RASHTRIYA KOMI EKTA PARTY IS ONE OF THE ‘23’REGISTERED UNRECOGNISED POLITICAL PARTIES.
The grievance of the Revenue in its appeal for the Asstt.Year 2012-13 is that the ld.CIT(A) has erred in deleting disallowance of Rs.55 lakhs in respect of donation to political parties under section 80GGC of the Act. The grievance of the assessee in its appeal for the Asstt.Year 2014-15 is that the ld.CIT(A) has erred in confirming the disallowance of Rs.5,86,32,892/- which was claimed as deduction under Chapter VIA in respect of donation given to political party and charitable institutions.
Brief facts of the case are that in the Asstt.Year 2012-13, the assessee has given donation of Rs.55 lakhs to Rashtriya Komi Ekta Party (“RKE” party for short) which is duly registered with Election Commission of India. Similarly, for the Asstt. Year 2014-15, the assessee has given donation to the following parties.
|Sr. No.||Name of the Donee||Amount in Rs.|
|1||Rashtriya Komi Ekta Party||3,00,00,000|
|2||Akhil Bhartiya Hindu Mahasabha||1,00,00,000|
|3||Lok Janshakti Party||1,54,00,000|
|4||Shri Sadvichar Panvar Jankalyan PashurakshaCharitable Trust||75,00,000|
|5||Mahavir Shubh Sandesh Jivdaya Panjrapoie charitable trust||25,00,000|
|6||Shri Vardhaman Jjivdaya Panjrapoie CharitableTrust||25,00,000|
|Total||6, 79,00, 000|
In the Asstt.Year 2012-13, the AO has disallowed this donation of Rs.55 lakhs. However, in the Asstt.Year 2014-15, he disallowed a sum of Rs.5,46,32,892/- out of total donation made by the assessee. The finding of the ld.CIT(A) while deleting disallowance of Rs.55.00 lakhs in the Asstt.Year 2012-13 reads as under:
“7.1 Decision: I have carefully gone through the appellant’s contentions reoroduced herein above. I have also perused the relevant paragraph of the Assessment Order under appeal. Upon perusal of records of proceedings, I find it as a fact that the appellant has given contribution of Rs. 55,00,000/- to Rashtriya Komi Ekta Party, which is a political party duly registered with the Election Commission of India. The necessary documentary evidences in the form of copy of the receipt of the donation given and also evidence regarding registration of the said political party with the Election Commission of India had been furnished by the appellant before the AO in the course of Assessment proceedings and also before me in the Appellate proceedings. /The AO’s reference in the assessment order to the effect that the said political party has not filed Return of Income for A.Y. 2012-13 will not disentitle the appellant’s claim for ‘deduction on account of contribution to the political party, when all the conditions prescribed in section 80GGC are duly satisfied. The donation has been made through cheque to a political party approved by Election Commission of India, therefore, the conditions to claim deduction u/s.80GGC are fully complied. Having regard to the totality of the facts and circumstances of the case, I hold that the AO is in error in disallowing claim for deduction on account of contribution to political party which is as per the provisions of section 80GGC. Accordingly, the disallowance made by the AO is hereby deleted and the AO is directed to allow the same. This ground no.5 is allowed.”
With assistance of the ld.representatives, we have gone through the record. In the Asstt.Year 2012-13, the assessee has given donation to only one party i.e. “RKE” whereas in the Asstt.Year 2014-15, it has given donation to three political parties viz. “RKE”, Akhil Bhartiya Hindu Mahasabha, Lok Janshakti Parity. Apart from these three political parties, it has further given donation to three charitable institutions vis. Shri Sadvichar Parivar Jankalyan Pashuraksha Charitable Trust, Mahavir Shubha Sandesh Jivdaya Panjrapole Charitable Trust, Shri Vardhaman Jjivdaya Panjrapole Charitable Trust. Let us take note of section 80GGC:
80GGC. In computing the total income of an assessee, being any person, except local authority and every artificial juridical person wholly or partly funded by the Government, there shall be deducted any amount of contribution made by him, in the previous year, to a political party or an electoral trust :
Provided that no deduction shall be allowed under this section in respect of any sum contributed by way of cash. Explanation.—For the purposes of sections 80GGB and 80GGC,
“political party” means a political party registered under section 29A of the Representation of the People Act, 1951 (43 of 1951).
A perusal of the above section would reveal that it provides deduction of any amount of contribution made by an assessee in the previous year to a political party. Only exception provided in this section is that the assessee should not be by a local authority i.e. Municipal authority etc. or any artificial juridical person wholly or partly funded by the Government. In other words, donation should not be given by a local authority or by a corporation funded by the Government. Except these two categories of the assessee, if any other assessees made a contribution to a political party, then such contribution would be allowed as deduction. Explanation appended to this section further provides the meaning of a political party and it contemplates a “political party” means a political party registered under section 29A of the Representation of the People Act, 1951. The assessee has produced details of payment made through account payee cheques as well as registration certificate of these political parties before the AO. Only exclusion made with effect from 1.4.2014 is that donation should not be made in cash and this clause is not applicable on the facts of the assessee’s case, because it has made through account payee cheques…………
The case of the Revenue in the Asstt.Year 2014-15 is that the assessee failed to prove, whether ultimately, the donees have used these monies ? The AO has devoted a lot of energy in conducting such inquiry as to how these monies have been incurred by the recipients. To our mind, the authorities below have misdirected themselves. The donees are taxable entities in themselves. If they misused their position and failed to conduct themselves in regard with requirement of law, then this amount could be taxable in his hands. Act nowhere put obligation upon the donor to ensure how the funds are utilized by thedonee towards their objects. Due to this reason, we are of the view that whole angle of inquiry at the end of the AO is misdirected. It is for the AO to verify whether these charitable institutions have utilized funds for charitable objects or not, in their own cases, and if they failed to utilize funds for their objects, then their charitable status could be cancelled. Registration under section 12AA could be cancelled as per the procedure contemplated in section 12AA(3) of the Act. The funds which were not used for objects of the Trust, that can be brought to tax under section 13(3) of the Act. A perusal of the scheme of Income Tax Act, it would reveal that once the donation has been made, the donee is not under obligation to keep a track of the donation, and nothing left in his hand which can ask for return of these amounts. There is no such provision provided in the Act. If a duly recognized institution, for the purpose of receiving donation, somebody makes donation and then how the donation would be bogus, if the donee failed to use it for the object which has been made eligible to receive the donation. How the donor could dictate terms after donations are made ? No donee will be under influence of the donor for arranging its affairs. Therefore, there isfallacy in the approach of the ld.AO as well as the ld.CIT(A) for disallowing the donations made by the assessee. We do not find merit in the grounds of Revenue raised in the Asstt.Year 2012-13. The ld.CIT(A) has rightly deleted the disallowance of Rs.55.00 lakhs. This ground of appeal is rejected. On the same analogy, the grounds appeal raised by the assessee in the Asstt.Year 2014-15 for disallowance of Rs.5,86,32,892/- is allowed.
In the result, ITA No.1778/Ahd/2016 (by Revenue) is dismissed, and ITA No.1900/Ahd/2016 (by assessee) is partly allowed.