It's taxing times for electoral bond buyers after Supreme Court's Feb verdict
TIMESOFINDIA.COM
Entities making political contributions through electoral bonds pre-Supreme Court decision date may face past cases reopening. They seek protection from excessive roving enquiries to prevent legal actions.
Synopsis
More than 1,000 entities who purchased electoral bonds for political donations may now face inquiries from tax authorities regarding the deductions claimed on these contributions, following the Supreme Court's decision to invalidate the scheme in February. The Supreme Court, in its ruling on February 15, declared the electoral bond scheme unconstitutional. Since its introduction in January 2018, the scheme had amassed Rs 16,518 crore in donations for political parties.
The 1,300 entities that purchased electoral bonds to make political donations potentially face questions from tax authorities on deductions that were made on these contributions with the Supreme Court having scrapped the scheme in February. A few companies have already received notices for deductions claimed for political contributions made through electoral bonds, people familiar with the development told ET.
The Supreme Court had on February 15 held the electoral bond scheme to be unconstitutional. The scheme had raised ₹16,518 crore for political parties since it was notified in January 2018.
Industry has asked that deductions claimed in respect of electoral bonds should not be questioned.
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"There is no clarity on political donations made through electoral bonds made up to February 15, the date of the Supreme Court decision," said a person aware of the development. "There is the possibility of reopening of cases for past years for eligible claims."
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Typically, contributions to political parties and electoral trusts used to be claimed as deductions under Sections 80GGB and 80GGC of the Income Tax Act. Contributions after 2018 had to be made through the Electoral Bond Scheme, 2018. They were exempt from income tax under Section 13A of the Income Tax Act, 1961.
Tax experts say the decision has created a peculiar situation and needs to be clarified.
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"Administrative instruction is needed to be issued clarifying that those who made contributions as per the scheme passed should not be subject to roving enquiries," a tax expert said, adding that taxpayers could approach the court and file a writ.
