Dravida Munnetra Kazhagam vs Commissioner of Income Tax

R. Jayasimha Babu, J.

The question referred to us at the instance of the assessee is :

Whether the Tribunal was correct in holding that the provisions of section 13A are not applicable to the assessee for the assessment years 1973-

74, 1975-76, 1977-78 and 1978-79 ?

Section 13A of the Income Tax Act, 1961, makes a special provision relating to incomes of political parties. That provision was introduced by

the Taxation Laws (Amendment) Act, 1978, with effect from 1-4-1979. That provision reads as under :

13A. Any income of a political party which is chargeable under the head Income from house property or Income from other sources or any

income by way of voluntary contributions, received by a political party from any person shall not be included in the total income of the previous

year of such political party :

Provided that

(a) such political party keeps and maintains such books of account and other documents as would enable the assessing officer to properly deduce

its income therefrom;

(b) in respect of each such voluntary contribution in excess of ten thousand rupees, such political party keeps and maintains a record of such

contribution and the name and address of the person who has made such contribution; and

(c) the accounts of such political party are audited by an accountant as defined in the Explanation below sub-section (2) of section 288.

The assessment years with which we are concerned are years which are prior to the assessment year in which section 13A came into force.

The assessee is a political party. Its objects are the establishment of dravidian culture in the four States of Tamil Nadu, Andhra, Kerala and

Karnataka within the framework of the Indian Constitution; to propagate the sense of duty, honesty and discipline; protection of constitutional

rights for establishing a free society; to attain a rationalist and intellectual society; to wipe out poverty in the working front; to obtain better living

conditions on the basis of equality; and other objects specified in its Constitution.

The assessee filed ""nil"" return for these assessment years although it had received subscription from members, amounts by way of

contribution/donation from non-members. The assessing officer as also the Commissioner held that the income of the assessee was taxable and that

the assessee was to be taxed as an association of persons. On further appeal the Tribunal held that the assessee should be taxed as a body of

individuals and remanded the case to the assessing officer. Before doing so it rejected the assessees claim that section 13A was only clarificatory

and that that provision would apply to these assessment years as well.

Learned counsel for the assessee submitted that the assessee is entitled to the benefit of section 13A. While section 13A is indeed a special

provision relating to political parties and the assessee is a political party, the benefit of that section could be claimed only prospectively after that

section had come into force and not for the period when that section was not part of the statute.

Counsel for the assessee very fairly brought to our notice the decision of this court in the case of Commissioner of Wealth-tax Vs. Varadharaja

Theatres Pvt. Ltd., , wherein this court examined the claim of the assessee therein that section 40(3)(vi) of the Finance Act, 1983, was curative

and declaratory and, therefore, was operative even for the period prior to the date on which it was introduced in the statute. The court while

rejecting that claim observed (page 524) :

If with a view to confer a benefit which had not been conferred before the law was amended, that does not necessarily imply that the amendment

is to be given retrospective effect even without a legislative declaration to that effect. Every case of removal of hardship by Parliament does not

indicate a parliamentary intention to remove that hardship from an anterior date unless the scheme of the Act, the context in which the amendment

was made and the language of the amendment warrant such a view.

There is nothing in the language or scheme of section 13A or in the scheme of the Income Tax Act, 1961 or the Finance Act, 1988, to indicate

that Parliament intended to give retrospective operation to section 13A.

The Tribunal was right in holding that for these assessment years the assessee was not entitled to the benefit of section 13A. The question

referred to us is, therefore, answered in favour of the revenue and against the assessee.

OPEN