an organized group of people meant to play crucial role in facilitating governance" and that failure of political parties to respond to lawful summons cannot be lightly accepted, but the assessee must be given opportunity to prove eligibility for deduction.The court found that the revised return claiming Double Taxation Relief under section 90 was not considered by the lower authorities and therefore set aside their actions and remitted the issue for fresh determination after providing the assessee proper opportunity.

RATIONALE:

The court applied the provisions of section 80GGC of the Income Tax Act, 1961, which permits deduction for donations made to political parties, contingent upon proof of genuineness and receipt.The court relied on procedural fairness principles, emphasizing that the assessee must be given "proper opportunity" to substantiate claims and that "de novo examination in accordance with law" is necessary when evidence is incomplete or political parties fail to cooperate.Regarding Double Taxation Relief, the court applied section 90 of the Act, which allows credit for foreign tax paid, and stressed that failure to consider revised returns claiming such relief requires remand for fresh adjudication.The court distinguished the present case from precedents where evidence was complete, noting the "incomplete bank statement" and non-service of summons as material factors necessitating further inquiry.