India's opposition Congress gets breather from $420 million tax payment until after elections

FILE PHOTO: Rahul Gandhi, a senior leader of India's main opposition Congress party, during his 66-day long "Bharat Jodo Nyay Yatra", in Jhalod town

NEW DELHI (Reuters) - India's Income Tax department will not pursue a 35-billion rupee ($420 million) payment from the main opposition Congress party until after the completion of general elections in June, the department told the country's top court on Monday.

The tax department's decision is seen as a breather for the Congress, which has been served multiple income tax notices over the past month and authorities have recovered 1.35 billion rupees in penalties from its bank accounts weeks before voting begins on April 19.

The party has called the action against it as politically motivated and an attempt to financially cripple it as it has hurt its election campaign expenses.

Prime Minister Narendra Modi's Bharatiya Janata Party has denied the allegations saying the tax department is only following rules that govern tax law violations.

Tushar Mehta, India's solicitor-general, told the Supreme Court that the Income Tax department will not initiate any "coercive action" until after the elections. The seven-phase elections are set to be held from April 19 to June 1 and votes counted on June 4.

The court set July 24 for the next hearing on the tax matter.

($1 = 83.3810 Indian rupees)

(Reporting by Shivam Patel in New Delhi; Editing by YP Rajesh and Michael Perry)