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CA Final · Direct Tax Laws & International Taxation · Assessment of Trusts and Institutions, Political Parties and Other Special Entities

Lokshakti Party, a registered political party, received during the tax year the following donations: ₹1,50,000 by account payee cheque from Mr. Rao, ₹1,800 in cash from Mr. Iyer, and ₹25,000 in cash from Mr. Khan. It otherwise maintained books, audit, treasurer's report and return filing. Which statement is correct regarding Schedule VIII conditions?

The ₹25,000 cash donation breaches the condition, so the exclusion is lost. Schedule VIII does not allow any donation above ₹2,000 to be received other than by account payee cheque or draft, electronic mode or electoral bond. The ₹1,800 cash receipt is within the limit.

  1. AThe cash donation of ₹25,000 breaches the condition that no donation exceeding ₹2,000 be received otherwise than through prescribed modes, so the exclusion is lostCorrect
  2. BThe cash donation of ₹1,800 alone breaches the condition
  3. CAll three donations are acceptable because the party is registered
  4. DOnly a record of Mr. Rao's donation is needed and no condition is breached

Explanation

The condition bars receipt of any donation exceeding ₹2,000 otherwise than by account payee cheque, account payee draft, electronic clearing or other prescribed electronic mode, or electoral bond. The ₹25,000 cash donation exceeds ₹2,000 and breaches it. The ₹1,800 cash donation is within the limit and is not a breach. Registration alone does not remove the conditions.

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