Recently, the Income Tax department has carried out raids and found heavy bogus donation to various regional political parties against RUPP (Registered Unrecognized Political Parties). More than 20 registered unrecognised political parties in Ahmedabad city of Gujarat itself suspected of laundering cash received in the guise of donations, thereby evading tax. Rashtriya Komi ekta Party is one of the 23 Registered unrecognised political parties, where ITAT Ahmedabad allowed the donation under section 80GGC of the act.
The case is of Armee Infotech who made donation of Rs 55 Lakhs to a Political Party, Rashtriya Komi ekta Party, being a RUPP (Registered Unrecognized Political Parties) for the AY 2012-13 under section 80GGC of the Act. Similarly, for the AY 2014-15, amount of Rs 3 crore donated to the same party.
Assessing Officer after finding that the political donation was against a RUPP made addition of Rs 55 Lakh income in the hands of assessee for the AY 2012-13. CIT(A) deleted the addition of Income for the political donation made for AY 2012-13.
Th revenue department appealed to ITAT Ahmedabad on the case that the assessee failed to prove, whether ultimately, the donees (party) have used these monies.
Read Also: Income tax notices sent to all involved in bogus political donation; check full list of party
ITAT Ahemdabad in case of ACIT Vs. Armee Infotech held
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 the donee 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.
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 is fallacy in the approach of the AO as well as the CIT(A) for disallowing the donations made by the assessee.
The Court do not find merit in the grounds of Revenue raised in the AY 2012-13. The 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 AY 2014-15 for disallowance of Rs.5,86,32,892/- is allowed.
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