With the general elections being round the corner, is there any move to regulate funding of political parties by corporate bodies?

H R Kailash , Bahrain

Provisions have been made for setting up of electoral trusts. Many well known industrial groups have set up such electoral trusts in India. Such trust has to be set up as a company under section 25 of the Companies Act, 1956, and if it obtains approval from the Central Board of Direct Taxes, it is exempted from paying tax in India. The approval is valid for four years at a time.

The trust has to furnish annual returns, giving a list of contributors to the trust and the amount of funds donated to political parties. During the financial year, the trust is required to distribute 95 per cent of the amount received by it. The electoral trust is debarred from receiving funds from foreign citizens, foreign entities and other electoral trusts. It can only receive funds from Indian citizens, Indian companies and other entities which have a permanent account number.

Recently my brother was hospitalised in Kochi. Though he had a medical insurance policy, the insurance company did not reimburse the hospital expenses on the ground that the third party administrator had not approved the claim. What action can be taken by my brother?

S Gopalakrishnan, Dubai

The Bombay High Court has held on a public interest petition that the insurance companies are required to pay the claims directly to their customers who have taken out insurance policies. The reason is that there is no tripartite agreement among the policy holder, the insurance company and the third party administrator. Hence, the latter has no right to reject any claim. The appointment of a TPA by an insurance company for processing claims is not permissible.

In fact, the Insurance Regulatory and Development Authority informed the Bombay High Court that TPAs cannot settle claims and only the insurance companies can do so. It was also submitted to the Court that no incentives would be given by insurance companies to TPAs for settling the claim at a lower amount. The four State-owned general insurance companies are now planning to set up their own administrator units in order to reduce consumer complaints and disputes. The private sector companies are now settling the claims in-house.

For the return of income which was filed by the partnership firm in which I have been a dormant partner for many years, the assessment was completed one year ago. The assessing officer proposes to reopen the assessment on the ground that certain income was not assessed by him. All particulars of money received have been shown in the accounts which were filed with the assessing officer. Can he reopen the assessment when no facts or information were concealed?

T K Shah, Doha

If an Assessing Officer has tangible material to come to the conclusion that income had escaped assessment, he has the power to reopen the assessment under section 147 of the Income-tax Act, 1961 within a period of four years from the end of the relevant assessment year. Therefore, even if the facts or information were on record at the time of the original assessment, but they were not considered or ignored at that time, he can reopen the assessment within the aforesaid time frame.

According to Courts, the only condition to be applied is whether there is tangible material on record which would be a ground for the belief that the income was not earlier assessed. However, if the Assessing Officer had considered such facts and information while framing his original assessment order in which such income was not assessed, he cannot subsequently reopen the assessment to tax such income, because that would amount to change of opinion. Hence, in your case, though the facts and information were disclosed in the accounts filed by your firm which were not considered by the Assessing Officer at the time of his original assessment, he would have jurisdiction to reopen the completed assessment within four years and consider whether any income was earned by your firm which he had not assessed to tax in the original assessment order.

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