The Union Budget is likely to propose an amendment in the Income Tax Act and Companies Act to ensure sovereign assurance till February 15, 2024 to companies and other stakeholders in the wake of the Supreme Court declaring Electoral Bond Scheme and supporting amendments in various laws as ‘unconstitutional’.
Sources said that Section 13A(b) of the Income Tax Act may be deleted, effective until February 15, 2024, when the apex court scrapped the electoral bond scheme. Additionally, changes to Section 182 of the Companies Act regarding contributions to political parties are possible. A proviso might also be added to Sections 80GGB and 80GGC of the Income Tax Act, which allow companies to deduct contributions to political parties.
“Once the amendments enacted through the Finance Act are in place, they may provide clarity to the Tax Department and all stakeholders. Also, these will ensure sovereign assurance until the date of the apex court’s order,” a source said.
This is important as there are reports that some corporate purchaser of electoral bonds received IT notices on deduction claimed on expenditure for these instruments.
On February 15, the apex court said: “The Electoral Bond Scheme, the proviso to Section 29C(1) of the Representation of the People Act 1951 (as amended by Section 137 of Finance Act 2017), Section 182(3) of the Companies Act (as amended by Section 154 of the Finance Act 2017), and Section 13A(b) (as amended by Section 11 of Finance Act 2017) are violative of Article 19(1)(a) and unconstitutional.” Further the deletion of the proviso to Section 182(1) of the Companies Act permitting unlimited corporate contributions to political parties is arbitrary and violative of Article 14, it added.
Section 13 A of the Income Tax Act prescribes any income of a political party which is chargeable under the head “Income from house property” or “Income from other sources” or “Capital gains” or any income by way of voluntary contributions received by a political party from any person shall not be included in the total income of the previous year of such political party. Through the Finance Act 2017, additional conditions were added to facilitate the electoral bond scheme.
Accordingly, it was said that no donations of ₹2,000 or more is received otherwise than by an account payee cheque, bank draft, use of electronic clearing system through a bank account or through electoral bonds. It is proposed to amend the said section to provide that political parties shall not be required to furnish the names and addresses of donors who contribute via electoral bonds. This amendment will take effect from April 1, 2018, and will apply to the assessment year 2018-19 and subsequent years.
Since the names of donors have been made public, reports suggest notices have been issued to some of donors.
There are over 1,300 companies that bought electoral bonds amounting ₹16,000 crore and donated to various political parties. Following the Supreme Court’s order, the State Bank of India, lone issuer of the bond, gave details of all the purchasers and the list was published on the website of the Election Commission of India.