Setback to Indian National Congress: ITAT denies ₹199 Crore Income Tax Exemption Over Late Filing & Cash Donations Breach [Read Order]

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) dismissed the appeal of the Indian National Congress (INC) against the denial of Rs. 199.15 crore income tax exemption under Section 13A of the Income Tax Act, 1961, citing violations related to delayed filing of return and receipt of cash donations exceeding the permissible limit.

The Indian National Congress, a recognized national political party registered under Section 29A of the Representation of the People Act, 1951, had filed its income tax return for the Assessment Year 2018-19 on 02.02.2019, declaring "Nil" income after claiming exemption of Rs. 199,15,26,560 under Section 13A of the Act.

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The Deputy Commissioner of Income Tax (DCIT) rejected the exemption claim, observing that the return was filed beyond the extended due date of 31.12.2018. Also, the party was found to have accepted cash donations of Rs. 14.49 lakh from individual contributors, each exceeding the statutory Rs. 2,000 limit, in contravention of clause (d) of the first proviso to Section 13A.

The assessee's counsel argued that the return was filed within the permissible time under Section 139(4), and that the cash contributions were “voluntary contributions” from identified party members, not “donations.” They also argued that only the net surplus, if any, should be taxable and not the gross receipts, especially because the party had reported a prior year deficit of over ₹96 crore.

The revenue counsel countered that the exemption under Section 13A is a special provision and must be interpreted strictly. They argued that failure to meet any condition, including timely return filing and donation compliance, disqualified the party from claiming exemption in full.

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The two-member bench, comprising Satbeer Singh Godara (Judicial Member) and M. Balaganesh (Accountant Member), upheld the findings of the lower authorities. The tribunal ruled that the return filed on 02.02.2019 was beyond the statutory “due date” as required under Section 139(4B), and such delay automatically disentitled the party from availing the Section 13A exemption.

The bench further held that the breach of donation rules involving cash receipts above Rs. 2,000 was a clear violation of Section 13A(d), irrespective of donor identity or record-keeping. The tribunal ruled that the entire claim of exemption stood vitiated and no deduction for expenditures could be allowed once the exemption was denied.

The ITAT dismissed the appeal and upheld the Rs. 199.15 crore tax addition along with consequential interest and fees.

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