Transparencies of Donations to the Political Parties:-
- It has been over a year since the Election Commission raised serious concerns over the Finance Act, 2017, which introduced amendments in other laws, especially the Representation of the People Act and the Companies Act, noting that the changes would have a serious impact on ensuring transparency in funding of political parties
- The Election Commission (EC) is wary of certain amendments to the Income Tax Act, the Representation of the People Act, 1951 and the Companies Act, 2013. As per the EC it will have a serious impact on the transparency aspect of political finance and funding of political parties.
- The amendments to the three laws are retrograde as far as transparency of donations is concerned- it will open the possibility of shell companies being set up only for the purpose of making political donations and allowing firms to not show political contributions in its profit and loss statement will compromise transparency.
RPI Act:-
- The amendment in Section 29C of the Representation of the People Act, 1951 had inserted a new proviso stating:
- “Provided that nothing contained in this sub-section shall apply to the contributions received by way of an electoral bond”. Its explanation stated that “for the purposes of this subsection, ‘electoral bond’ means a bond referred to in the explanation to sub-section (3) of Section 31 of the Reserve Bank of India Act, 1934.”
- It is evident from the amendment which has been made that any donation received by a political party through an electoral bond has been taken out of the ambit of reporting under the Contribution Report as prescribed under Section 29C of the Representation of the People Act, 1951 and therefore this is a retrograde step as far as transparency of donations is concerned and this proviso needs to be withdrawn.
Income Tax Act:-
- An amendment has been made in Section 13A of the Income Tax Act whereby no donation exceeding Rs 2,000 can be received by a political party otherwise than by an account payee cheque drawn on a bank or an account payee bank draft or use of electronic clearing system through a bank account or through electoral bond.
- However, the limit for receipt of anonymous donations by political parties still remains at Rs 20,000 in Section 29C of the RR Act, 1951. EC has demanded that the RP Act needs to the amended to reduce the limit of anonymous/cash donations to Rs 2,000 so as to bring these two Acts in consonance with each other.
Companies Act:-
- Even in case of the Companies Act, 2013, the EC found several lacunae. It noted that certain amendments have been proposed in Section 182 of the Companies Act, where the first proviso has been omitted and consequently the limit of seven and a half percent (7.5%) of the average net profits in the preceding three financial years on contribution by companies has been removed from the statute.
- This opens up the possibility of shell companies being set up for the sole purpose of making donations to political parties, which no other business of consequence having disbursable profits.
Compromising Transparency:-
- The second amendment to Section 182(3) had abolished “the provision that firms must declare their political contributions in their profit and loss statements, as this requirement is now reduced to only showing a total amount under this head, which again, would compromise transparency.”
- Thus, the amendments made in Section 29C of the Representation of the People Act, 1951 and Companies Act, 2013 introduced in the Finance Act, 2017” should be reconsidered and modified so as to provide for transparent reporting of contributions received by the political parties through electoral bonds under section 29C of the RP Act, 1951.
- A provision should be made in the Companies Act to declare the party-wise contributions made by companies in the P&L A/c so that the transparency in the fundraising by political parties is maintained.
- The abolition of the relevant provision of Section 182 of the Companies Act would lead to increased use of black money for political funding through shell companies and therefore the earlier provisions should be reconsidered which ensured that only profitable companies with a proved track record could provide donations to political parties.