AMENDMENTS TO INCOME-TAX ACT
TAXATION LAWS (AMENDMENT) ACT, 1978
Special provisions relating to income of political parties - New section
13A
3. The Amending Act has inserted
a new section 13A in Chapter III which provides that
the following categories of income derived by a political party will not be included in
computing its total income :
a. any income which is chargeable under the heads "Interest
on securities",
"Income from house property " and "Income from other sources", and
b. any income by way of voluntary contributions.
TAXATION LAWS (AMENDMENT) ACT, 1978
4. Exemption under the new provision
will not be available unless the political party
fulfils the following conditions, namely :—
i. the political party keeps and maintains such books
of account and other
documents as would enable the Income-tax Officer to properly deduce its income
therefrom ;
ii. the political party keeps and maintains a record of
each voluntary
contribution in excess of Rs. 10,000 and of the names and addresses of persons who have
made such contributions ; and
iii. the accounts of the political party are audited by a chartered
accountant or
other qualified accountant as defined in the Explanation
below section 288(2).
TAXATION LAWS (AMENDMENT) ACT, 1978
5. The Explanation
to new section 13A defines the term "political party" as an
association or body of individual citizens of India registered with the Election
Commission of India as a political party under paragraph 3 of the Election Symbols
(Reservation and Allotment) Order, 1968 and includes a political party deemed to be
registered with that Commission under the proviso to sub-paragraph (2) of that
paragraph. Hence, exemption under the new provision will be available only in the cases
of political parties which satisfy the tests laid down in the aforesaid definition.
[Section 2(a)
of the Amending Act]
TAXATION LAWS (AMENDMENT) ACT, 1978
Disallowance of expenditure on advertisement in souvenirs, etc., published
by
political parties - Section 37(2B)
6. The Amending Act has inserted
a new sub-section(2B) in section 37 to provide that,
notwithstanding anything contained in sub-section (1) of that section, no deduction shall
be allowed in respect of expenditure incurred by an assessee on advertisement in any
souvenir, brochure, tract, pamphlet or the like published by a political party. It is relevant
to note, that the term "political party" has not been defined for the purposes of this
provision. As such, the term will bear its ordinary meaning and, therefore, wider
connotation for the purposes of this provision.
TAXATION LAWS (AMENDMENT) ACT, 1978
Consequential amendment in section 37(3A)
7. The Amending Act has also
made certain consequential amendments in new sub-section (3A) directed to be inserted in section 37
by the Finance Act 1978. Section
37(3A) provides for the disallowance of a specified percentage of the "adjusted
expenditure" incurred by an assessee on advertisement, publicity and sales promotion in
India. Under the provision as enacted by the Finance Act, 1978, the term "adjusted
expenditure" has been defined as the aggregate expenditure incurred by a taxpayer on
advertisement, publicity and sales promotion in India as reduced by so much of such
expenditure as is not allowed under section 37(1) or 37(3). In consequence of the
insertion of new sub-section (2B) relating to the disallowance of expenditure on
advertisement in souvenirs, etc., published by political parties, the definition of the term
"adjusted expenditure" has been amended to secure that the amount disallowed under
new sub-section (2B) will also be deducted from the aggregate expenditure on
advertisement, publicity and sales promotion in India for the purposes of computing the
"adjusted expenditure".
TAXATION LAWS (AMENDMENT) ACT, 1978
8. The other amendment made
in sub-section (3A) of section 37 is intended to clarify that
the disallowance under that sub-section shall be without prejudice to the provisions of
new sub-section (2B).
[Section 2(b)
of the Amending Act]
TAXATION LAWS (AMENDMENT) ACT, 1978
Return of income by political parties - Section 139(4B)
9. The Amending Act has inserted
a new sub-section (4B) in section 139 which casts an
obligation on the chief executive officer (where such chief executive officer is known as
Secretary or by any other designation) of every political party to furnish a return of
income of the political party, if the total income of the political party, as computed under
the provisions of the Income-tax Act without giving effect to the exemption under new
section 13A, exceeds the maximum amount which is not chargeable to income-tax. The
term "political party" has been defined for the purposes of section 139(4B) and, as such,
for the purposes of this provision also, it will bear its ordinary and wider meaning.
[Section 2(c)
of the Amending Act]