Pranav B Prem

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT), consisting of Judicial Member Shri Satbir Singh Godara and Accountant Member Shri M. Balaganesh, dismissed the appeal filed by the Indian National Congress (INC) seeking exemption of ₹199.15 crore under Section 13A of the Income Tax Act, 1961, for Assessment Year 2018–19. The Tribunal found that the political party had failed to comply with the mandatory condition of filing its return on or before the “due date” as required by the third proviso to Section 13A, and held that the belated return rendered the exemption claim invalid.

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Background of the Case

The Indian National Congress filed its return of income for AY 2018–19 on 02.02.2019, declaring “nil” income after claiming an exemption under Section 13A for ₹199,15,26,560. This was well beyond the prescribed “due date” of 31.10.2018 under Section 139(1). The Assessing Officer denied the exemption on the ground of delayed filing, and this finding was later upheld by the Commissioner of Income Tax (Appeals). The party then approached the ITAT in second appeal. The party argued that the return was still filed before the extended timeline under Section 139(4), which allowed returns up to 31.03.2019 for the relevant assessment year. It claimed that compliance with the broader deadline should be sufficient for Section 13A, and that denial of exemption based on mere delay would defeat the purpose of the provision.

Arguments Rejected by ITAT

The Tribunal, however, rejected these submissions in clear terms. It held that Section 13A imposes specific conditions that must be strictly fulfilled in order to qualify for exemption. One such condition, incorporated through the third proviso inserted by the Finance Act, 2003, is that the return of income must be furnished “on or before the due date under Section 139(1).”

The bench observed: “We are of the considered view that the above former clause in fact restricts any further liberalism herein as clearly incorporating the expression of 'due' date; and, therefore, the moment there is violation of such a 'due' date, section 13A 3rd proviso gets attracted, so as to result in denial of exemption to the political party concerned.”

The ITAT emphasized that a return filed under Section 139(4) (belated return) does not override the specific requirement of “due date” in Section 139(1) when it comes to claiming exemptions under Section 13A. It clarified that though Section 139(4) allows late returns for general assessment purposes, the benefit of exemption under Section 13A is subject to stricter statutory conditions.

Reliance on Judicial Precedents

The Tribunal extensively referred to binding precedents, including:

1. Delhi High Court Judgment in INC v. CIT (2016), where it was held that compliance with Section 13A conditions must be strict, and failure to meet them disentitles the party from claiming the exemption.

2. Supreme Court's Constitution Bench ruling in Commissioner v. Dilip Kumar & Co. (2018) 9 SCC 1, which established the principle that exemption clauses in taxing statutes must be strictly interpreted, and in case of ambiguity, the benefit must go to the Revenue, not the assessee.

The Tribunal reaffirmed that exemption provisions are not to be interpreted liberally and must be viewed narrowly in line with these rulings.

Applicability of Section 139(4B)

The Tribunal clarified that political parties must furnish returns as per Section 139(4B), which mandates that the return of income should be furnished within the time allowed under Section 139(1). The bench held that: “Section 139(4B) has stipulated filing of return within the ‘due’ date i.e., required to be furnished under Section 139(1).”  Hence, returns filed after the due date, even though within the extended time limit under Section 139(4), would not meet the requirement of Section 139(4B) read with the third proviso to Section 13A.

On Other Grounds and Arguments

Given that the primary requirement of filing the return on time was not fulfilled, the ITAT observed that it was unnecessary to go into the remaining grounds or other arguments raised by the assessee. It stated: “We are of the considered opinion that since the assessee’s instant grievance fails on the very legal issue of belated filing of return, the rest of the grounds on merits become academic.”

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The Tribunal ultimately held that the return filed on 02.02.2019 was not within the prescribed “due date” of 31.10.2018 under Section 139(1) and therefore, the assessee was not entitled to exemption under Section 13A. It dismissed the appeal and upheld the denial of the ₹199.15 crore exemption to the Indian National Congress.

Appearance

Assessee: Sh. P.C. Sen, Sr. Adv. Sh. Prasanna, Adv. Sh. N. Bhalla, Adv. Sh. L.M. Garg, CA

Department: Sh. Zoheb Hossain, Special Counsel Sh. Vipul Agrawal, Sr. Standing Counsel Sh. Sanjeev Menon, Adv. Ms. Purvi Nanda, ACIT

Cause Title: Indian National Congress All India Congress Committee V. DCIT

Case No: ITA No.1609/Del/2023 

Coram: Satbeer Singh Godara [Judicial Member], M. Balaganesh [Accountant Member]