TaxTMI 
TaxTMI 
2016 (3) TMI 879
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....possessed of such resources, undue advantage over 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 litigat....
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....udgment today the Court is disposing of a similar case involving 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 ....
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....tion of political parties filing returns. In Commissioner of Income Tax v. Gujarat Pradesh Congress 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 centra....
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....ish: (i) its consolidated accounts on an all-India basis by incorporating all the accounts of the State Units; (ii) complete 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-....
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....ed the cash book and ledger of the Central Office. The AO then noted as under: "1. From the "Sale of coupons" A/c's there are deposits exceeding Rs. 10,000/- The AR have explained that the Treasurer of the Party is in custody of the same & it is 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 u....
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..... However, till the time of framing of the assessment by the AO, these details were not furnished. 24. The AO then discussed the accounts of 14 State units furnished by the INC. The AO noted that the details of the donations or the list of donors in excess of Rs. 10,000 were not furnished. No documentary evidence 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, ....
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....ent. The expenditure of state units was computed at Rs. 68,71,700. The total expenses worked out to Rs. 1,20,89,616 which when adjusted against the receipts (Rs. 26,33,57,696), gave a taxable income of Rs. 25,12,68,081. 31. Towards the end of the order, the AO observed "Charge interest. Penalty proceedings under Section 271(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 Reg....
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.... 15 crores was upheld. 37. However, the CIT (A) found that the AO's decision as regards the expenditure incurred by the INC for the AY in question was erroneous. The expenses of the INC as a political party had to be viewed from the perspective of it having to implement its policies, objectives and manifesto and also to contest elections 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. ....
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....xpenses. Order of the ITAT 43. The ITAT in the impugned order dated 9th April 2001 came to the following conclusions: (i) Till the completion of the assessment order on 31st March 1997, the Assessee failed to file the audited accounts of all the state units and produce the books of accounts. The auditing of the accounts of state units was completed only 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 accou....
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....not be taxable income since it did not fall under any of the heads of the income under Section 14 of the Act. It would not come under the head 'income from other sources'. The expenditure incurred by a political party on its political activities was allowable as a deduction since such expenditure was incurred to carry out its aims and objects for which the voluntary contributions 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 int....
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....ces of the instant case and on the basis of the material available on record, the total income adopted at Rs. 25,12,68,08 was valid and in accordance with the provisions of Section 13A of the Income Tax Act and further, whether the assessee was not entitled to an exemption on or any part of the aforesaid amount? 2. Whether ITAT was justified in law in restricting the estimate of income to the figure 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 pur....
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....butions received by a political party'. However, does that mean that voluntary contributions received by a political party, which finds mention as an exempted category of income under Section 13A of the Act, is not otherwise 'income'? 52. In order to understand this, the purpose of inserting Section 13A of the Act has to be examined. Section 13A of the Act was introduced by the Taxation Laws (Amendment) Act, 1978 with effect from 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 po....
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....endments, the Taxation Laws (Amendment) Act, 1978 also amended the Wealth Tax Act, 1957 to exempt political parties from the levy of wealth tax. 56. The statement of objects and reasons accompanying the Taxation Laws (Amendment) Bill, 1978 that introduced the above amendments reads as under: "Political parties are essential in any democratic set-up. The taxation of their income, however, reduces their disposable funds thereby adversely affecting their 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 contri....
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....hall 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 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; 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....
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....t it was felt necessary to term a voluntary contribution as a 'deemed income' under Section 11 of the Act since otherwise it was not. 63. Mr Aggarwal pointed out that under Section 14 of the Act, there were various heads of income provided but there was no head of income by way of 'voluntary contribution'. In any event since it did not fall within the definition of income under Section 2(24) of the Act it could not be held liable to be assessed as that would be beyond the scope of Section 5 of 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 ....
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....pplies to Trusts. 71. The charging provision as far as the Act is concerned is Section 4 of the Act. Section 5 of the Act says that the total income of a person includes all income from whatever sources derived. For an income to come within the purview of 'total income' it must satisfy the requirements of Section 5 and must be computed in the manner laid down under the Act. Section 2 (24) of the Act sets out the definition of 'income'. 72. In Karanpura Development Co. Ltd. v. Commissioner of Income Tax (supra), the 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 ....
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....ove heads of income are compared with the heads of exempt income under Section 13A of the Act, as far as a political party is concerned, three of the above heads are exempt from tax. These are income from house property, income from other sources and capital gains (the latter having been inserted by Finance Act, 2003 with retrospective effect from 1st April 1979). Apart from the above three, there is also mentioned 'any income by way of voluntary contributions received by a political party' from any person. 76. The question that arises is 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....
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....es the issue. In other words, 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. 81. It is true 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. 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....
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....s' as contended by Mr. Aggarwal. Although it is true that all receipts are not income, clause F of Section 14 read with Section 56(1) of the Act, provides an affirmative answer to the question whether income by way of voluntary contributions is 'income from other sources' in a situation where the proviso to Section 13A(1) of the Act is not fulfilled by a political party. 87. The decision in Commissioner of Expenditure Tax v. P.V.G. Raju (supra) is distinguishable on facts. In that case, the context was that the Expenditure Tax Act, 1958 ('ET Act') which taxed certain 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 con....
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....nation to sub-section (2) of Section 288 of the Act, are filed that the AO may reasonably deduce the taxable income of the political party therefrom. In other words, the requirement of maintaining the audited accounts and furnishing those accounts in terms of the proviso to Section 13A of the Act is not merely directory. 93. The decisions cited by Mr. Aggarwal are distinguishable as each of them talks of the non-filing of an auditor's report and not the non-filing of audited accounts themselves. 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 13 A of the Act will be defea....
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....es. There can be no excuse for such company not doing so for any given AY. Without there being audited accounts, none of the figures mentioned by an Assessee in the returns can be verified. Where the accounts of an Assessee fail to inspire confidence and merit rejection, or where there is no full and true disclosure by the Assessee, a combination of Sections 143 and 144 of the Act would come into play and the AO would have to deploy the best judgment assessment. Therefore, in the present case, merely because the INC had several state units and other associated bodies, whose individual accounts 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....
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....r. 3. Certain Committees have prepared their final accounts in the form of receipt and payment account. Hence while drawing the Balance Sheet as on 31.3.94 of those offices, fixed Assets and moveable assets have been estimated by the said committees/office bearers and taken into account with corresponding credit to the Reserve Fund account. Assets and liabilities have been incorporated in the financial statement on the basis of details provided to us by the Pradesh Committees. 4. As no financial accounts were drawn for the year in the case of Tamil Nadu and Arunachal Pradesh Committees due to split of the party, the 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 D....
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....so referred to the instructions recently issued regarding the filing of income tax returns by political parties. 105. The ICAI issued a 'Guidance Note on Accounting and Auditing of Political Parties' in February 2012. The covering note of the President, ICAI states inter alia: "Political Parties are one of the core organisations for functioning of a democracy. In this dynamic scenario, where the sources of funding of the Political Parties are diversified, the objectives of accountability and transparency seem to be of great importance. Transparent accounting and financial reporting are also central to the fulfilment of new 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 o....
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....unts submitted by the INC at the appellate stage. There is no estoppel in such situations particularly since the Assessee has been put on notice that all orders passed on remand are subject to the outcome of the appeal filed by the Revenue in this Court. 111. It is, therefore, to no avail that the AO on remand assessment relied on these audited accounts to determine whether there was a taxable income or a deficit for the AY in question. The INC cannot possibly take advantage of what happened in the remand proceedings. The rule of consistency 112. Another contention that was urged was based on the rule of consistency. It was contended that when the 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....
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....he assessment was completed, the INC could produce only the accounts of its central office and 14 state units. The question that arises is whether, in such circumstances, an AO could have resorted to best judgment assessment? 117. As rightly pointed out by Mr Aggarwal, estimation of income of a political party is different from estimation of income of other taxable entities. It is not possible to even reasonably guess what could be the contribution to a political party in a given year because a variety of factors are involved. In an election year, closer to the actual dates of election, and because of the extraordinary efforts made by members of a political party, 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 el....
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....ntary contributions received by the state units. 122. However, as far as the present case is concerned since it is impossible to meaningfully of estimate the income by way of voluntary contributions made to state units, the Court sees no purpose in remanding the matter to the AO for that purpose. The impugned order of the ITAT to the extent it remands the matter to the AO is hereby set aside. Consequently all proceedings consequent upon such remand are rendered non-est. 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 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 fail....
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....f the Act, it would serve no purpose to compare it with Section 11 of the Act which applies to Trusts. (ii) Section 13A of the Act is not a computation section. Income by way of voluntary contributions would be excluded only subject to fulfilment of the conditions stipulated under Section 13A of the Act. (iii) It could never have been the legislative intention that voluntary contributions received 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 (now enhanced to Rs. 20,000) and getting the accounts audited - would be exempt from tax. In such event, the income 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 to....
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....ment of the proviso to Section 13A of the Act was not fulfilled by the INC. (xiii) With the Revenue having preferred an appeal before this Court against the impugned order of the ITAT, all further proceedings consequent upon the remand to the AO were subject to the outcome of the present appeal. It is, therefore, to no avail as far as the INC is concerned, that in the remand proceedings the AO relied on the audited accounts submitted by the INC at the appellate stage. (xiv) The rule of consistency cannot be applied to condone the violation of the law by the INC. (xv) There is no basis indicated by the AO for estimating the figure of voluntary contributions received by the state units during AY 1994-95 at Rs. 15 crores 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, ....
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....uction, only if the conditions of the first proviso to Section 13A of the Act are cumulatively satisfied by the political party. Question No. 6 (framed on 8th December 2015) is answered by holding that when the voluntary contributions received by a political party 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, such voluntary contributions would be included in the taxable income under the head "income from other sources" Answers to the questions in the Assessee's appeal 131. Now the Court proceeds to answer the questions that have been framed in ITA 180/2001 by the order dated 8th December 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 ....