Section 37(2B)
This query is : Resolved
02 December 2009
It says"No allowance shall be made in respect of expenditure incurred by an assessee on advertisement in any souvenir, brochure, tract, pamphlet, magazine or the like published by a political party"
I wanna d reason or d purpose beind introducing this section.
I wanna d reason or d purpose beind introducing this section.
02 December 2009
A political party has some biased views on particular matters. Our Constitution of India does not permit to develop such practices. Further; if advertisement is permitted; the business houses will be under pressure to give them advertisement and thereby indirectly development such biased views.
CA Rakhecha
Surat
CA Rakhecha
Surat
03 December 2009
It says"No allowance shall be made in respect of expenditure incurred by an assessee on advertisement in any souvenir, brochure, tract, pamphlet, magazine or the like published by a political party"
I wanna d reason or d purpose beind introducing this section.
I wanna d reason or d purpose beind introducing this section.
23 July 2025
The purpose behind introducing Section 37(2B) of the Income Tax Act, 1961 was primarily to prevent misuse of tax deductions for indirect political funding and to maintain the neutrality and integrity of the tax system.
📌 Section 37(2B) — Key Provision:
"No allowance shall be made in respect of expenditure incurred by an assessee on advertisement in any souvenir, brochure, tract, pamphlet, magazine or the like published by a political party."
🎯 Reason/Purpose Behind Introduction of Section 37(2B):
To Prevent Tax-Exempt Political Contributions:
Prior to this provision, corporates and individuals could disguise political contributions as advertising expenses, claiming deduction under Section 37(1) as a business expenditure.
This circumvented restrictions on political donations and offered undue tax benefits.
To Curb Backdoor Political Funding:
Political parties often publish souvenirs and brochures during events and solicit advertisements from business houses.
These ads often had no real commercial value, acting as a veiled donation.
Section 37(2B) was brought in to disallow such indirect, opaque funding.
To Uphold Political Neutrality of Business Expenditure:
Allowing such deductions would mean the government indirectly subsidizes political activity, which could be misused.
The goal is to keep business expenditure and political preferences separate.
To Deter Coercive Solicitation by Political Parties:
Businesses might feel pressured or compelled to contribute via advertisements, fearing regulatory or political backlash.
By denying tax benefits, the provision discourages such coercion or influence.
🧾 Budget Speech and Legislative History:
The provision was introduced by the Finance Act, 1980. The memorandum explaining the Finance Bill stated:
"In order to discourage indirect contribution to political parties, it is proposed to insert sub-section (2B) in section 37 of the Income-tax Act to provide that any expenditure incurred by an assessee by way of advertisement in a souvenir, brochure, tract, pamphlet, magazine, etc., published by a political party will not be allowed as a deduction in computing the taxable profits."
✅ Summary:
Purpose Explanation
Block disguised political donations Prevent businesses from claiming tax deductions on political ads disguised as business expenses.
Ensure transparency and fairness Promote clear political funding rather than concealed support through advertising.
Discourage coercive practices Avoid scenarios where businesses are pressured to advertise in party publications.
Protect tax base Ensure public funds (via deductions) aren’t indirectly routed to political parties.
📌 Section 37(2B) — Key Provision:
"No allowance shall be made in respect of expenditure incurred by an assessee on advertisement in any souvenir, brochure, tract, pamphlet, magazine or the like published by a political party."
🎯 Reason/Purpose Behind Introduction of Section 37(2B):
To Prevent Tax-Exempt Political Contributions:
Prior to this provision, corporates and individuals could disguise political contributions as advertising expenses, claiming deduction under Section 37(1) as a business expenditure.
This circumvented restrictions on political donations and offered undue tax benefits.
To Curb Backdoor Political Funding:
Political parties often publish souvenirs and brochures during events and solicit advertisements from business houses.
These ads often had no real commercial value, acting as a veiled donation.
Section 37(2B) was brought in to disallow such indirect, opaque funding.
To Uphold Political Neutrality of Business Expenditure:
Allowing such deductions would mean the government indirectly subsidizes political activity, which could be misused.
The goal is to keep business expenditure and political preferences separate.
To Deter Coercive Solicitation by Political Parties:
Businesses might feel pressured or compelled to contribute via advertisements, fearing regulatory or political backlash.
By denying tax benefits, the provision discourages such coercion or influence.
🧾 Budget Speech and Legislative History:
The provision was introduced by the Finance Act, 1980. The memorandum explaining the Finance Bill stated:
"In order to discourage indirect contribution to political parties, it is proposed to insert sub-section (2B) in section 37 of the Income-tax Act to provide that any expenditure incurred by an assessee by way of advertisement in a souvenir, brochure, tract, pamphlet, magazine, etc., published by a political party will not be allowed as a deduction in computing the taxable profits."
✅ Summary:
Purpose Explanation
Block disguised political donations Prevent businesses from claiming tax deductions on political ads disguised as business expenses.
Ensure transparency and fairness Promote clear political funding rather than concealed support through advertising.
Discourage coercive practices Avoid scenarios where businesses are pressured to advertise in party publications.
Protect tax base Ensure public funds (via deductions) aren’t indirectly routed to political parties.
You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now
Click here to login now
Similar Resolved Queries
Unanswered Queries
- Refund Annexure-B
- Liable to deduct tds and 44ADA
- Sale of Equity shares for Purchase of Residential Property
- Nomination of Bank for refund in itr 2
- Section 56(2) of the Income tax Act 1961 , Gift to relative .
- ECO SUPPLY REPORTIONG IN GSTR-1
- Is Interest applicable for payment made through credit ledger vide DRC03 for FY 2020-21 & 2021-22
- CCFS 2026 Schemed
- Subscription paid to foreign customer
- Two seprate Invoice needed
- E Commerce GSTR1 & 3B how to file
- GST Cancellation without jurisdiction
- Legal Opinion on Registrar's Refusal to Investigate a Society for Non-Renewal and Non-Compliance
- GST Refund_RFD-01
- Form10BD was uploaded successfully without any Error but after 24 hours, Form10BE are not available
- Annexure B utility for GST Refund
- Tax amount diff in Gstr1 and 3B in tax compare reports
- Tds on GST in connection with sale to public company
- Restoration of certificate of practice
- Regarding change in correspondence address in SSP portal
Trending Online Classes
-
DT & Audit (Exam Oriented Fastrack Batch) - For May 26 Exams and onwards Full English
CA Bhanwar Borana & CA Shubham Keswani
CAclubindia
