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Mohan Padmanabhan

KOLKATA, April 19

THE Election and Other Related Laws (Amendment) Bill, 2002, now pending before Parliament, is purportedly intended to "bring transparency in the funding of political parties by the corporate sector and by other persons by streamlining and promoting donations received by parties for elections by giving suitable tax exemptions and withdrawal thereof in specified circumstances."

While some of the top corporate houses prefer to remain silent, as the Bill has not yet been passed, tax experts are not amused. Questioning the rationale behind such tax exemptions, especially when the Finance Minister himself had clearly indicated in the Budget speech that exemptions would now have to go, they feel that such a relief would be a travesty of justice as far as the honest taxpayer was concerned.

Moreover, the powerful corporates would now be legally allowed to meddle in political affairs through use of money power, and this may lead to a disturbing trend, it is feared.

Talking to Business Line, Mr Narayan Jain, a tax advocate and author, said it was unfair that while honest taxpayers are being pressured to quote (permanent account number) PAN number and other details even for small amounts paid out, donations up to Rs 20,000 (amount now proposed to be raised from the earlier Rs 10,000) could be made to political parties without any hassle and one can enjoy tax relief in return.

In a lighter vein, he remarked that if such amendments in the Income-Tax Act are brought in, people may find it more useful to donate to political parties rather than invest in savings instruments which fetch rebates under Section 88.

He said if one donation (of Rs 20,000) is received every day, in a 365-day year, the party will net a neat Rs 73 lakh, and if 10 such donations are received per day for the same period, the rake in will be Rs 7.3 crore. The Bill proposes to amend the Representation of the People Act, 1951, the Companies Act, 1956 and the Income-tax Act, 1961.

The key section of 13A, which elaborates on the special provision relating to incomes of political parties, is now proposed to be amended (clause b), to raise the amount of hassle-free donation to Rs 20,000 from the existing Rs 10,000. In the case of such voluntary contributions in excess of Rs 10,000, political parties are now expected to maintain a record, especially the name and address of persons contributing.

The other two new sections are 88D and 88E, to be inserted after 88C; under 88D (donation by companies), while computing the amount of income-tax on the total income of an Indian company, there shall be allowed from the amount of income (as computed before allowing the deduction under this section) a deduction of an amount contributed directly or indirectly to any political party or for any political purpose to any person. Section 88E, in a similar fashion, governs donations given by any persons to parties.

Criticising the proposed changes, Mr Jain suggested that any donation to a political party of an amount exceeding Rs 1,000 should be put on record and maintained by the party for tax purposes, if accountability and transparency has to be there, especially since no ceiling on such donations was being prescribed. The overall tax kitty of the Government, already under strain, would be further hit, as corporates would be paying less tax because of the rebates, he pointed out.

The Government, he clarified, would also have to shell out more by way of free supply of certain material to candidates of recognised political parties, if the new section 78A is introduced in the Representation of the People Act. The wording of the Bill, with regard to the above Act in the area of audit and accounts of donations report, also leaves much to be desired.

Mr Jain said it was significant that while the earlier Dinesh Goswami Committee was of the view that donations made by companies to political parties be completely banned, the Indrajit Gupta Committee report of 1999 left the decision in this regard to ''the wisdom of Parliament and the Government''. The bottom line, according to the Union Minister of Law and Company Affairs, Mr Arun Jaitley, while delineating the objects and reasons for the proposed Bill, was that "the corrupting influence of money in politics has, however, not abated despite these legislative remedies."

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