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Report No. 255

(v) Laws regulating disclosure of political contribution by parties and companies

2.23.1. Section 29C of the RPA regulates the disclosure of donations received by political parties and requires every party to prepare an annual report in respect of all contributions exceeding Rs. 20,000, received from any person or (non-government) company, and submit the report to the Election Commission. If this is not complied with, the party is not entitled to any tax relief under Section 29C(4) read with Section 13A of the IT Act. Commenting on the need to disclose the source of funding, the Supreme Court has observed as follows:

"We wish, however, to point out that though the practice followed by political parties in not maintaining accounts of receipts of the sale of coupons and donations as well as the expenditure incurred in connection with the election of its candidate appears to be a reality but it certainly is not a good practice. It leaves a lot of scope for soiling the purity of election by money influence." Gajanan Krishnaji Bapat v. Dattaji Raghobaji Meghe, (1995) 5 SCC 347.

2.23.2. Section 13A of the IT Act further provides that income of political parties will be exempt from tax only if they maintain a record of the sources of funding, i.e. the names and addresses of the contributors, when the amount donated exceeds Rs. 20,000.43 Section 80GGB of the IT Act provides that all corporate contributions to political parties and electoral trusts are entitled to income tax deduction, while Section 80GGC of the IT Act has similar provisions with respect to contributions made by individual persons to political parties or electoral trusts.

43. Section 29C, RPA; Section 13A, Income Tax Act, 1961

2.23.3. Section 182(3) of the Companies Act, 2013 regulates the disclosure of donations made by companies, requiring every company to disclose the total amount of its contribution, and the name of the party receiving the said contribution, in every financial year in its profit and loss account. Failure to comply with this provision will result in a fine and/or imprisonment provided under Section 182(4) referred above.

2.23.4. In exercise of its plenary powers under Article 324 of the Constitution, the ECI issued a scheme relating to "Electoral Trust Companies" on 10th December 2013 to fill in the vacuum in respect of disclosure requirements of contributions by electoral trusts in 2014. Although companies contributing to Electoral Trust Companies (for further contribution to political parties) are not required to make any disclosures pursuant to Section 182(3) of the Companies Act, 2013, they are required to disclose the amount released to an Electoral Trust Company.

In turn, the Electoral Trust Company is required to disclose all amounts received from other companies or sources in its books of account and the amount contributed by it to a party pursuant to Section 182(3).44 Further, Electoral Trusts are required to submit Annual Reports of contributions to the ECI containing details of the name and addresses of the donors and the amount of donation given to each political party.45 The ECI has released a list of approved Electoral Trusts.

44. Ministry of Corporate Affairs, Clarification with regard to Applicability of Section 182(3) of the Companies Act, 2013, Circular No. 17/27/2013-CL-V, 10th December 2013,

45. ECI, Guidelines for Submission of Contribution Reports of Electoral Trust, No. 56/ElectoralTrust/2014/PPEMS, 6th June 2014,

2.23.5. Finally, Section 75A of the RPA requires every elected candidate in a parliamentary constituency to furnish information relating to their assets and liabilities to the Lok Sabha Speaker or the Rajya Sabha Chairperson within ninety days of taking the oath for their seat in Parliament.

2.23.6. Having examined the law in India, it is worthwhile to examine the law in different countries around the world in the next section.

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