Section 80GGB of the Income Tax Act provides an independent deduction for political contributions without monetary ceilings, and amendments struck down as unconstitutional are prospective in operation, thus not affecting the validity of tax deductions claimed for past transactions made under then-prevailing law.

ORDER

PER RAJESH KUMAR, ACCOUNTANT MEMBER:

The appeal filed by the Revenue is directed against the order dated 15.10.2025 of the Commissioner of Income-tax (Appeals) – 26, Kolkata [hereinafter referred to as the “ld. CIT(A)”] passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) for the assessment year 2022-23.

2. The issues raised in Ground Nos. 1 to 3 are directed against the order of the ld. CIT(A) deleting the disallowance of Rs.5,18,50,157/- made by the ld. AO u/s 80GGB of the Act.

3. The facts in brief are that, the assessee had filed its return of income u/s 139(1) of the Act declaring total income of Rs.5,56,06,686/-. The assessee had, inter alia, claimed deduction in respect of political donation by way of electoral bonds of Rs.5,50,00,000/- u/s 80GGB of the Act. The ld. AO was of the opinion that the Hon’ble Supreme Court in the case of ADR vs UOI (159 taxmann.com 383) had struck down the Electoral Bond Scheme and had also held the amendment made by the Companies Act, 2017 removing the cap on political donation, which earlier was 7.50% of the average net profits to be unconstitutional. According to the ld. AO, the assessee was entitled to deduction u/s 80GGB to the extent of 7.50% of the average of last three years’ profits which worked out to Rs.31,49,843/- and thus disallowed the balance claim of Rs.5,18,50,157/- [Rs.5,50,00,000 (-) Rs.31,49,843].

4. In the appellate proceedings, the ld. CIT(A) deleted the addition made by the ld. AO by taking into account the arguments and submissions of the assessee by observing and holding as under:-

“3.3 I have carefully considered the submissions of the appellant and the findings recorded by the AO for making the impugned disallowance. The issue in dispute is narrow in compass. The admitted facts are that, the appellant had purchased electoral bonds of Rs.5,50,00,000/- during the year which were encashed by registered political party and accordingly the appellant had claimed deduction for the aforesaid amount u/s 80GGB of the Act. The purchase of electoral bonds is supported by relevant contemporaneous documents which are not in dispute. It is noticed that the average profits of the appellant for the last three years was Rs.4,19,97,900/-. It was AO’s view that the appellant could have legally donated only 7.5% of the average net profit, in terms of Section 182 of the Companies Act, 2013 which worked out to Rs.31,49,843/- and therefore the excess donation of Rs.5,18,50,157/- was made to the political party in violation of the provisions of Companies Act, 2013 and thus such excess contribution was held to be not allowable as deduction u/s 80GGB of the Act. This analogy of the AO is found to emanate from the judgment of the Hon’ble Supreme Court in the case of ADR Vs UOI (supra) wherein the amendment made to Section 182 of Companies Act, 2013 by the Amendment Act of 2017 removing the cap of 7.5% and permitting companies to make donations of any amount(s) was held to be unconstitutional. The AO was of the view that this judgment had retrospective operation.

3.3.1 In order to adjudicate this issue, it is first relevant to take note of the provisions of Section 80GGB , which is in dispute in the present case. The relevant provisions read as under: -

“In computing the total income of an assessee, being an Indian company, there shall be deducted any sum contributed by it, in the previous year to any political party or an electoral trust:

Provi