Political parties registered with the election commission may not necessarily escape scrutiny of their returns with regard to deposits of old demonetised notes just because they are exempted from taxation under Section 13 A of income tax law.
For political parties to gain exemption under Section 13 A, certain conditions have to be met.
Also, there are "enough provisions" in the income tax law to scrutinise the accounts of political parties, which are also subject to other provision including filing of returns, the Central Board of Direct Taxes (CBDT) said in a clarificatory statement.
"There have been some newspaper reports which seem to wrongly suggest that there cannot be any scrutiny of income tax returns of political parties registered with the election commission in the context of deposits of old currency notes", said the Central Board of Direct Taxes (CBDT) statement.
This inference seems to have been drawn because of the fact that the income of the political parties is exempt from income tax under Section 13A, the statement added..
CBDT statement noted that the conditions that have to be met for availing Section 13 A exemption include keeping and maintaining books of accounts and other documents as would enable the assessing officer to deduce its income therefrom; In respect of each voluntary contribution in excess of Rs. 20,000, the political party will have to maintain a record of such contributions along with the name and address of such person who has made such contribution; The accounts of each such political party is to be audited by a Chartered Accountant; and The political party has to submit a report to the Election Commission about the donations received within a timeframe prescribed.
No special treatment for political parties, clarifies Jaitley
Meanwhile, Finance Minister Arun Jaitley said in a statement that political parties have not been granted any exemption post demonetisation and introduction of Taxation Laws (second amendment) Act 2016 which came into force on December 15 this year.
Post demonetisation, no political party can accept donations in 500 and 1000 rupee notes since they were rendered illegal tenders. Any party doing so would be in violation of law, Jaitley added.
Just like anyone else, political parties can also deposit their cash held in the old currency in banks till December 30 provided they can satisfactorily explain the source of income and their books of accounts reflect the entries prior to November 8.
If there is any discrepancy in the books or records of political parties, they are as liable to be questioned by the income tax department as is anyone else. They enjoy no immunity whatsoever, Jaitley added.
"There is no question of sparing anyone, and the political class is no exception. In fact, PM Modi is setting a new example of propriety in public life, by asking all MPs, MLAs of BJP to submit their bank account details post demonetisation. We would like to urge the other parties to do the same and prove their intentions against corruption", Jaitley said.