Supreme Court rejects PIL challenging I-T exemptions to parties

New Delhi: The Supreme Court dismissed on Wednesday a PIL challenging the Centre’s decision to exempt political parties from paying income-tax on voluntary contributions that they receive.

A bench comprising Chief Justice J.S. Khehar and Justices N.V. Ramana and D.Y. Chandrachud said that the executive can, as a policy, grant income-tax exemptions to political parties.

When petitioner and lawyer M.L. Sharma said the exemption was contrary to statutory provisions, the CJI said, “No, it is not contrary. The executive chooses it. The government can choose how and on what grounds it can repudiate tax. It is the will of those who govern to decide on it and not this court.” The CJI asked the counsel when income from agricultural produce is exempt from tax, why not this exemption.

The petition challenged the constitutionality of Section 13A of the Income Tax Act of 1961 and Section 29 of the Representation of People Act, 1951. The petition had asked the apex court to decide on why ordinary persons are taxed while political parties enjoy exemption from tax.

“Political parties registered with the Election Commission of India are 100 per cent exempted from paying Income Tax under Section 13A of Income Tax Act, 1961 as long as the political parties file their Income Tax Returns every assessment year along with their audited accounts, income/expenditure details and balance sheet,” the petition said.

Mr Sharma said political parties depositing the demonetised Rs 500 and Rs 1,000 notes in their accounts will not face income tax investigations. “If it is a deposit in the account of a political party, they are exempt. But, if it is deposited in an individual’s account, then that information will come into the I-T radar” the government had said.

The PIL said opaque political funding is the foundation of black money in any economy. It is that evil that feeds and nurtures all other forms of illegal cash in the system, the petitioner had said. Unless political funds are brought under tax scrutiny, everything else the government does in the name of black money hunt is only to harass common man and to protect powerful group/ houses/ politicians which is a serious corruption under Prevention of Corruption Act.

The government’s action is a clear case of violation of Article 14 of the constitution as the common man is supposed to bare it all, answer questions, face harassment even if his money is legitimate but political parties enjoys a God-given immunity, said the PIL and sought a direction to quash the 100 per cent exemption.