ITAT Mumbai Upholds Denial Of Tax Deduction On ₹25 Lakh Donation To Kisan Party Of India

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has upheld the denial of a tax deduction claimed by a Mumbai chemical trader for a ₹25 lakh donation to the Kisan Party of India. The tribunal found several circumstances that cast doubt on whether the contribution was genuine.

A bench of Judicial Member Sandeep Singh Karhail and Accountant Member Bijayananda Pruseth noted that the taxpayer was a chemical trader with no apparent connection to a Bihar-registered political party claiming to work for agriculturists.

The bench also noted that the donation amounted to nearly 40% of his annual net profit and that, apart from this, he had not claimed any other welfare-related donation deduction during the year.

The bench observed:

“Therefore, the aforesaid facts, coupled with the information available with the Revenue on the conduct of the Kisan Party of India as noted in the foregoing paragraphs, do not inspire confidence to accept the claim of the assessee that the donation of INR 25 lakh was genuine.”

The assessee had claimed a deduction under Section 80GGC of the Income Tax Act for the donation. He stated that he was contacted several times by the party's staff, who said it worked for the welfare of agriculturists. He said he decided to morally support that cause.

The tribunal separately observed:

“It is pertinent to note that the assessee is a trader of chemicals used in the Electroplating Industry. Thus, in such a business profile of the assessee, there is no material available on record to show as to how the staff of the Kisan Party of India, which claims to be working for the welfare of the agriculturists, came in contact with the assessee"

The Revenue reopened the assessment after receiving information from the Investigation Wing. The information emerged from a search and seizure action against certain Registered Unrecognised Political Parties, including the Kisan Party of India.

The Revenue alleged that these entities were facilitating bogus donation claims through circuitous fund routing. According to the Assessing Officer, donations received through banking channels were routed through intermediaries and allegedly returned to donors in cash or through electronic means. Key persons and intermediaries allegedly earned commissions in the process.

The tribunal also noted that the Kisan Party of India was registered in Bihar. It found no material on record showing the party's presence in Maharashtra, particularly Mumbai, where the assessee lived and was assessed to tax.

It further observed:

“Thus, the donation of INR 25 lakh to the political party constitutes approximately 40% of the assessee's net profit before tax as per the profit and loss account.”

The assessee relied on earlier tribunal rulings in support of his claim. However, the ITAT held those decisions were factually distinguishable and did not assist him.

Accordingly, the tribunal upheld the disallowance of the deduction claim and dismissed the appeal.

For Assessee: Vimal Punmiya

For Revenue: Vikas Chandra, Sr. DR