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Section 80GGB

Ajay (CA Job) (512 Points)

19 August 2010

is an amount contributed to a trade union affiliated to a political party admissible for deduction u/s 80GGB (by companies)?especially since section 80GGB gives the meaning for the word "contribute" the same meaning as given under section 293A of the cinpanies Act 1956?pls clarify...thank you...

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4 Replies

FATEMA (CHARTERED ACCOUNTANT) (719 Points)
Replied 19 August 2010

Dear Ajay,

Deduction u/s 80GGB can be claimed by an Indian Company for any sum contributed by it to a political party or an electoral trust.

Sec 2(22AAA) defines the term 'electoral trust' to mean a trust so approved by the Board in accordance with the scheme made to fund the political parties in the organised manner, by the Central Government.

Trade unions are neither politcal parties nor an electoral trust.Hence deduction will not be allowed.

Regards,

Fatema

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Ajay (CA Job) (512 Points)
Replied 19 August 2010

Thank u Fatema...i had a doubt on it as the explanation to Section 80GGB makes a reference to Sec 293A of Companies Act 1956,under which contribution to trade union may be a considered as ''political contribution''...guess deduction wont be available income tax purpose..thanks anyway...

Maria Kachwala (Article Assitant) (70 Points)
Replied 21 August 2010

As per Sec 80GGB deduction shall be allowed in respect of any contribution, as referred to in Sec 293-A of the Companies Act,1956 made by Indian Company to any Political Party or an Electoral Trust

Restrictions regarding political contribution: Section 293-A of the Companies Act

1956 deals with prohibitions and restrictions regarding political contribution. A non-

Government company which has been in existence for not less than three years may

contribute any amount or amounts directly or indirectly to any political party or for any

political purpose to any person provided that the aggregate of the amounts which may be

so contributed by a company in any financial year shall not exceed 5% of its average net

profits determined in accordance with the provisions of Section 349 and 350 during the

three immediately preceding financial years.

Hence, in the light above provision of Co's Act & IT Act. i think deduction is allowed under Sec80GGB provided the contribution is made for Political Purpose to Trade union which is joined to a Political Party.

Suggestion are welcome

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Ajay (CA Job) (512 Points)
Replied 22 August 2010

thank u Maria,

this was what exaclty i was trying to say...Sec 293A talks about, inter alia, political purpose...in my case, the contribution to the trade union (affiliated to a political party) is during the election time for election purpose...so as of now,i will take it as deduction under 80 GGB..

thank u for contributing...