Tax returns of political parties can be made public

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Tax returns of political parties can be made public
By T. N. Pandey in the Hindu

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The only way a citizen can gain access to the details of funding of
political parties is through their income-tax returns filed annually
with the I-T authorities.
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Section 13A of the Income-Tax Act, 1961 is a special provision
relating to income of political parties, which mean parties registered
under Section 29A of the Representation of People Act, 1951 (RPA),
vide this section, income of political parties from (i) house
properties; (ii) income from other sources; (iii) capital gains; and
(iv) income by way of voluntary contributions received from any
person, are exempt from income-tax provided:
Such political parties keep and maintain books of accounts and other
documents as would enable the assessing officer (AO) to properly
deduce income therefrom;
For voluntary contributions, in excess of Rs 20,000, the political
parties maintain a record of such contributions with the name and
address of the contributors, who have made the contributions;
The accounts of such parties are audited by chartered accountants.
The exemption gets forfeited if a political party fails to submit a
report under Section 29C(3) of the RPA for a financial year.
Demand under RIA

The Right to Information Act (RIA) is applicable in respect of public
authorities established, owned or substantially financed by the
Central Government, the State Governments, Union Territories,
including panchayats, municipalities and other local bodies. It
extends to the whole of India except Jammu and Kashmir. The I-T
Department is certainly a department of the Central Government and,
therefore, comes within the purview of the RIA.
According to Section 2(j) of the RIA, 'right to information' means the
right to information accessible under the Act, which is held by or
under the control of any public authority and, inter alia, includes
taking notes, extracts, or certified copies of documents and records
available with the specified authorities.
Income-tax returns would fall in this category, where right of
inspection or asking for certified copies can be exercised. Section 8
of the RIA enumerates situations where exemption can be claimed in
respect of the information in the possession of an authority on an
application made to it under the provisions of the RIA.
Returns of political parties

Can exemption be claimed by the I-T Department with regard to returns
filed by the political parties? This issue came in for the
consideration of the Central Information Commission (CIC) in the Ms
Anumeha, C/o Association for Democratic Reforms vs Chief CIT
(CIC/AT/A-200701029, 01263 TO 1270 dated April 29, 08) case (reported
in Vol.-12, Part-I of Corporate Professionals Today of May 1-15,
2008).
In the application filed under the RIA, the argument for getting the
information was that since political parties exercise power,
transparency in their organisation, functions and, more particularly,
their means of funding is a democratic imperative and, therefore, it
is in public interest that the income-tax returns of political
parties, insofar as they contain funding details, should be disclosed.
This view has been accepted by the Commission. The view expressed by
the Commission is that the laws of the land do not make it mandatory
for political parties to disclose the sources of their funding, and
even less so the manner of expending those funds. In the absence of
such laws, the only way a citizen can gain access to the details of
funding of political parties is through their income-tax returns filed
annually with the I-T authorities.
This is about the closest political parties get to accounting for the
sources and the extent of their funding and expenditure. There is
unmistakable public interest in knowing these funding details, which
would enable citizens to make an informed choice about the political
parties to vote for.
The RIA emphasises that "democracy requires an informed citizen" and
that transparency of information is vital to flawless functioning of
constitutional democracy. It can be nobody's case that while all
organs of the state must exhibit maximum transparency, no such
obligation attaches to political parties. Given that political parties
exercise power, transparency in their organisation, functions and,
more particularly, their means of funding, is essential and,
therefore, is public interest.
However, a safeguard has been provided in the matter of furnishing the
information. Though the I-T returns of political parties regarding the
funding details are liable for disclosure, there should be no
disclosure of PAN of such parties in view of possibility of fraudulent
use of such disclosure.
(The author is a former chairman of CBDT.)
The Hindu Business Line : Tax returns of political parties can be made public

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Funding details of big two parties throw up surprises

Reported by Utkarsh Anand, June 13, 2008 in Indian Express

BJP gets Dow money, Shahdara ‘builder’ tops list; Cong’s big donor is Aditya Birla group

New Delhi, June 12: While its Madhya Pradesh government has demanded more compensation for Bhopal victims and funds for a memorial, an uncomfortable fact has tumbled out of the BJP closet: that the party in 2006-7 received a donation of Rs 1 lakh from Dow Chemicals, the US-based company that acquired the controversial Union Carbide.


This is one of the facts thrown up by a Right To Information (RTI) application about the donations above Rs 20,000 to the BJP and the Congress in 2005-7.

The revelations come a month after the Central Information Commission (CIC) rebuffed political parties for their reluctance to part with the information pertaining to their funding and held there was “public interest” in knowing their sources of money.

While the biggest donor for the Congress in 2006-7 was the General Electoral Trust of the Aditya Birla Group (which had given Rs 35 lakh to the BJP in 2005-6), for the BJP it was Akik Education Centre (P) Ltd, based in Shahdara in East Delhi.

A visit to the address of the Akik Education Centre revealed that it was a residential building with no sign of any academic activity. Subodh Kumar, the owner of the house, said that his elder brother was a director of the Akik Education Centre which was also involved in construction. He also said that the company did not have an office. “Registered office to wohi hai par vaise chalta firta office hai hamara (This is our registered office but our office is mobile),” he said. He said his elder brother would be able to talk about the donation to the BJP. But when contacted later, he said his elder brother was out on a vacation.

The RTI petition was filed by Afroz Alam, a Delhi-based social activist.
Asked about the donation from Dow, which has been under the constant criticism of the activists for reportedly evading the legal responsibilities of India’s worst industrial disaster ever since it took over Union Carbide, BJP spokesperson Ravi Shankar Prasad said he would have to verify the record as neither he nor his party has seen it (the documents made available through RTI).

“I am not aware of it and, hence, would refrain from commenting but BJP does verify the credentials of its contributors before accepting the funds and the party will never receive donations from a criminal or a mafia,” said Prasad.

While the BJP’s list of corporate donors is longer, the Congress has a string of donors from within_including Sonia Gandhi (Rs 39,350 in 2005-6 and Rs 28,117 in 2006-7) and Manmohan Singh (Rs 50,000 in 2006-7).

Another interesting fact is both the parties have more or less equal financial support from Goa where the governments change more often than seasons. Almost all significant Goan industrialists-Salgaonkar, Dempo and Sesa-have contributed generously to both.
Congress treasurer Motilal Vora said political funding was already transparent as the party was furnishing all the details to the Election Commission and the Income Tax authorities. Vora clarified that the money was accepted only after checking the donors’ credentials.

When asked about companies in politically unstable Goa contributing equally to both Congress and BJP, he said, “How would we know where else are they donating? We receive funds from people and institutions which are our party’s sympathisers and connect with its ideology.”

IndianExpress.com :: Funding details of big two parties throw up surprises

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As reported by Ananya Sengupta in telegraphindia.com on 16 June 2008:
The Telegraph - Calcutta (Kolkata) | Frontpage | Schools bankroll parties

Schools bankroll parties
- ‘Gifts’ flow from Delhi schools to Congress, BJP



[LEFT]New Delhi, June 15: Watch it, moms and dads, while you shell out big bucks to get your kids into Delhi public schools! Chances are the cash you are “donating” to the students’ welfare fund is going someplace else.

[/LEFT]
[LEFT]A plea filed by a social activist under the Right to Information Act has revealed that public schools in the capital have been making donations to political parties, possibly to court favour with them.

[/LEFT]
[LEFT]According to documents available with The Telegraph, the Congress treasury swelled by nearly Rs 3 lakh in the financial year 2005-06 and the BJP’s by Rs 75 lakh in 2006-07, thanks to “gifts” from public schools.

[/LEFT]
[LEFT]The information was revealed to Afroz Alam Sahil, who had sought a report on donations above Rs 20,000 received by parties. Sahil said he had the records only for the two parties and the list could be longer if other parties were scrutinised.

[/LEFT]
[LEFT]Two public schools have issued cheques with a c/ in the name of state education minister Arwinder Singh Lovely.

[/LEFT]
[LEFT]The money routed through Lovely shows in the Congress account.[/LEFT]
[LEFT]These are St Lawrence Convent and Sai Memorial Educational Society, which have paid Rs 51,000 (cheque No. 144390, UTI Bank) and Rs 75,000 (cheque No. 099701, Indian Bank) respectively.

[/LEFT]
[LEFT]Lovely, however, said: “Party sympathisers pay donations. No public school pays donation to political parties. There is a difference between donating to a relief fund and donating to a political party. During a crisis, many schools and other organisations pay to the party’s relief fund of their own accord.”

[/LEFT]
[LEFT]But S.L. Jain, chairman, National Progressive School Conference, which has all public schools in the country under its ambit, was aghast.

[/LEFT]
[LEFT]“I am shocked. This is highly irregular. Public schools are not supposed to issue any cheques to anyone --- political parties or otherwise. If there is an emergency in the country, we do raise funds, but that is done after a proper circular is issued by the schools informing the parents.”

[/LEFT]
[LEFT]Jain said the money raised was then handed over to the chief minister’s relief fund or whichever credible fund had been set up for the crisis.

[/LEFT]
[LEFT]“No school can decide on its own to donate to relief funds or issue cheques to political parties. This is entirely unethical. One can easily guess why these schools need political patronage,” he said, pointing out that the schools were not among the most sought after in the capital.

[/LEFT]
[LEFT]Sources said the schools might be topping up party coffers to extract benefits such as land for expansion and to generally keep themselves out of trouble.

[/LEFT]
[LEFT]Other Delhi schools that have made payments to the Congress are:

[/LEFT]
[LEFT]a) Sarvodaya Modern School, which has paid Rs 31,000 (cheque No. 001719, HDFC Bank, New Delhi);

[/LEFT]
[LEFT]b) Bharti Public School c/ Ramesh Pandit, which has paid Rs 25,000 (cheque No. 011821, Canara Bank);

[/LEFT]
[LEFT]c) Little Flower Public School c/ Ishwant Singh, which has paid Rs 21,000 (cheque No. 340014, Syndicate Bank);

[/LEFT]
[LEFT]d) Principal, Kalka Public School, which has paid Rs 50,000 (cheque No. 774051, Bank of Punjab Ltd);

[/LEFT]
[LEFT]e) Kala Niketan Bal Vidhyalaya, which has paid Rs 31,000 (cheque No. 245651, Central Bank).

[/LEFT]
[LEFT]The Rs 75-lakh donation to the BJP has been made by a single school --- Akik Education Centre (P) Ltd. The payments are by draft, six of them for Rs 9 lakh and three for Rs 7 lakh.

[/LEFT]
[LEFT]The numbers of the drafts for Rs 9 lakh are 601394, 601395, 601090, 601091, 601223 and 601219. Those of the Rs 7-lakh drafts are 601393, 601092 and 601218.

[/LEFT]
[LEFT]All nine drafts give the same address for the school -- 88 Baldev Park, Shahdara (east Delhi) – but each has a different pin code: from 110032 through 110040.

[/LEFT]
[LEFT]A visit to the address revealed a three-storey building that didn’t have a sign giving the school’s name.

[/LEFT]
[LEFT]Subodh Kumar, who said he was the owner of the house and was in the construction business, refused to give details about the school. He said his elder brother ran the school and would be able to answer questions about any donations, but added that he was away on vacation.

[/LEFT]
[LEFT]The school is not registered with the Central Board of Secondary Education, Council for the Indian School Certificate Examinations or the Delhi state board, as their websites show. Jain said it could be a centre for private coaching.

[/LEFT]
[LEFT]None of the other schools or the political parties would comment on the donations or say what the money was being used for. Many of the schools said no official was present since classes were closed for the summer vacation.

[/LEFT]
[LEFT]BJP spokesperson Rajiv Pratap Rudy expressed surprise that such payments were being made.

[/LEFT]
[LEFT]“I am very surprised and unable to understand how and on what pretext an educational institute would issue cheques to political parties,” he said. “This is akin to running a business in the name of education. To the best of my knowledge, I don’t recall our party getting such cheques.”








[/LEFT]

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Political bet?

As Reported By Khushboo Narayan in Live Mint
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Parties get biggest financial helping from firms
Political analysts and activists said such disclosures by the Election Commission,
even if forced by RTI, can be a step towards accountability
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Mumbai: India’s two biggest political parties, the Congress and the Bharatiya Janata Party (BJP), received at least Rs104 crore in officially disclosed contributions between 2004 and 2007, largely from well-known companies.

Almost a third of this amount came in 2004-05, the last year in which national elections were held.
Contributions are expected to soar in 2008-09 in the run-up to elections, officially due sometime in early 2009.

India’s Election Commission provided the information on contributions, or donations as they are dubbed, to Parivartan, an activist group that had filed a right to information, or RTI, application seeking a report on single contributions of more than Rs20,000 to political parties during these years.

The disclosure sheds some light on what has been and continues to be a grey area in the Indian electoral system. Unlike in the US, where parties and candidates have to disclose funding sources, the financing of Indian parties and politicians has always been a secretive affair. Not all companies and other contributors funding the parties disclose details of this; nor do all recipients.

Sometimes, the funding is in kind, through the use of aircraft, vehicles, guest houses or other infrastructure. It is widely acknowledged that significant amounts of cash are donated and deployed by most politicians and political parties in India, much of which is never accounted for.

According to the Election Commission, the Aditya Birla Group, an industrial conglomerate, was the largest donor to any political party between April 2006 and March 2007. It gave Rs10 crore to the Congress, the dominant party in the ruling United Progressive Alliance government.

Pharmaceuticals giant Ranbaxy Laboratories Ltd was the next biggest donor for the Congress in that year, giving Rs40 lakh.
A spokesperson of the Aditya Birla Group simply said: “The group has a general electoral trust, which is administered by highly reputed people such as Julio Ribeiro (former director general of Punjab Police and governor of Jammu and Kashmir), Tarjani Vakil (a finance professional) and E.B. Desai (a legal luminary). The trust is managed independently.”

A Ranbaxy executive said the company’s annual report mentioned that it has donated Rs40 lakh each to the Shiromani Akali Dal and Punjab Pradesh Congress.

For the current main opposition, or the BJP, the biggest donors were Noida-based Jubilant Enpro Pvt. Ltd and Kamaljeet Singh
Ahluwalia, with contributions of Rs50 lakh each.

In the previous year, from April 2005 to March 2006, Videocon International Ltd contributed Rs3 crore to the Congress party, while the biggest donor for the BJP was Akik Education Centre, which gave Rs75 lakh. Details on Ahluwalia and Akik Education Centre were not immediately available.

An email sent to Jubilant Enpro did not elicit any response and its spokesperson was travelling. Videocon group chairman Venugopal Dhoot declined to comment. Some promoters of Jubilant are significant shareholders in HT Media Ltd, which publishes Mint.
Political analysts and activists said such disclosures by the Election Commission, even if forced by RTI, can be a step towards accountability even if these official sums are likely to be a fraction of total contributions, most of which remain unreported and unaccounted.

“Many companies give their funding clandestinely,” notes Jaiprakash Narayan, national coordinator of Loksatta, an activist group that works in the area of political reform. “These firms don’t want to be seen funding a political party and political parties don’t want money that is accounted for because the real electoral expenditure is no longer legitimate. We need to make the pain of unaccounted donations so great that no entrepreneur will take the risk to do it.”

Even with this list, many contributors’ identities remain unclear. For instance, in 2003-04, when the Congress was the opposition party, it received Rs5 lakh from an entity simply listed as “National Growth”.
The biggest donations for both parties naturally came in an election year, 2004-05. The BJP, then the dominant constituent of the ruling National Democratic Alliance, saw its treasury swell by about Rs34 crore from contributions. The Congress received Rs32 crore.

“Official donations are not necessarily voluntary donations. As 2004 was the election year, both parties must have gone to business houses seeking donations rigorously,” said psephologist and Mint columnist G.V.L Narasimha Rao. “You can expect a spurt in donations this year due to the elections ahead.”

In other years, the contributions are usually more modest.
In 2003-04, the BJP received at least Rs11 crore while the Congress managed Rs2.35 crore. In 2005-06, the Congress received Rs6 crore, against BJP’s Rs3 crore. The Congress doubled its collection to Rs12 crore the following year, while the BJP received Rs4 crore.

Over the years, there have been some regular contributors, some of which have given money to both the Congress and the BJP.

For instance, between 2003 and 2007, the biggest contributor has been the Aditya Birla Group through its General Electoral Trust. The trust has contributed Rs21.71 crore to the Congress in this period and Rs3.16 crore to the BJP. Other significant contributors include the Vedanta group, either through its Indian subsidiary Sterlite Industries (India) Ltd, or a trust run by this subsidiary, the Public and Political Awareness Trust.

Vedanta’s contribution between 2003 and 2007 has been Rs10.5 crore. Of this, Rs1 crore has gone to the Congress and Rs9.5 crore to the BJP.
An email sent to the Vedanta group did not elicit any response.

Other donors include the Tata group through its Electoral Trust (it gave money only in 2004-05, and to both parties), Jindal Steel and Power Ltd (which gave money to both parties in 2003-04) and Bajaj Auto Ltd, which gave money to the BJP in 2003-04 and the Congress in 2004-05.

India’s biggest company by market capitalization, Reliance Industries Ltd, is missing from the list, as is any company that is part of the Reliance-Anil Dhirubhai Ambani Group (R-Adag).

Also missing are all of India’s large software services firms, Infosys Technologies Ltd, Wipro Ltd and Satyam Computer Services Ltd (the largest, Tata Consultancy Services Ltd, is part of the Tata group).
RTI activist Arvind Kejriwal said he hoped the disclosure on corporate donations through RTI would empower people to draw linkages and question favours granted to companies by political parties.

“This transparency will force political parties not to be blatant in favouring these business houses,” added Kejriwal, who won the Ramon Magsaysay award in 2006 for his work in transparency in governance through RTI.

Political bet? Parties get biggest financial helping from firms - Economy and Politics - livemint.com

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The full list of contributors is attached to this post.

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Power makes political parties grow richer, faster
as reported by Chetan Chauhan, Hindustan Times, New Delhi, September 17, 2008

That political parties in power at the Centre can make more money than those out of power is understandable. Now here’s proof.

The Congress party’s assets grew at a rate of 28.5 per cent annually since 2004 — the year it replaced the Bharatiya Janata Party (BJP) as the principal ruling party at the Centre.

This is revealed in the Income Tax documents submitted by the parties, which were made available to NGO Association for Democratic Reforms against a right to information application.
The Congress received Rs 69.56 crore in 2003, Rs 153 crore in 2004. The contributions shot up to Rs 227 crore in 2005.

On the other hand, the BJP recorded a fall in the contributions it received annually after 2004.
While the BJP’s annual growth is less than India’s 8 per cent, the Congress party’s fund grew three times faster than the country’s economy.

Even allies of the Congress did well in its ruling years — the CPM received Rs 152 crore between 2001 and 2006. It was Congress’ new-found ally, the Samajwadi Party, that had the fastest annual economic growth — 40.9 per cent.

The party was followed by its rival in UP, the Bahujan Samaj Party, with a rate of economic growth of 32.2 per cent.

The source of income for political parties, excluding the Left parties, was from corporate houses and voluntary ‘donations’. The parties also earned from membership fees.

Dr N Bhaskara Rao, Chairman of the Centre for Media Studies (CMS) points out that “these figures are still not the total money that political parties get”.

“These are only those amounts that have been contributed by large industries. The parties are not required legally to declare contributions below Rs 20,000,” said Rao.
Power makes political parties grow richer, faster- Hindustan Times

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New parties narrow cash gap with old
as reported in Live Mint by Ruhi Tewari and Teena Jain, Sep 30 2008

The aggregate assets of seven parties, including the Indian National Congress and Bharatiya Janata Party were almost Rs580 crore according to these filings

New Delhi: New political parties seem to have successfully piggybacked a rapidly expanding economy, changing rules and coalition dynamics to catch up with older and more established rivals in raising money, according to income-tax (I-T) filings.

Click here to listen to an interview with Amitabh Singh, partner with global tax advisory services Ernst and Young, on tax laws that govern political parties in India

The aggregate assets of seven parties, including the 123-year-old Indian National Congress and the 56-year-old Bharatiya Janata Party (BJP), which grew out of the Bharatiya Jan Sangh, were almost Rs580 crore according to these filings, but two parties of relatively recent origin, the Samajwadi Party (SP) and the Bahujan Samaj Party (BSP), account for a little more than one-fifth of this number.

And even more significantly, some of the new parties have as much, if not more, money than older parties on their books.

For instance, in 2005-06, the most recent year for which data is available, the SP had Rs72 crore of cash (and bank balance) on its books, of which Rs40.34 crore came from voluntary contributions. The BSP had Rs24.67 crore. That compares with Rs27.49 crore for the Congress and Rs26.25 crore for the BJP.

These findings are the result of a Mint analysis of the information provided by the I-T department in response to a right to information (RTI) application filed last year by the Association for Democratic Reforms, an Ahmedabad-based non-political group that aims at bringing about government and electoral reforms.

To be sure, older parties have bigger balance sheets than newer ones — the balance sheet size of the Congress is Rs228.5 crore compared with the BSP’s Rs44.06 crore — and most parties end up spending a lot more than the numbers presented in the chart on elections.

The numbers are also interesting because it is among the first look at the closely guarded balance sheets of political parties. The details were made available in July by the I-T department after the Central Information Commission, overruled the objections of political parties.

The seven political parties on whom data was sought and provided are the Congress, the BJP, the Nationalist Congress Party, (NCP), the BSP, the Communist Party of India (CPI), the Communist Party of India (Marxist), or CPM, and the SP. While the first six are recognized as national parties by the Election Commission, the SP has been included because of its growing influence in national politics, especially after its recent alliance with the Congress.

While Rs200 crore, or 35%, of the total assets of the seven political parties is in cash, around Rs84 crore is in fixed assets. Interestingly, over the five-year period for which data was provided, the cash and assets of some of the relatively new parties have risen rapidly.

For instance, the balance sheet of the BSP, which was elected to power in Uttar Pradesh last year, on 31 March 2002 showed fixed assets of Rs98,000. The following year, it jumped to Rs58 lakh and, by the end of 2005-06, it rose to Rs11.73 crore.

The largest leap in its asset base came in 2001-02, which was also the year the BSP chief Mayawati came to power for the third time as chief minister of Uttar Pradesh.

Justifying the growth in assets, Ambeth Rajan, treasurer of the BSP, said: “An increase in the value of immovable assets is directly related to the number of people who voted for us, since we take money from our voters. Compare the percentage of votes in favour of the BSP in 2002 and 2007 and then you will know. It is directly proportionate to the number of votes. In 2007, 20.70 million people voted for us.”

Easier rules
One reason for the rapid growth in the size of the balance sheets of most parties between 2001-02 and 2005-06 is a change in rules. In 2003, India enacted a new law that made private donations to political parties easier. This law allows contributions by private firms to political parties with a maximum limit of 5% of their profits. It also makes contributions by cheques mandatory and asks that parties audit their annual accounts and maintain a list of donors who give more than Rs20,000 and submit this to the Election Commission.

The numbers do not come as a surprise to Pratap Bhanu Mehta, president, Centre for Policy Research, a New Delhi-based think tank. “We must understand that today in the context of an altered economy, one can generate huge assets and funds from many different sources as compared to earlier. Also, the size of UP (Uttar Pradesh) is equal to that of nine other states. So, its leading parties possessing major wealth seems fine,” he said.

India’s economy has expanded rapidly over the past few years and for the year ended March, the country’s national income at current prices was estimated at a little more than $1 trillion (Rs46.9 trillion).

The link between an expanding economy and the swelling balance sheets of political parties isn’t a straightforward one, said E. Sridharan, an expert who authored a study on political finance in India for University of Pennsylvania Institute for the Advanced Study of India. “More funds are available in a faster growing economy, but a more liberalized economy means that parties in power do not have the kinds of controls like licensing and import licensing that they used to have that could be used to export funds from business.”

While newer parties have begun to match their older rivals in fund-raising, these are yet to translate into share of seats in the Lok Sabha. Of the 542 seats in the current Lok Sabha (excluding the Speaker), the Congress won 153, the single largest, followed by the BJP with 129 seats, the CPM with 42 seats, the SP with 39, the BSP 17, the NCP 11 and the CPI 10.

ruhi.t@livemint.com

Krishnamurthy Ramasubbu contributed to this story.
This is the first of a three-part series that scrutinizes the I-T returns of six recognized national parties.

New parties narrow cash gap with old - Home - livemint.com

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I-T returns filed by parties show discrepancies
by Ruhi Tewari and Teena Jain in Live Mint, OCTOBER 02, 2008

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Some political parties are openly violating Election Commission guidelines regarding disclosure of their source of funds
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New Delhi: The Nationalist Congress Party (NCP) has been claiming the income tax (I-T) exemption that political parties are eligible for provided they meet one criterion—without doing so.

The condition involves submitting to the Election Commission (EC) a list of donors who contributed at least Rs20,000 to the party, or certifying that there are no such donors.

It isn’t just the NCP; the returns filed by several other parties, including the Communist Party of India (Marxist), or CPM, and the Bahujan Samaj Party (BSP) show discrepancies.

These findings are based on a Mint analysis of information on tax filings of seven parties between 2001-02 and 2005-06 provided by the I-T department in response to a Right To Information application filed last year by the Association for Democratic Reforms, an Ahmedabad-based non-political group which aims at bringing about government and electoral reforms.

The NCP, part of the ruling United Progressive Alliance government, “has never submitted a contribution report”, said a senior official at EC, a statutory body that conducts elections in India.

The official, who did not want to be named added that the party “submitted one earlier this year for the first time, pertaining to fiscal year 2006-07, but even that was done after the due date and hence, is of no use.”

According to the Representation of the People Act, political parties are to submit a contribution report for every financial year ending March to EC on or before the deadline for filing I-T returns for that year. EC issues a certificate to political parties that submit these reports, and this certificate has to be attached to the parties’ I-T filings.

Mint couldn’t independently ascertain whether the NCP failed to submit the report to EC or submitted it directly to the I-T department.

It also isn’t clear how the company could have filed its tax returns without a certificate from EC.

Y.P. Trivedi, treasurer, NCP, claimed that the party had been satisfying all required norms. “We have not received any complaints from the EC nor has there been any assessment order against us. All our accounts are properly audited.”

“If they (NCP) have not filed the contribution report with the Election Commission their exemption can be withdrawn. The Election Commission should have informed the income tax department,” said an official in the tax department who did not wish to be named.

EC and the I-T department, however, do not share information. Election commissioner S.Y. Quraishi said that the only consequence of a party not filing a report on contributions with it was that the party would not get any tax relief. “It is up to the I-T department to check that (whether they have filed a contributory report or not).”

Any party that fails to “file the contribution report for that financial year” would not “be eligible for exemption, in which case all contributions they have collected that year or any other income will get fully taxable”, said Amitabh Singh, partner, at audit and consulting firm Ernst and Young.

Yet, NCP’s filings for the years 2001-02 to 2005-06 show no tax payments.

Unbalanced finances
If NCP’s tax returns show that it paid no tax while it should have, CPM’s return for 2005-06 were filed with a balance sheet that didn’t balance.

The asset side of the sheet showed Rs107.88 crore, while the liabilities side showed Rs107.68 crore—a gap of Rs20 lakh.
This wasn’t a printing error as the aggregates added up to these numbers.

The balance sheet bears the stamp and signature of the auditor BM Sharma and Associates, and has been countersigned by senior party officials.

“The basic rule of a balance sheet is that its assets and liabilities sides should match. This is an instance of utmost carelessness and there is no reason why it should happen,” said a senior tax and audit expert who did not want to be named. The party, however, claimed this was merely a “clerical mistake”.

“It is a mistake on the liabilities side. It would have been worrying if there was a problem on the assets side,” said Sitaram Yechury, politbureau member of the CPM.

“Some figures had been wrongly punched while typing. It is not as if the balance sheet is not actually tallying. Even in the next balance sheet, there is no problem, which goes to show that this particular problem is merely a typographical error,” said Sharma.

The I-T department, which usually returns erroneous filings, seems to have missed this one. “We have not received any notice from the I-T department regarding this balance sheet,” Sharma added.

Losses in a boom
The I-T department also seems to have missed some unusual transactions in BSP’s tax returns.

The party’s return for 2005-06 shows that it bought and sold properties the same year at a loss. Three properties in the New Civil Lines area in Lucknow were sold at a loss the same year they were bought, as was another property in another neighbourhood.

According to real estate consultants who do not want to be named because a political party is involved, this seems inexplicable given that property prices have only been on the rise and the BSP has enough of a bank balance to not need liquid cash urgently to the extent of selling prime properties at a loss. “I am not sure which properties these are. I must check the market price at that time,” said BSP’s treasurer Rajan, who uses only one name.

“2005-06 was one of the best years for the Indian real estate market, with property prices witnessing a boom. Since then, the market has been good and it is impossible that property bought in a posh locality (or any locality) could have been sold at a loss. In fact, nobody sells property at a loss, unless in dire need of liquid cash,” said an executive at a real estate advisory who did not want to be named.

BSP auditor Ajay Shekhar declined to comment on the issue, claiming it was “confidential information” and that speaking about it was against his “code of conduct”.

I-T returns filed by parties show discrepancies - Home - livemint.com

[sidmis]

POLITICAL PARTY FUNDS - Tax filings point to lack of transparency


Many national political parties in India did not utilize even half their declared total receipts between 2001-02 and 2005-06 despite one general election and 35 state elections being held in this period, according to an analysis of the income-tax (I-T) filings of seven political parties.
Politicians who do not wish to be named say that the average election expenditure by the candidate of a mainstream party in a Lok Sabha constituency could go up to Rs2 crore.

The tax filings by the political parties show they spent, on an average, Rs75 lakh on every seat they won (the average also includes the amount spent on seats they lost; the number was arrived at by dividing total expenditure by the number of seats won).

The Election Commission, or EC, the constitutional body that conducts elections, caps the expenditure on each Lok Sabha seat at Rs25 lakh and that on each assembly seat at Rs10 lakh.

A psephologist and media expert said political parties are clearly under-reporting the amount they spend on elections, but added that the limit set by EC is low.

“Strictly going by the current inflationary trends, one can say that this limit is low. It does not quite allow the candidate to reach out to every voter in his constituency. For instance, for a Lok Sabha constituency with a population of 10 lakh, given the EC limit, each candidate ends up spending only a little above Rs2 on every voter. Today, almost 80% of the candidates end up exceeding the EC ceiling. However, the problem is that none of the political parties regularly file expense statements. If they had done so, the EC could have increased the limit further,” said N. Bhaskar Rao, chairman, Centre for Media Studies, or CMS. To be sure, candidates pick up part of their electoral expenses, but the numbers culled from the tax filings clearly demonstrate the need for more transparency in the way political parties raise and spend money.

Mint reported on 22 September that one-fifth of the country’s electorate was paid cash for votes and that in the recent assembly elections in Karnataka, one in every two voters was similarly induced.

The tax filings of seven parties were provided by the I-T department in response to a Right to Information application filed last year by the Association for Democratic Reforms, an Ahmedabad-based activist organization that isn’t associated with any political party. The seven are the Indian National Congress; the Bharatiya Janata Party, or BJP; the Nationalist Congress Party, or NCP; the Bahujan Samaj Party, or BSP; the Communist Party of India, or CPI; the Communist Party of India (Marxist), or CPM, and the Samajwadi Party, or SP.

While the first six are recognized as national parties by EC, the SP has been included in the analysis because of its increasing influence and importance in national politics.

Need for transparency Yashwant Sinha, a former Union finance minister and a Rajya Sabha member of the BJP, said there is an “urgent” need to make funding of political parties more transparent.

“While corporate houses can donate funds to political parties, most of them don’t do so because of fear of persecution in case a rival party or group comes to power. That is why, above-the-table donations are still much less than under-thetable funding.” Sinha’s reference to underthe-table funding deals with contributions disclosed neither by the donor nor the recipient. Political parties have been exempt from I-T, subject to certain criteria, since 1979.

Interestingly, till 1996, political parties were not filing I-T returns. They started doing so only after a Supreme Court order on 20 February 1996.

The numbers themselves hide more than they reveal.
For instance, the Congress, India’s largest and richest party (with a balance sheet size of Rs228 crore on 31 March 2006, according to I-T filings), derives most of its revenue from the sale of coupons.

In 2005-06, the filings show, revenues from sale of coupons were Rs95 crore, almost 800% more than the year’s contributions. In 2004-05, the party received Rs162 crore from the sale of coupons. Congress party’s treasurer, Motilal Vora, said the coupons were “general coupons... We sell them generally to different persons.” “All our returns have been filed properly in accordance with I-T laws,” Vora added.

In 2005-06, the Congress party spent only 55% of its total receipts of Rs124 crore. The trend of not using all receipts, however, is common to most parties.

Inflow higher Indian laws make it mandatory for public trusts to spend 85% of their surplus for chari table purposes every year to benefit from I-T exemption.

There is no such restriction on political parties.
Most political parties do not utilize even half of their total receipts and the unutilized part is ploughed back as reserves into their balance sheets. In 2005-06, the SP spent less than one-fifth of its total income. The amount of profit held back by the party can comfortably meet its expenses for the next four years, even if it does not receive any contribution for the next four years. Similarly, the Congress party, the NCP and the CPI spent only 55%, 66% and 44% of their revenues, respectively.

The BJP, however, spent more than it received, partly because of expenses on subsidized publications. The party is also known for its extensive organization machinery.

“When political parties are holding so much surplus, the same should be utilized for the welfare of society, too. What good is sitting on so much cash when they don’t have to give any dividend income.

They can return the money to the public through some welfare activities or can also donate to the Prime Minister’s Relief Fund,” said a tax expert at a multinational audit and consulting firm who did not want to be named.

One political analyst, however, said Indian parties and politicians end up spending a lot more than indicated on their books. “One has to spend a day with them on the field to know how much money they spend on social activities. In some ways, they fill in for the role that schemes for social welfare play in countries like the US. However, all these expenses political representatives incur are often not reflected as party expenditure and hence, accounts of parties might not show a high level of expenses, even though money is being spent,” said political analyst Mahesh Rangarajan.

Other experts do not have any problems with the money being spent or not being spent by parties. They just want them to be more transparent.

“I don’t think there is any problem with exempting political parties. However, the real challenge is to make their assets more transparent. An effective enforcement mechanism is needed to see if political parties are keeping a list of donors and whether this list is matching with the receipts, besides occasional verification of this information by I-T officers,” said Pratap Bhanu Mehta, president, Centre for Policy Research, a New Delhibased think tank.

And, more than looking at the fairness of tax exemptions, it is important to ensure that India moves to a system of election funding where all parties are treated equal, said D. Raja, national secretary, CPI. “The concept of state funding for political parties has to be accepted and implemented to ensure all parties are on an equal footing.” ruhi.t@livemint.com www.livemint.com To read Part I and Part II of this three-part series as well as an interview with a tax expert analysing the returns of political parties can be seen at www.livemint.com/partyfund.htm



POLITICAL PARTY FUNDS - Tax filings point to lack of transparency - mint

[karira]

An article by Shyamlal Yadav in indiatoday.digitaltoday.in on 07 November 2008:
India Today - India?s most widely read magazine.

Funds and games

Money, it is easily said, makes the world go around; and politics, around and around. What’s not so easy is nailing the numbers.

Cut to 2003: then law minister Arun Jaitley, while moving amendments to the Representation of the People Act (RPA) in Parliament, said the proposed changes were aimed at bringing accountability into the political system.

The amendments were later ratified by the Parliament and changes were also made in the Companies Act and Income Tax Act, all aimed at ensuring greater transparency and reducing the role of unaccounted money in funding of political parties.

Five years down the line, it appears that the changes then made in the RPA have had little impact on the funding of most political parties. India Today invoked the Right to Information (RTI) Act to get details of funds collected by political parties.

Cutting across party and ideological divides, one fact stands out: almost all political parties still get a large chunk of their funds from undisclosed sources.

The seven recognised national parties—Congress, Bharatiya Janata Party (BJP), Bahujan Samaj Party (BSP), Communist Party of India (CPI), Communist Party of India-Marxist (CPI-M), Rashtriya Janata Dal (RJD) and Nationalist Congress Party (NCP)—collected over Rs 309 crore from donations, voluntary contributions, election funds and sale of coupons during 2006-07 (The figures available for the NCP and RJD are for 2005-06).

Surprisingly, the source of funding has been disclosed only for Rs 15 crore. Similarly, nine regional parties—Telugu Desam, Lok Janshakti Party, Dravida Munnettra Kazhagam (DMK), Biju Janata Dal, Shiv Sena, Rashtriya Lok Dal (RLD), Janata Dal-United (JD-U), Shiromani Akali Dal and Samajwadi Party—collected over Rs 94 crore from voluntary contributions, election funds and coupon sales but have disclosed the sourcing for a piffling Rs 15 lakh.

Put together, 16 of the largest political parties in the country collected over Rs 400 crore of which less than Rs 16 crore was attributed to known sources. RTI applications sent in May this year regarding the returns filed by parties like the AIADMK, National Conference, Indian National Lok Dal, People’s Democratic Party (PDP), Janata Dal-Secular and Asom Gana Parishad (AGP) remain unaddressed.

A close scrutiny of the tax returns of parties show that most do not take income tax provisions seriously.

A number of parties file returns much past the deadline, do not file them in the required format, and do not bother to attach the prescribed documents.
The IT Department, in turn, shows no keenness to scrutinise the files and impose penalties as per the rules. A senior official at the IT Department says they keep the tax returns of political parties as they are filed; sometimes they scrutinise them and send notices out.

But because they can only address the income of parties, which is exempt from income tax, the scrutiny becomes meaningless. Most parties don’t enclose details of fixed assets. When they do, the figures are often incorrect or misleading.

The CPI, for instance, puts a value of Rs 5.94 lakh on its head office at Ajoy Bhavan in New Delhi’s Rouse Avenue, even though the most tightfisted of realtors would write out a cheque a hundred times that amount for the property.

Hand it to the Congress. India’s grand old party has led the way in filling its coffers. Though headquartered in Delhi, the Congress accounts are audited by a Kanpur-based chartered accountant. In 2006-07, the Congress collected Rs 34.64 crore as donation and Rs 123 crore from the sale of coupons. Yet the party has only disclosed a list of 102 donors who each paid more than Rs 20,000, the contributions totalling Rs 12 crore. The party also claims it spent Rs 48.76 crore on elections though it gives no details of such expenses.

And though the deadline for filing the returns for 2007-08 was October 31, 2007, the ruling party had filed the returns on February 8, 2008. To a query on whether penalties would be imposed on political parties for such delay, spokesman of the Central Board of Direct Taxes, Shishir Jha, said, “If any discrepancy is found, appropriate action will be taken according to law.” When asked about action taken so far, he said: “According to income tax law, we can scrutinise the income tax returns of the past six years.”

The lotus seems parched in comparison. India’s main opposition party has shown a loss of Rs 1.01 crore for 2006-07. The BJP, which once claimed to be the party with a difference, has kept up its difference in one way at least: it is the only political outfit to have secured bank loans worth Rs 8.08 crore.

It earned Rs 55.61 crore through voluntary contributions during 2006-07 but disclosed the names of only 107 donors for a total contribution of Rs 2.95 crore. Like the Congress, the BJP too filed its ITR for 2007-08 on March 31, 2008, six months after the deadline of October 31, 2007.

Unlike the BJP, Mayawati’s BSP seems to have no need for loans. The party took a donation in excess of Rs 20,000 in 2004-05, which it disclosed in its return: it received Rs 19 lakh from ITC Limited.

In other years, Mayawati has enclosed an affidavit which says the party “has not received any single voluntary contribution in excess of Rs 20,000 during the year”.

The BSP collected Rs 45.05 crore during 2006-07 as against Rs 2.55 crore a year earlier. According to its tax return, the party purchased five properties in Lucknow for Rs 1.46 crore between January and May 2005. Strangely, it sold them a few months later for Rs 1.36 crore, a time when land prices were skyrocketing. The Samajwadi Party is no newbie to this great game. It collected Rs 80.47 crore during 2006-07, but disclosed sources for only Rs 6.57 lakh of this amount.

The CPI parks its money in private sector banks. It has deposits of Rs 1.15 crore with HDFC Bank as on March 31, 2007. The party has shown income from donations and party funds of Rs 44.18 lakh during 2006-07, of which sources for only Rs 12.69 lakh have been disclosed; most donations coming from party office-bearers. Big brother CPI(M) has a bigger pot. It acknowledges collecting Rs 24.90 crore during 2006-07; a list of 10 donors has been disclosed for a total of Rs 11.24 lakh.

Lalu Prasad Yadav’s RJD had not filed its income tax return for 2007-08 till the first week of July this year, though the deadline was October 31, 2007. Having recently received the national party status from the Election Commission, the RJD collects money under three heads: donations, chunav kosh (election fund) and anudaan. The party has collected Rs 5.29 crore under these three heads in the last three financial years, with Rs 75 lakh mobilised as donations and Rs 1.41 crore as chunav kosh during 2005-06.

Such funding routes apart, sale of coupons remains a traditional favourite with parties like the Congress and NCP. The NCP, which had not filed its ITR for 2007-08 till first week of July (i.e. the date of reply), collected Rs 6.05 crore during 2005-06 from sale of coupons, besides Rs 50.76 lakh through donations. It collected Rs 24.70 crore under these two heads without disclosing the sources over the last three years.

On the other hand, despite being in and out of power in India’s richest state, Punjab, Shiromani Akali Dal has shown a meagre income of Rs 5.19 lakh for 2005-06. Similarly, Ram Vilas Paswan’s Lok Janshakti Party showed an income of Rs 78.49 lakh during 2006-07 from donations and sale of coupons.

Records show that over the last three financial years, the seven recognised national parties together collected over Rs 814 crore from donations and voluntary contributions. Of this, the 1,134 donors that the parties have named in their returns account for only Rs 87 crore. You can follow the money, but you won’t see it coming. At least not the overwhelmingly larger chunk.