Congress Loses Rs 199 Cr Tax Battle As Tribunal Rejects Exemption Claim

The ITAT has dismissed Congress’s appeal against a ₹199.15 crore tax demand for FY 2018–19, citing non-compliance with Section 13A conditions. The move comes ahead of the 2024 Lok Sabha polls, marking a legal and financial setback.

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In a major setback for the Indian National Congress, the Income Tax Appellate Tribunal (ITAT) has dismissed the grand old party’s appeal against a Rs 199.15 crore tax demand raised before the Lok Sabha elections 2024. The tax notice pertains to the assessment year 2018–19. The tribunal ruled that the party failed to meet the statutory conditions required for exemption under Section 13A of the Income Tax Act.

The tribunal’s order, issued on Monday, stated that the party’s income tax return filed on February 2, 2019, was beyond the “due date” prescribed under Section 139(1). This delay rendered the party ineligible for exemption, as political entities must file returns within the stipulated timeframe under Section 139(4B) to qualify for tax relief.

Congress had declared nil income in its return, claiming the ₹199.15 crore received through donations as exempt. However, the ITAT rejected the party’s argument that late filing should be treated similarly to charitable trusts under Section 12A, emphasizing that political parties are subject to stricter compliance norms.

In addition to the delayed filing, the tribunal flagged violations related to cash donations. The assessment revealed that Congress accepted ₹14.49 lakh in cash contributions, with individual donations exceeding the legal limit of ₹2,000. This contravenes clause (d) of the first proviso to Section 13A, which mandates that donations above ₹2,000 must be received via banking channels.

“The assessee's return filed on 02.02.2019 is not within the 'due' date to make it eligible for the impugned exemption,” the tribunal noted, reinforcing the need for timely and transparent financial disclosures by political parties.