Faced with the challenge of curbing black money in electoral process, the Income Tax (I-T) department has now proposed assessment of the income of political parties under the provisions of charity law instead of the present system of doing so under a special clause. The department’s proposal, prepared after it’s investigation wings across the country helped the Election Commission in conducting polls in West Bengal, Tamil Nadu and Assam, has been sent to the Finance Ministry and the EC for consideration.

“Informing people of the democratic institutions and about the party policies is in accordance with the Directive Principles as enshrined in the Constitution and therefore the political activities are in the nature of general public utility.

“The political parties should be treated as charitable institutions allowed to do charitable work like opening health care centres, promoting hygiene and sanitation facilities and other such activities. The political parties should accordingly be assessed under section 11 and not under section 13A of the I-T Act. This will allow them to use money power and influence the voters mind in a constructive manner the department’s proposal said.

While section 13A of the I-T Act allowed for “special provision relating to incomes of political parties, section 11 defines “income from property held for charitable or religious purposes.

“The I-T department’s argument is that when exemptions and special provisions are enjoyed by political parties they should be suitably justified. Invoking the charitable clause while exempting income of political parties is a step to curb the use of illegal money power in the elections, a senior officer privy to the development said.

This will enable the I-T department to better assess and scrutinise the incomes of political parties and check if proper use of this income was made by the party, the officer said.

The services of the investigation and enforcement wings of the I-T department were deployed hugely by the EC since the Assembly polls in Bihar last year, after the EC created a first-ever Election Expenditure Monitoring (EEM) cell within its establishment.

Interestingly, the EC has recently also increased the strength of the unit by sanctioning another post of an Indian Revenue Service official to the cell, after it felt that the cell has a  huge task to deal with in the coming days.

With the proposed change, the I-T department also expects to keep a check on fake applicants and those political parties which enjoy tax exemption but do not participate in electoral process but rather indulge in financial irregularities of their income.

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June 2021