By Special Messenger ELECTION COMMISSION OF INDIA Nirvachan Sadan, Ashoka Road, New Delhi 11000] A No. 56/PPEMS/Transparency/2017 Dated. May, 2017 To The Seeretury, Legislative Department, Ministry of Law and Justice, Shastri Bhawan. New Dalhi. Subject: Amendments in she Finance Act 2017 sir, 1am directed to draw your attention to the Finance Act 2017, which has miroduecd cetain amendments in the Income Tix Act, the Representation of the People Act 1951 and the Companies Aci, 2013 and will have serious impact on Transpareney aspect of political finaneesfunding of political parties 1, Representation of the People Act: 2(i) The amendment in Section 29C of the Representation of the People Act, 1951, aserls a new provisa and explanation to sub-section (1), which reac as follows “Provided that nothing contained in this sub-section shall apply to the contributions received by way of an electoral honed. Explanation For the pueposes of this sub-section, “electoral bond” mec @ bond referred io in the Explanation ier sub-section (3) af Section 32 of the Reserve Bank of India Aci, 1934." ‘Aii) It is evident from the Amendment which has been made. that any denation received by a political party through an electoral bord has been ken out af the Of reporing under the Contribution Repert as presciibed uncer Szctien 29C of the Representation pf the People Act, 1951 and therefore, {is is a retrograde step weas far as transparency of donations is concerned and this Proviso heeds to be withdrawn. 2G) Moreover, in a situation where contributions reezived through Electorel Bonds Fe not reported, un perusal of the Contribution reports of the political partics, it Cannot be ascertained whether the political party has taken any donation in violation of provisions under Section 29B of the Representation of the People Aci, 1951, which prohibits ihe political parties from taking donations from Government Companies aud Forcign sources, : Income-tax Act, 1961: An amendment has been made in See. 13A of the {frcome Tax Act, whereby, 10 donation exceeding Ks.2,000 ean be received by a dolitical 2arty otherwise than hy ar account payee cheque drawn an a bank or an AV account payce bank draft or use of electronic clearing system through a bank account or through electoral bond. However, the limit for receipt of anonymous donations 3y political partics still remains at Rs.20,00U in See.29C of the RP Act, 1951, The RP Act needs to be Amended to reduee the limit of anonymous/eash donations to Rs.2,000 so as to bring these two Acts in consonange with each other. Afi), Companies Act, 2013: Certain amendments have been proposed in Section 182 of the Companies Act, where the first proviso has been omitted and consequently the limit of seven and.a half perceni(7.3%) of the average net profits in the preceding three financial years on contributions by companies. has boon iemoved from the statute. This pens up the possibility of shell companies being sct ap fer the sole purpose 0° making dorations to political parties, with no other AY business of consequence having disbursable profits. 44) The second amendment, in Sec. 182(3), abolishes the provision that firms ‘must declare their political contributions in thcir profit and loss statements, as this requirement is now reduccc to only showing a total ariount under this heae, which again, would compromise transparency. 5. In view of the position explained above, I am directed to state that the amendments made in Section 29C uf the Representation ofthe People Act 1951 and ‘Companics Act, 2013 introduced in the Finance Act 2017, referred to abeve in paras i) and 4(ii) above may be reconsidered and modificd so as (o provide forTransparent Reporting of Contributions received by the Political Parties through Elecioral Bonds u/s 29C of the RP Act, 1951 anda provision should be mace in the Companies Act to declare the party-wise Contributions made by Companies in the P&L Ale, so thet the transparency im the fund maintained ng by political pertics is 6. With respect to para 4(i), the Commission has expressed its apprehension that the abolition of the relevant provision of See, 182 would lead to increased usc of black moncy for political funding through shell comaanies, The Commission is of tae view t the carlicr srovisiors ensured that only profita’sle companies with a proven track Afcord could provide donations to political parties and accordingly, it is ccommended that this provision may be Re-introduced A 7. Further, as mentioned in para 3, necessary changes may kindly be made in RP Act, 1951 Yours faithfully, if,