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TMI Blog2024 (3) TMI 821X X X X Extracts X X X X X X X X Extracts X X X X ..... eed to refer and deal with such arguments, it would be expedient to briefly touch upon the background, which has culminated in the present proceedings. 3. The Applicant before us is a Political Party registered under Section 29A of the Representation of the People Act, 1951. The Assessing Officer completed an assessment under Section 143(3) of the Income-tax Act, 1961 (hereinafter referred to as 'the Act') for the Assessment year 2018-19 vide an order dated 6th July, 2021 at an income of Rs. 1,99,15,26,560/-, as against Nil income declared by the assessee in the return of income filed on 2nd February, 2019, thereby resulting in a demand of Rs. 105,17,29,635/- (inclusive of interest under Section 234A at Rs. 3,51,83,040/-, under Section 234B at Rs. 28,14,64,320/-, under Section 234C at Rs. 3,55,81,089/- and under Section 234F at Rs. 10,000/-). The difference between the returned and assessed income is solely for the reason that assessee's claim for exemption under section 13A of the Act has been denied by the Assessing Officer, and, accordingly, the entire income of Rs. 1,99,15,26,560/- has been held to be taxable. The Assessing Officer has faulted the claim of exemption under Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not to be enforced during the pendency of appeal before the CIT(A). The learned Senior Standing Counsel submitted that thereafter the assessee neither took the option of depositing 20% of the demand and nor challenged the rejection of its application before any higher authority. Having waited for almost two years, the Assessing Officer issued a letter on 9th January, 2023 seeking payment of the entire outstanding demand; the assessee by way of an e-mail dated 14th January, 2023 sought some time to reply and thereafter by letter dated 27th January, 2023 again sought stay on the recovery of demand under Section 220(6) of the Act, because of the pendency of the appeal before the CIT(A). Learned Senior Standing Counsel submitted that the appeal of assessee was dismissed by the CIT(A) on 28th March, 2023; against which, an appeal has been preferred before this Tribunal on 24th May, 2023; and, even at that stage, no stay on the recovery of demand was sought till such time the Assessing Officer initiated the instant proceedings under Section 226(3) on 13th February, 2024. On the basis of the aforesaid sequence of events, it was submitted that the Assessing Officer has not shown any mali ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... easoning, the time available to the Political Parties to file their return would be the time allowed as per sub-section (4) of Section 139 of the Act, and it is not restricted to the due date prescribed in sub-section (1) of Section 139 of the Act. Adverting to the import of subsection (4B) of Section 139 of the Act, the learned Senior Counsel submitted that it merely prescribes the mode of filing of the return by the Political Parties, and the same does not prescribe that the time limit for furnishing the return is the due date as per Section 139(1) only, because it, inter alia, prescribes that "all the provisions of this Act, shall, so far as may be, apply as if it were a return required to be furnished under sub-section (1) of Section 139 of the Act"; and, that Section 139(4) being adjunct to Section 139(1) of the Act the period permissible in sub-section (4) would also be applicable; and, thus, the return filed by the assessee on 2nd February, 2019, though filed beyond the due date as per sub-section (1), is very much a return filed within the time allowed under Section 139 of the Act, having been filed within the time allowed under sub-section (4) of Section 139 of the Act. Le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o to Section 13A when read with Section 139(4B) of the Act, makes it clear that the 'due date' is to be reckoned as per the definition in Explanation 2 of Section 139(1) of the Act only, thereby expressly making Section 139(4) of the Act inapplicable in the case of Political Parties seeking exemption under Section 13A of the Act. 11. As regards the alleged violation of clause (d) of the Proviso of Section 13A of the Act, the learned Senior Counsel submitted that indeed, no donation exceeding two thousand rupees has been received by the assessee otherwise than by account payee cheque/draft, and therefore, there is no violation of clause (d) of the Proviso to Section 13A of the Act. It is submitted that assessee received Rs. 14,49,000/- in cash as voluntary contributions, substantially from its own elected Members of Legislative Assemblies/Parliament/Office Bearers, etc. and that such sums do not constitute 'Donations' so as to attract clause (d) of the Proviso to Section 13A. It was pointed out that complete details in this regard along with names, addresses and Permanent Account Number (PAN), etc. have been furnished and that such contributions fall for consideration in terms of c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he same as income was manifestly wrong. In this context, it was also pointed out that the income tax authorities have also not offset the deficit of Rs. 96,30,18,572/- of the immediately preceding assessment year while determining the taxable income. In this context, he has relied upon the judgment of Hon'ble Supreme Court in the case of Commissioner of Income-tax (Central), New Delhi Vs. Bijli Cotton Mills (P.) Ltd. - [1979] 116 ITR 60 (SC) as well as the judgment of Hon'ble Delhi High Court in the case of Deputy Director of Income-tax (Exemptions) Vs. Petroleum Sports Promotion Board - [2014] 362 ITR 235 (Delhi). 15. On the other hand, learned Senior Standing Counsel assailed the aforesaid by pointing out that in the return of income filed, assessee has not made any such claim of deduction for expenditure in terms of Section 57(iii) of the Act. According to learned Senior Standing Counsel, only the expenses incurred wholly and exclusively for the purpose of earning income are allowable under the head "income from other sources" and that in the case of voluntary contributions of the nature in question, no expenses can be said to be attributable towards earning of voluntar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal is not likely to be exercised in a routine way or as a matter of course in view of the special nature of taxation and revenue laws. It wilt only be when a strong prima facie case is made out that the Tribunal will consider whether to stay the recovery proceedings and on what conditions and the stay will be granted in most deserving and appropriate cases where the Tribunal is satisfied that the entire purpose of the appeal will be frustrated or rendered nugatory by allowing the recovery proceedings to continue during the pendency of the appeal." 19. We may also refer to the judgment of Hon'ble Supreme Court in the case of Assistant Collector of Central Excise Vs. Dunlop India Ltd. And Ors. - 1985 AIR 330 wherein the Hon'ble Court has enunciated broad parameters to be applied while considering the pleas for grant of interim injunctions/stay on the recovery proceedings. The pertinent observations of the Hon'ble Supreme Court are as under :- "There can be and there are no hard and fast rules. But prudence, discretion and circumspection are called for. There are several other vital considerations apart from the existence of a prima facie case. There is the quest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s before us :- Section 13A "13A. Any income of a political party which is chargeable under the head "Income from house property" or "Income from other sources" or "Capital gains" or any income by way of voluntary contributions received by a political party from any person shall not be included in the total income of the previous year of such political party : Provided that- (a) such political party keeps and maintains such books of account and other documents as would enable the Assessing Officer to properly deduce its income therefrom; (b) in respect of each such voluntary contribution [other than contribution by way of electoral bond] in excess of [twenty] thousand rupees, such political party keeps and maintains a record of such contribution and the name and address of the person who has made such contribution; (c) the accounts of such political party are audited by an accountant as defined in the Explanation below sub-section (2) of section 288 ; and (d) no donation exceeding two thousand rupees is received by such political party otherwise than by an account payee cheque drawn on a bank or an account payee bank draft or use of electronic clearing system through a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company, referred to in the first proviso to this sub-section, the 31st day of October of the assessment year; (c) in the case of any other assessee, the 31st day of July of the assessment year." Section 139(4B) "139(4B) The chief executive officer (whether such chief executive officer is known as Secretary or by any other designation) of every political party shall, if the total income in respect of which the political party is assessable (the total income for this purpose being computed under this Act without giving effect to the provisions of section 13A) exceeds the maximum amount which is not chargeable to income-tax, furnish a return of such income of the previous year in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and all the provisions of this Act, shall, so far as may be, apply as if it were a return required to be furnished under subsection (1)." 25. As the genesis of the dispute revolves around Section 13A of the Act, we may briefly touch upon the same. Section 13A of the Act is a special provision relating to incomes of Political Parties. It prescribes that any income of a Political Part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... follows:- "Given the context in which section 13A of the Act was introduced, it was critical from the point of view of the Legislature that political parties are made to disclose what their state of financial affairs is in any given financial year. It was felt necessary to make them account for the receipts and expenses in any financial year. After all, political parties do deal with monies contributed by the public. Political parties are purportedly incurring expenses for their political activities. It is with a view to placing a check on the financial transactions of political parties that the proviso to section 13A was enacted. In this context, the object of section 13A of the Act will be defeated if the compliance with the requirements of the proviso thereto are held not to be mandatory. 94. Section 13A has to be read as a whole. It is a provision beneficial to a political party. It exempts various items of income of a political party from tax. If it has to be strictly construed, so too should the conditionality attached to section 13A. If a political party seeks exemption from paying Income-tax in a particular assessment year, it is incumbent on such political party to str ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any person who has not furnished return within the time allowed under sub-section (1), may furnish the return belatedly at any time before the end of the relevant assessment year or before the completion of the assessment, whichever is earlier. As per the learned Senior Counsel, sub-section (4) is a provision adjunct to sub-section (1), since both appear in Section 139 and, therefore, so long as a return of income is filed within the time allowed under sub-section (4) of Section 139, it should be considered as compliant with the requirements of the third Proviso to Section 13A of the Act. 31. We have considered the above plea. The third Proviso, as reproduced by us in the earlier part of this order, was inserted in Section 13A by the Finance Act, 2017 with effect from 1st April, 2018. As per the Memorandum explaining the provisions introduced in the Parliament, it was noted that Political Parties were required to file their return of income in terms of Section 139(4B) of the Act; So, however, the filing of the return was not a condition precedent for availing exemption under Section 13A of the Act. The Proviso was introduced to make it mandatory for a Political Party seeking exem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the reason that the return of income filed was not within the due date of filing of the return. It has been canvassed by the learned Senior Counsel that the two provisions being pari materia, similar reasoning should govern the understanding of the condition prescribed in the third Proviso to Section 13A of the Act with regard to the due date of furnishing of the return. 36. In our view, the plea of the assessee to seek treatment on par with Trusts, is misplaced having regard to the pronouncement of Hon'ble Delhi High Court in assessee's own case (supra). The following observations of Hon'ble High Court are worthy of notice in this regard:- "69. Section 2(15) of the Act defines what is "charitable purpose". This is relevant for section 11 of the Act. A political party cannot be said to be carrying on an activity that is comparable to that carried on by a "charitable trust". Treating the income of a political party to be that of a Trust and using the same principle to test the treatment of its expenses is inconsistent with the very scheme of the Act. 70. It is clear, therefore, that for understanding and interpreting section 13A of the Act, it would serve no purpose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rwise than by the modes prescribed therein. The assessee submitted that the aforesaid sum was in the nature of 'voluntary contributions' and not 'Donations' so as to be outside the purview of clause (d) of the first Proviso and falling for consideration only in clause (b) of the first Proviso. 39. After having perused the orders of the authorities below as well as other material, it is borne out that it is only during the assessment proceedings that the assessee has sought to make a distinction between 'voluntary contributions' and 'Donations'. The Assessing Officer has recorded a finding, after examining the books of account that all the contributions have been recorded as 'Donations' and the distinction canvassed by the assessee is not supported by the account books maintained. The report filed by the assessee with the Election Commission of India in terms of Section 29C(1) of The Representation of the People Act, 1951 dated 29th September, 2014 also does not support any distinction between receipt of Voluntary Contributions and Donations. All these aspects, in our view, do not inspire any confidence in the plea of the assessee that there is a difference between Voluntary Contri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by a political party that does not satisfy the requirement of Section 13A of the Act - viz., maintaining books of accounts, keeping a record of voluntary contributions in excess of Rs. 10,000 and getting the accounts audited - would be exempt from tax. If the above conditions are not fulfilled, the income of a political party by way of voluntary contributions would be included in the taxable income." 42. In the present case, the detail of Rs. 14,49,000/- clearly show that each contribution is in cash in excess of Rs. 2,000/-, thereby reflecting clear violation of clause (d) of the first Proviso. At this point, we are conscious of the statement made by the learned Senior Counsel at Bar that out of the sum of Rs. 14,49,000/-, a sum of Rs. 3,00,000/- has been received by transfer through RTGS. However, even after considering the same, violation of clause (d) to the first Proviso is palpable qua the balance of the amount. 43. Another aspect brought out by the learned Senior Counsel is that the component of Donations received in cash in excess of Rs. 2,000/- each was merely 0.1% of the total contribution received and, therefore, the same should not invite wholesale denial of exemptio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ur side inasmuch as the same has been authoritatively negated by the Hon'ble Delhi High Court vide its Order dated 23rd March, 2016 (supra). As per the Hon'ble High Court, once the income by way of voluntary contributions is not excludible from total income on account of denial of exemption under Section 13A of the Act, the same is liable to be treated as "income from other sources". Thereafter, the question of allowability of expenditure incurred by a Political Party for attaining its aims and objects was declined by the Hon'ble Delhi High Court in the following words :- "Expenditure of a political party 123. Here it is important to address another submission made on behalf of the Revenue which finds favour with the court. Under the head "Income from other sources", no expenditure can be allowed as a deduction on the ground that the expenditure has been incurred by a political party for attaining the aims and objects of political party. As rightly pointed out, the only deduction is under section 57(iii) of the Act and this cannot be granted since the Indian National Congress (I) did not place on record the factual basis for such a claim. 124. The legal position i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rated its keenness to expeditiously settle the issue inasmuch as the Appeal of the assessee pending with the Tribunal had come up for hearing on three occasions, viz., 21st September, 2023, 28th November, 2023 and 5th February, 2024 and, on each of the occasion, the record of proceedings reveal that the appellant-assessee was not prepared and sought adjournment. Now, the Appeal is fixed for hearing on 23rd April, 2024 before the regular Bench. Even in the course of hearing of the present petition, it was put across to the parties that since extensive arguments were being advanced, the Appeal pending before the Tribunal may be taken up for hearing on merits to facilitate an expeditious disposal of the same. The learned Standing Counsel had no objection to the same, while the learned Senior Counsel appearing for the Applicant did not opt for the same. Be that as it may, we are pointing out the aforesaid only to emphasize that the power to grant the stay is exercised inter alia, in cases where a delay can be expected in the determination of the pending Appeal in the due course. So however, in the instant case, the delay in determination of Appeal, if any, is not attributable to the Re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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