TaxTMI 
TaxTMI 
2016 (3) TMI 879
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....er other political parties or individuals. Douglas points out in his book called Ethics in Government at p. 72, "If one party ever attains overwhelming superiority in money, newspaper support, and (Government) patronage, it will be almost impossible, barring an economic collapse, for it ever to be defeated". This produces anti-democratic effects in that a political party or individual backed by the affluent and wealthy would be able to secure a greater representation than a political party or individual who is without any links with affluence or wealth. This would result in serious discrimination between one political party or individual and another on the basis of money power and that in its turn would mean that "some voters are denied an 'equal' voice and some candidates are denied an 'equal chance' ". 1.2 The Supreme Court also noted that: "The small man's chance is the essence of Indian democracy and that would be stultified if large contributions from rich and affluent individuals or groups are not divorced from the electoral process." 1.3 Till the Supreme Court began actively examining the issue in a public interest litigation (PIL) instituted in 1995 by 'Common Cause&#....
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....ing the Janata Party for AY 1995-96. The present appeals 2. The present appeals under Section 260A of the Act are directed against an order dated 9th April 2001 of the Income Tax Appellate Tribunal ('ITAT') in ITA Nos. 4181/Del/98 and 5100/Del/98 for AY 1994-95. While ITA No. 145 of 2001 is by the Revenue, ITA No. 180 of 2001 is by the Assessee, INC, a political party registered as such under Section 29A of the Representation of People Act, 1951 ('RP Act'). 3. The central issue in these appeals involves the interpretation of the words 'income by way of voluntary contributions received by a political party' occurring in Section 13A of the Act. The ITAT by its impugned order held that the accounts of the Assessee for the AY 1994-95 were incomplete and therefore, the exemption under Section 13A of the Act was not available to it. At the same time, the ITAT held that the Assessing Officer ('AO') could not invoke the provisions of Sections 144 and 145 of the Act to estimate the quantum of income earned by the Assessee by way of voluntary contributions. Accordingly, the matter was remanded to the AO with the direction to the AO that he should undertake afresh the exercise of computing....
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.... Samiti [1994] 207 ITR 622 (Guj), the Gujarat High Court considered the question whether the Gujarat Pradesh Congress Samiti ('GPCS') was an independent taxable entity. 10.2 The facts there were that the Income Tax Officer ('ITO') served a notice under Section 148 of the Act on the GPCS for AYs 1960-61, 1961-62 and 1962-63 on the basis that it was a taxable entity having an income of its own. The ITO proceeded to tax GPCS as an association of persons. The Appellate Assistant Commissioner accepted the contention of GPCS that it was only a unit of the INC and annulled the assessments for the said three AYs. 10.3 After the ITAT dismissed the appeal of the Revenue, a reference was made to the Gujarat High Court, which agreed with the ITAT that a comparison of the constitution of the INC and the GPCS showed that the GPCS was one of the constituents and committees of the INC and did not have a separate existence. 11. The aforementioned decision of the Gujarat High Court made explicit the legal requirement of the INC having to file consolidated income tax returns for both the central office and the State units. Nevertheless, the INC did not file a return of income, much less the consol....
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....ete books of accounts and other documents that may enable the AO to properly deduce the income of the party therefrom; and (iii) the list of all donors, who had given voluntary contributions in excess of Rs. 10,000/- with their names and addresses. 16. The order sheets of the proceedings before the AO have been placed on record. On 28th October 1996, the AO noted that there was no compliance or any communication received from the INC. The same position continued on 28th November, 1996 and 16th December, 1996. The proceedings of 29th January 1994 read as under: "There has been a continued non-compliance from the Party and no details have been placed on record by the Party. In between Shri C.P. Malhotra had appeared in connection with the filing of I.T. Return was again reminded. In view of this, a specific show cause is being issued for a final opportunity on the 14.02.1997. In case of non-compliance, the Party has been informed that as ex-parte assessment will be made." 17. The proceedings of 14th February, 1997, again showed that there was non-compliance and there was no communication received from the INC. The proceedings of 25th March, 1997 read as under: "Shri Rajesh Sharm....
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....s he who gets collection from Sale thereof. 2. From the donations A/c in page 650 of Ledger, the name of donors is mentioned but the addresses is not shown. No supporting documents produced. 3. From Misc. receipts it is noticed that no. entry is in excess of Rs. 10,000/-. With these observation, case is discussed." The assessment order 19. Thereafter on 31st March 1997, the AO passed the assessment order for AY 1994-95. In para 3.1 of the assessment order, the AO noted that the returns pertained to the accounts of the Central Office alone. It disclosed the following receipts: "(i) Collection from sale of Coupons & Purse money, etc. Rs.8,20,75,000/- (ii) Other income Rs.3,12,65,500/- (iii) AICC membership fee Rs. 3,220/- (iv) Delegation fee Rs. 13,375/- (v) AICC Membership fund Rs. 600/-" 20. The details of 'other income' were furnished in Schedule 6 of the accounts and read as under: "Other Income i. Interest on Fixed deposits Rs. 89,72,827/- ii. Miscellaneous Receipts Rs. 13,532/- iii. Donation Rs.2,22,73,430/- iv. Literature Sale Rs. 5,710/- Rs.3,12,65,500/-" 21. The AO proceeded to note that the INC had given a b....
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....idence in respect of sale of coupons was also furnished. In sum, the conclusion drawn by the AO was that the INC had failed to furnish the true and fair picture of the receipts on all India basis; it could not produce the books of accounts and other documents in order that the income of the party may be properly deduced therefrom; in respect of the 14 State units none of the accounts could be treated as genuine. 25. The AO discussed at length the provisions of the Act governing political parties. The AO noted that the INC had failed to satisfy the conditions mentioned in Section 13A of the Act in all three respects, i.e., (i) furnish consolidated accounts that would reflect its income on all India basis; (ii) produce books of accounts and other documents to enable the AO to properly deduce the figures of its income therefrom; and (3) place on record the list of all donors, who had made voluntary contributions in excess of Rs. 10,000 with their complete names and addresses. 26. Consequently, the AO concluded that the INC's claim under Section 13A of the Act could not be allowed and that the receipts would be subject to tax. The AO noted the note in the Auditor's report that si....
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....1(1)(b) and 271(1)(c) have been separately initiated". Appeal before the CIT (A) 32. The INC then filed an appeal before the Commissioner of Income Tax (Appeals) ['CIT (A)']. The appeal was filed on 4th November 1997 along an application under Rule 46A of the Income Tax Rules, 1962 ('Rules'). In this application, it was stated that the dates for compliance in the proceedings referred to in the order of the AO pertained to AY 1995-96 which assessment was still pending and, therefore, the INC had not been granted sufficient opportunity to comply with the various requisitions of the AO. 33. The INC stated that the task of consolidating the accounts of the party including all its state units was a herculean task "as the aforesaid attempt was being made for the first time". The INC had 26 Pradesh Congress Committees, 6 territorial Congress Committees, 2 Regional Committees, as also the account of All India Youth Congress, All India Mahila Congress Committee, All India Congress Seva Dal, National Students Union of India & Congress Parliamentary Party. It was claimed that "the Assessee, under such a tremendous pressure could not consolidate and also file the complete details pertaining....
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....s for which it needed a large number of vehicles, millions of leaflets, posters, banners, flags, loudspeakers etc. The employees' expenses were allowed in full. It was also held that depreciation to the extent of Rs. 1,15,46,998.17 also ought to have been allowed. The balance claim of expenses then came to Rs. 14,92,22,294. Consequently, an estimate was made of the expenses incurred by the INC as regards its political activities and the CIT (A) held it to be reasonable to restrict the INC's claim of expenses to 60% of the claim after excluding employees' expenses and depreciation. This worked out to Rs. 8,95,33,374. The total relief granted to the INC by the CIT(A) was to the extent of Rs. 9,27,48,793. Appeals before the ITAT 38. Aggrieved by the above order of the CIT(A), both the INC and the Revenue filed appeals before the ITAT. 39. The INC was aggrieved that the CIT(A) had granted relief of only reducing the computable income by Rs. 9,27,48,793 (thereby computing the total income at Rs. 25,12,68,081 (-) Rs. 9,27,48,793). Further according to the INC the CIT (A) ought to have considered the additional evidence tendered and no prejudice would have been caused to the Revenu....
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....y thereafter. (ii) Even if there was no time limit for completion of the accounts and audit, they had to be completed within a reasonable time. Non-completion of accounts and their audit even within two years from the end of the relevant financial year ('FY') cannot be condoned and the Assessee cannot be given the benefit of a reasonable cause to enable the additional evidence to be tendered under Rule 46A of the Rules. In terms of Rules 46A(1)(b) and 45A(1)(c), there was no sufficient cause which prevented the Assessee from producing the requisite evidence before the AO. The CIT (A), therefore, was justified in declining to admit the additional evidence. (iii) There was no violation of the principle of natural justice as sufficient opportunity was given to the Assessee to produce the books of accounts and audited accounts. After the decision of the Gujarat High Court in Commissioner of Income Tax v. Gujarat Pradesh Congress Samiti (supra) rendered in 1993, the Assessee could not have any doubt about having to comply with the statutory requirements under Section 13A read with Section 139(4B) of the Act. (iv) The Assessee did not fulfil the conditions (a), (b) and (c) under the p....
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....tions were also received. The aims and objects of political party fell within the scope of the expression "any other object of general public utility" appearing in the definition of 'charitable purposes' under Section 2(15) of the Act. (ix) The contention of the Assessee that exemption under Section 13A of the Act can be granted even if the prescribed conditions are fulfilled at the appellate stage was rejected. The Assessee did not deserve the grant of exempton at the appellate stage. At the same time, the Assessee did not deserve its assessment to be set aside so that the AO could grant exemption under Section 13A of the Act. (x) In view of the overall excess of expenditure over income and the decision of the Supreme Court in Ranchi Club Ltd. v. Commissioner of Income Tax (2001) 247 ITR 209 (SC), the interest charged under Section 234A and 234B of the Act was required to be deleted. (xi) The Revenue's appeal was dismissed by observing that the allowance of depreciation and 60% of the expenditure by the CIT (A) could not be held to be erroneous. (xii) The impugned order of the CIT (A) on the allowability of the expenditure was set aside and the matter was restored to the AO wi....
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....re disclosed by the Assessee in the books of accounts produced before the AO and CIT (A) despite its finding that Assessee failed to furnish the complete accounts and produce the books of accounts of all its units before AO in spite of ample opportunities given to it? 3. Whether ITAT was justified in law and on the facts in holding that the objects of a political party fall within the scope and expression "any other object of general public utility" appearing in Section 2(15) of the Act? 4. Whether ITAT was justified in deleting the interest charged under Sections 234A & 234B of the Act altogether?" 5. Whether the voluntary contributions received by a political party in view of Section 13-A is income per se and whether expenditure incurred by a political party for political purposes or for aims and objects of the political party can be allowed as a deduction for calculating income, when conditions of the first proviso are not satisfied? 6. Whether the ITAT was justified in holding that the voluntary contributions received by the political party cannot be considered as income from other sources in the absence of availability of relief of benefit of Section 13-A of the Act? Ques....
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....m 1st April 1979. Section 13A as it stood during the period relevant to the AY in question reads thus: "13A. Special provision relating to incomes of political parties.- Any income of a political party which is chargeable under the head "Income from house property" or "Income from other sources" 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 in excess of ten 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; and (c) the accounts of such political party are audited by an accountant as defined in the Explanation below sub-section (2) of section 288. Explanation.-For the purposes of this section, "political party" means an association or body of individual citizens of India registered with the Election Commissio....
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....eir capacity to finance their activities from legitimate sources of income. It is, therefore, proposed to provide for exemption from income tax in respect of specified categories of income derived by political parties, namely income from investments both in movable and immovable properties and income by way of voluntary contributions. The proposed exemption will be available only in the case of political parties which are registered or deemed to be registered with the Election Commission of India under the Election Symbols (Reservation and Allotment) Order, 1968. The exemption will not be allowed unless the political party maintains proper books of account; records the name and address of every person who has made a voluntary contribution of more than ten thousand rupees at a time; and the accounts of the political party are audited by a chartered accountant or other qualified accountant. 2. Payments made for advertisements in souvenirs, brochures and the like published by political parties are not made on considerations of commercial expediency, but are in the nature of disguised donations made with the twin objective of circumventing the ban on company donations and for securing....
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....s made such contribution; and (c) the accounts of such political party are audited by an accountant as defined in the Explanation below sub-section (2) of section 288 : Provided further that if the treasurer of such political party or any other person authorised by that political party in this behalf fails to submit a report under sub-section (3) of section 29C of the Representation of the People Act, 1951 (43 of 1951) for a financial year, no exemption under this section shall be available for that political party for such financial year. Explanation.-For the purposes of this section, "political party" means a political party registered under section 29A of the Representation of the People Act, 1951 (43 of 1951). 59. Thus the basic requirement under Section 13 A of the Act for a registered political party to be able to claim exemption from income tax remains the same. To strengthen the provision, the second proviso was added to make it mandatory for a political party to submit a report to the Election Commission of India under Section 29C (3) of the RP Act if it wanted to seek exemption in terms of Section 13A of the Act. Submissions of Senior counsel for the INC 60. The sub....
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....the Act. 64. Mr Aggarwal submitted that had income by way of voluntary contributions been 'income from other sources,' there would have been no occasion to separately provide for it under Section 13A of the Act. It the expression 'income from other sources' implied that there had to be in the first place income from some 'source'. Since the originating cause of the voluntary contribution was the will of the contributor, it cannot be said to be 'income from other sources'. 65. Mr Aggarwal referred to the memorandum accompanying the Finance Bill, 1972 which inserted Section 2(24)(iia) of the Act. Reference was also made to Instruction No. 1988 dated 19th October 2000 issued by the CBDT which clarified that income of political parties from voluntary contributions cannot be said to be 'income from other sources'. A distinction was also drawn between the expression 'income by way of voluntary contributions received' occurring in Section 13A of the Act and 'any voluntary contribution received by an electoral Trust' occurring in Section 13B of the Act. Submissions of counsel for the Revenue 66. Countering the above submissions, it was pointed out by Mr. Raghvendra Singh, learn....
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....he question that arose was whether amounts received by the Assessee as 'Salami' for the mining sub-lease constituted a trading receipt in its hands and the profits therefrom were assessable to tax under the Indian Income Tax Act, 1922. The Supreme Court made the following observations: "6. The words "income" has not been defined in the Income-tax Act. In the definition which is enacted certain receipts are said to be included in the concept of income; but it does not say that "income" itself means. Certain working definitions have been given by Courts, chief among which is by the Judicial Committee in Commissioner of Income-tax v. Shaw Wallace & Co. (1932) L.R. 59 I.A. 206, where it was held that by income is meant a periodical monetary receipt, not in the nature of a windfall but coming in with some sort of regularity or expected regularity. In business, it was also pointed out, income was the produce of something "loosely spoken of as capital". This income in business is profit which is earned by a process of production, or, in other words, by the continuous exercise of an activity. These observations of the Privy Council were quoted with approval by this Court in many cases and....
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....s whether income by way of voluntary contributions received by a political party is a species different and distinct from 'income from other sources', particularly since it is separately mentioned in Section 13A of the Act. According to the INC, this question has to be answered in the affirmative. It is submitted that but for Section 13A of the Act, income by way of voluntary contributions received by a political party would not be income at all. 77. Although the above argument appears attractive at the first blush, on a careful perusal of the entire scheme of the Act, it is not possible to accept it. As rightly pointed out, Section 13A of the Act is not a computation section. It is only a provision that tells us what types of receipts of a political party would not be included in determining its taxable income. While it is true that income by way of voluntary contributions is not identified as a separate head of income in Section 14 of the Act, the legislative intent was not to exclude it altogether from the taxable income. It would be excluded only subject to fulfilment of the conditions stipulated under Section 13A of the Act. It could never have been the legislative intention ....
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....e Act. However that does not place it outside the purview of 'income from other sources' for the purposes of Section 13 A read with Section 56 (1) of the Act. The Privy Council in Commissioner of Income Tax v. Shaw Wallace & Co. AIR 1932 PC 138, in the context of the Income Tax Act, 1922, held that Section 4(3)(v) of that Act was only clarificatory and "must be due to the over anxiety of the draftsman to make this clear beyond possibility of doubt". Applying that analogy it has to be held that the mere fact that income by way of voluntary contributions in the hands of Trusts and other entities (other than the political party) is deemed to be income under Section 2 (24) (iia) of the Act, will not mean that it is not income as far as the political party is concerned. 82. The submission that there has to be in the first place a source of income and in relation to it there has to be income from 'other sources' does not hold good in the present context since admittedly the INC has also income from house property, which is reflected in its returns. That apart, Section 56 (1) of the Act makes it clear that even if there was no income under clauses A to E of Section 14 of the Act,....
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....in forms of expenditure. Section 5(j) of the ET Act specifically excluded expenditure incurred by an Assessee by way of a gift, donation or settlement on Trust or otherwise for the benefit of any other person. It is in this context that it was held that the donation made to a political party qualifies for exemption under Section 5(j) of the ET Act. 88. The situation here is hardly comparable. What is sought to be exempted for the purposes of Section 13A of the Act is not expenditure by way of a donation but income by way a voluntary contribution. 89. Consequently, on this aspect, it is held that the voluntary contributions received by the INC during the AY in question has to be treated as 'income from other sources'. Non-furnishing of audited accounts within time 90. This next takes us to the question of whether the CIT(A) and the ITAT ought to have permitted the Assessee to place on record its audited accounts although they were not completed and audited prior to the passing of assessment order by the AO for the AY in question. 91. Mr. Aggarwal makes an earnest plea that for the purposes of Section 13A of the Act, there is, in fact, no time limit specified for furnishing the ....
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....om 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 13 A 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 AY, it is incumbent on such political party to strictly comply with each of the requirements in the proviso to Section 13A and to do so by the time the assessme....
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....unts had to be tallied and finalised, was not a sufficient cause for it not to comply with the requirements of the proviso to Section 13A of the Act by the time of completion of the assessment. 98. The Court, therefore, holds that the INC failed to demonstrate sufficient cause in terms of Rule 46A(1)(b) and 46A(1)(c) of the Rules. The decision of the CIT(A) as affirmed by the ITAT, is upheld. The accounts do not give a true and fair picture 99. Admittedly, in the present case, the accounts for AY 1994-95 were audited only on 1st July 1997. This was more than two years after the end of the relevant FY. The consolidated accounts were tendered before the CIT (A) only on 4th November 1997. This was certainly an unacceptable and inordinate delay. Given the context of Section 13A of the Act, such delay could not possibly have been condoned. 100. In any event, The audited 'consolidated' accounts filed before the CIT (A) also do not satisfy the mandatory legal requirement. The Court pointed out to Mr Aggarwal during the course of hearing various discrepancies and shortcomings therein. The auditor's report is not in the format that one expects a duly qualified CA to adopt. When ....
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....e same could not be incorporated in the Balance Sheet of Indian National Congress as on 31.3.94. 5. During the year, the party had received certain donations from outside India amounting to Rs. 1.00 crore by demand drafts. A public interest petition has been moved in Delhi High Court challenging the acceptability of these donations under the provisions of the Foreign Contribution (Regulation) Act, 1976. The party is of the opinion that the acceptance of these donations are not in contravention of the Foreign Contribution (Regulation) Act, 1976. 6. Income Tax Department has raised a demand amounting to Rs. 22.96 crore for the assessment year 1994-95. The Party has gone in appeal against this demand and the recovery of the same has been stayed by the department till the disposal of the first appeal." 102. It is not understood how despite the above note, the auditor can simply certify that the balance sheet and the statement of income and expenditure as on 31st March 1994 are in agreement with the books of accounts, vouchers, receipts, books etc. "produced before us". In the facts of the present case, when admittedly the complete figure of the receipts and expenditure of all the st....
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....ew age governance, The introduction of acceptable accounting practices and disclosure norms are not just technical practices but the foundations for the integrity and maturity of the Political Parties. Political Parties would, therefore, need to reflect their 'financial position' and 'financial performance' which should indicate their ability to achieve their developmental goals, meet their programme targets, their efficiency in the use of resources. 106. The covering note of the President ICAI acknowledges that "the present system of accounting and financial reporting followed by political parties in India does not adequately meet the accountability concerns of the stakeholders." The 'Illustrative format of Auditor's report' appended to the note requires the auditors to state inter alia that: ''In our opinion and to the best of our information and according to the explanations given to us, the said accounts give a true and fair view in conformity with the accounting principles generally accepted in India'' 107. The above guidance note of the ICAI can be said to clarify the legal requirement regarding the standard of reporting that is ....
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....he accounts of the INC for all the AYs, earlier to and later than AY 1994-95, have been accepted by the Department without demur, then why must only AY 1994-95 be picked up for a different treatment? Reliance was placed on the decision in Excel International Ltd. v. CIT (2013) 358 ITR 295 (SC) which reiterated the decision in Radha Saomi Satsang v. CIT (1992)193 ITR 321(SC) 113. As already noticed, the so-called audited accounts that were presented to the AO by the INC for AY 1994-95, and later in a 'consolidated' form on 4th November 1997 before the CIT(A), does not inspire confidence. The same type of incomplete accounts have been prepared and submitted by the same auditor, for several AYs earlier to and subsequent to the AY in question. There appears to be a laxity on the part of the income tax authorities in not insisting on strict compliance with the mandatory requirement of Section 139(4B) read with Section 13A of the Act, thereby defeating the very purpose of the said provisions as was foreseen by the Supreme Court in Common Cause v. Union of India (supra). In the circumstances, the rule of consistency cannot be applied to condone the violation of the law by the INC....
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...., the extent of voluntary contributions might show a marked increase. In a year which is not an election year, the contributions might show a decline. Again, this will depend on whether the party is in power in a certain state. Even in such case, the anti-incumbency factor, and when that might surface are all matters of speculation. 118. The types of elections held would also have a bearing on the income of the party. For e.g., elections to the Parliament would require a different level of activity when compared to elections to a state Legislative Assembly or to a local body. Also the profile of the contributors may determine the size and frequency of the contribution. For instance, just a few corporate entities could make a very sizeable donation to a political party compared to a political party which has a large number of individual donors. Therefore, there are too many imponderables that make the task of estimating, with a degree of certainty, the income of a political party extremely difficult. This kind of an exercise would require collating a vast amount of data which as of now does not exist in the public domain particularly with political parties resisting attempts at bri....
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....enditure 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 INC did not place on record the factual basis for such a claim. 124. The legal position is 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 of the Act. 125. Therefore, the only way to proceed in the present matter is to wholly disallow the expenditure claimed by the INC as relatable to 'income from other sources'. On the receipts side, the Revenue will simply have to go by whatever is disclosed by the INC as income by way of voluntary contributions in the return as originally filed and treat that as income from other sources. 126. Consequently, the Court disagrees with the decision of the CIT (A) restricting the expenditure of the Assessee to 60% of the amount claimed and order of the CIT (A) and the ITAT to that extent are set aside. Comparison with a Trust mis....
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....me of a political party by way of voluntary contributions would be included in the taxable income. Voluntary contributions are not capital receipts. (iv) Clause F of Section 14 of the Act is a residuary provision. An income which is not to be excluded from the total income and is not chargeable to income tax under heads A to E, has to be treated as 'income from other sources'. If the total income by way of voluntary contributions of a political party cannot be excluded from its total income because such political party has not complied with any of the conditions in the proviso to Section 13A of the Act, then by virtue of Section 56(1) of the Act, such income by way of voluntary contribution would be 'income from other sources' under Section 56(1) of the Act. (v) The mere fact that income by way of voluntary contribution of a political party is not deemed to be income under Section 2(24)(iia) of the Act, does not place it outside the purview of 'income from other sources.' (vi) Donations to a political party may be made for a variety of reasons and is an act of participation in a democracy. The known tests for determining 'income' are, therefore, inadequate for determinin....
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.... and therefore the above estimation cannot be sustained. However, it would be futile to remand the matter to the AO for such estimation as the submitted accounts are not reliable and it is not possible to even reasonably guess what could be the contribution to a political party in a given year because of the variety of factors involved. (xvi) The expenditure claimed by the INC as relatable to 'income from other sources' is disallowed. On the receipts side, the Revenue will simply have to go by whatever is disclosed by the INC as income by way of voluntary contributions in the return as originally filed and treat that as income from other sources. Consequently, the decision of the CIT (A) and the ITAT restricting the expenditure of the INC to 60% of the amount claimed are set aside. (xvii) Subsequent to the decision of the Supreme Court in Commissioner of Income Tax v. Bhagat Construction Co. Pvt. Ltd. [2015] 279 CTR 185 (SC) interest can be charged on the tax amount due under Sections 234A and 234B of the Act, even if the same was not separately dealt with in the assessment order. The decision of the ITAT on this aspect is set aside. Answers to the questions in the Revenue's....
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....r 2015: Question No.1 is answered in the affirmative by holding that the ITAT was correct in law in holding that the audited accounts filed by the INC before the CIT (A) could not be accepted as evidence since they were not audited till the assessment was framed and, therefore, the INC was not entitled to exemption under Section 13A of the Act. Question No.2 is answered in the affirmative by holding that the ITAT was justified in denying exemption to the INC under Section 13A of the Act and refusing to condone the delay that had occurred in the audit of some of the state units. Question No.3 is answered in the affirmative by holding that the ITAT was right in its conclusion that the INC failed to fulfil the three conditions envisaged under clauses (a), (b) and (c) of Section 13A of the Act. 132. The impugned order dated 9th April 2001 of the ITAT in ITA Nos. 4181/Del/98 and 5100/Del/98 for AY 1994-95 and the corresponding order dated 31st March 1997 of the AO and the order dated 8th July 1998 of the CIT (A) shall stand modified in terms of this judgment. It is clarified that the inasmuch as this Court has set aside the impugned order of the ITAT to the extent it has remanded th....