No exemption under sec. 13A to a political party if it fails to maintain books of account

Facts:

a) The assessee (the then ‘Janata Party’) was a political party registered under the Representation of the People Act, 1951 ('RP Act'). It claimed exemption under Section 13A in respect of voluntary contribution received from members.

b) Assessing Officer (AO) taking a view that assessee did not maintain proper books of account, rejected its claim for exemption.

c) The CIT(A) confirmed the order of the AO. However, on further appeal by assessee, the tribunal reversed the order of the AO.

d) Aggrieved by the order of the tribunal, revenue filed the instant appeal before the High Court.

The High Court held in favour of revenue as under-

1) The three mandatory requirements for availing of the benefit of exemption under Section 13A are that a political party:

•          has to keep and maintain such books of account and other documents as would enable the AO to properly deduce its income;

•          has to, in respect of each voluntary contribution in excess of Rs. 20,000, keep and maintain a record of such contribution and the name and address of the person who has made such contribution;

•          has to get its accounts audited by an Accountant as defined in the Explanation to section 288(2).

2) In the instant case, it was undisputed that no regular books of account had been maintained by assessee except at its central office and audit report did not satisfy the requirement of the law. Further, no explanation was furnished regarding the source of the amount deposited in bank account.

3) Hence, exemption under section 13A was rightly denied to assessee - [2016] 68 taxmann.com 299 (Delhi)