Political contribution by Companies

The amendment to Companies Act, 1985 was a milestone in the above subject. Prior to that amendment Companies are restricted from contributing for any political purpose. This amendment made some leniency in this regard.
Here contribution may consists of contributing any amount directly or indirectly
i.	To any political party; or
ii.	To any person for any political purpose.
Donation and subscription are fall under the purview of this contribution. The amount of expenditure incurred by a Company on advertisement in any publication like souvenir, brochure, tract, pamphlet or the like by or on behalf of a political party or for the advantage of a political party shall also be deemed to be contribution of the amount to such political party or for political purpose. The word contribution means payment without consideration.
Even after the 1985 amendment, the following Companies not allowed to make any political contribution.
i.	Government Companies; and
ii.	Companies, which have been in existence for less than three financial years.
It does not mean that other Companies can freely contribute to political purpose. Through Section 293 A, the Companies Act, 1956 made strict measures for making political contribution. So other Companies may contribute for any political purpose subject to the following conditions.
i.	Such a contribution should be supported by a Resolution passed atb the Board Meeting.
ii.	The aggregate amount of contribution in any financial year shall not exceed 5% of its average net profits made during the last three financial years.
iii.	Every Company must disclose in its Profit and Loss Account the details such as: 1.   The total amount of such contribution; and 2.   The name of the party or person to which or to whom such amount has been contributed.
Penalty
Contravention to this Section imposes punishment to both Company and defaulting officer.
Company		Shall be punishable with fine which may extended to three times the amount so contributed;
Defaulting officer		Shall be punishable with imprisonment up to three years and shall be liable to fine.
Important  points
i.	This is an offence compoundable under Section 629A
	Re. Adani Exports Limited(2004)
ii.	Companies can contribute to national defense fund or any other fund approved by Central Government for the purpose of national defense. The amount involved should be disclosed in the Profit and Loss Account.