SC VERDICT & IMPACT ON OTHER LAWS Syllabus GS Paper 2 – Polity)

News-CRUX-10     16th February 2024        

Context: Recently, the Supreme Court invalidated numerous amendments made by the government in crucial laws, including those aimed at facilitating corporate donations to political parties, alongside the Electoral Bonds Scheme (EBS).

oIn its judgment, the court struck down the amendments to Section 29C of the RP Act, Section 182(3) of the Companies Act and Section 13A(b) of the Income Tax for violating “the right to information of citizens guaranteed in Article 19(1)(a) of the Constitution.”

Representation of the People Act, 1951 (RPA)

  • Section 29C of the Act requires political parties to prepare a report detailing the donations received by them in a financial year. 
  • Finance Act, 2017: Amended the RP Act to include an exception to Section 29C. It said that the requirement to declare all donations in excess of Rs 20,000 would not apply to donations received through Electoral Bonds.

The Companies Act, 2013

  • A number of changes were made to Section 182 of the Act, which details the prohibitions and restrictions a company must abide by when giving political contributions.
  • Section 182(1) placed a cap on the amount of money a company could donate in a single financial year, limiting it to 7.5% of the company’s average net profits during the previous three financial years.
  • Section 182(3) required a company to disclose any amount contributed to any political party along with the particulars of the amount donated.
  • Finance Act, 2017: This section was amended to remove the cap on the amount of money a company could donate to a political party. Also, only the total amount contributed had to be disclosed 

The Income-tax Act, 1961

  • Section 13A(b) of The Income-tax Act says that a political party shall not include voluntary contributions as part of its total income, but it is required to maintain a record of all contributions received that are above Rs 20,000. 
  • Finance Act, 2017: The Act amended this section to include the words “other than contribution by way of Electoral Bond”.

oAlso, a new Section 13A(d) was added, which required that all donations exceeding Rs 2,000 must be given through certain methods, which included Electoral Bonds.