I-T exemptions on donations lead to birth of new parties: CEC

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New Delhi, Jan 16 (PTI) The Election Commission has madea strong pitch for providing tax benefits on donations only tothose political parties which prove their strength at thehustings as exemptions on such funds have led to the birth ofseveral new parties.

The Commission''s recommendation has come in the wake of anumber of instances when registered parties have been found tomisuse provisions of tax laws.

Fraudulent parties are being floated to launder moneywhich finds its way into stock market and buy jewellery buthas little to do with electoral purposes, it feels.

"The number of political parties registered with theCommission is almost touching the 1200-mark. A recent law thatexempted donations to political parties from income tax, forboth the payers and the payee, has caused a spurt in theformation of new political parties," Chief ElectionCommissioner S Y Quraishi told PTI.

A random check by the EC revealed that office of one suchparty was in a tea shop while another spent Rs two to Rs threecrore on jewellery and shares and a third party''s office wasnon-existent, he said.

Observing that almost 75 to 80 per cent of these partieshave not participated in any elections for the last severalyears, the CEC said though the Commission has power toregister political parties, it does not have the same forderegistering them.

Therefore the EC also wants the power to deregisterpolitical parties if they fail to participate in elections.

The EC has already recommended to the government that thelaw regulating registration of parties should be amendedauthorising it not only to deregister them on sufficientgrounds but also to regulate them so that they practicedemocracy in their internal functioning, he said.

Quraishi said that the Commission is also of the viewthat tax exemption should be given only to those parties whichparticipate in elections and show their political existence bytheir poll performance.

In order to bring transparency in the accounts ofpolitical parties, he said that the EC has recommended thatall parties should get their accounts audited annually by apanel of auditors appointed by CAG or EC.

The parties should also publish their annual accountsespecially for the reason that donations to political partiesenjoy income tax exemptions, he added.

"In my view, the failure to do so should invite nothingless than deregistration," Quraishi said.

Noting that many parties were not even auditing theiraccounts and not submitting their annual returns with the I-Tdepartment, he said that the EC asked for a report fromCentral Board of Direct Taxes (CBDT) about defaulting parties.

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