Income-tax files throw up tough posers for parties

Did the Bharatiya Janata Party spend the money collected in the name of the Gujarat Relief Fund on itself?

Why did the income-tax (I-T) department take a sudden U-turn to grant income-tax exemption to the Congress? How can leaders of the Communist Party of India (CPI) justify purchase of shares in private limited companies with party funds? And how can political parties contest elections in Bihar when they are either bankrupt or have meagre funds?

Questions, and more questions, came up as DNA carried out an exhaustive analysis of the I-T returns filed by the country’s major political parties seeking tax exemption. These returns have for years remained secret, but thanks to recent efforts and many spirited appeals by the Association for Democratic Reforms, an NGO working for improving transparency in the electoral process, the details are now tumbling out.

Over the past several days, DNA has been combing through these returns with the assistance of experts. Several startling facts have emerged, foremost being the callousness with which the I-T department has been scrutinising these returns.

There are huge gaps in the claims of many political parties in their I-T returns. How could the bankrupt RJD of Lalu Prasad contest elections in Bihar year after year? How was it possible for the Janata Dal (United) to fight elections in Bihar with assets worth just a few lakh rupees?

The BJP’s balance sheets for 2001-06 show that it collected Rs 2.68 crore as a ‘Gujarat Relief Fund’ during this period, but not a single paisa from that was disbursed for relief. Also, it’s not clear if this relief fund is part of the BJP’s net worth of Rs102.70 crore in the financial year 2005-06.

There were two I-T cases pending against the Congress. Soon after the Congress-led United Progressive Alliance (UPA) came to power in 2004, one of them, a 10-year-old case pertaining to the exemption sought by the party on foreign donations, was disposed of by the commissioner of income tax (appeals) on December 7, 2004. The decision went in the party’s favour.

The party had sought I-T exemption for foreign donations worth Rs2.5 crore and Rs25 lakh received in 1994-95 and 1995-96, respectively. The assessing officer denied the exemption.  

The balance sheet of 2001-02 shows that the assessing officer raised tax demands of Rs1.80 crore and Rs14.79 lakh, respectively, on the two donations. Strangely, the Congress returns do not show who donated these amounts.

In 2002-03, when the BJP-led NDA was still in power, the assessing officer increased the tax demand on these donations to Rs2.57 crore and Rs18.12 lakh, respectively. The Congress went in for fresh appeal to the commissioner of income tax (appeals). Within months of coming to power, the party got a favourable order.

The CPI(M) had disclosed donations worth only Rs27.70 lakh to the Election Commission between 2003 and 2007, placing it among India’s poorest national parties. DNA has published a series of reports on donations declared by political parties to the commission.

But the CPI(M) is among the richest parties in the country. According to its returns, the party’s donations, a majority of which are below Rs20,000 each, add up to a whopping Rs84.84 crore between 2001 and 2006.

For the CPI, the returns bring up some uncomfortable questions. The party’s auditor, Pune-based PG Bhagwat Chartered Accountants, has stated that several private equity shares running into lakhs have been purchased by CPI leaders. The auditors have, however, not given out the names of the CPI leaders in whose names the shares were purchased. What makes things more suspicious is that two of the private firms, both based in Mumbai, are shown to have closed business.

Meanwhile, the fortunes of Mayawati’s BSP have been soaring. As per the I-T returns filed by the party, its net worth, which stood at Rs11 crore in 2001-02, shot up four times over to Rs44 crore in 2005-06. A major portion, Rs22.32 crore, of the BSP’s income in 2002-03 came from voluntary donations. Total voluntary donations received by the party between 2001 and 2006 added up to over Rs31 crore. Another major source of income for the party is membership fees, which total Rs22.70 crore for the five-year period 2001-06.