INCOME TAX OFFICER- 23(3)(1), MUMBAI vs. UTI ASSET MANAGEMENT COMPANY LIMITED EMPLOYEES PROVIDENT FUND, MUMBAI

4. Aggrieved with the order of Ld. AO, the assessee preferred an appeal before Ld. CIT(A), who allowed the assessee’s appeal after making the following observations: “6,1 On perusal of the assessment order passed by ITO, Ward- 23(3)(4), Mumbai, for the A. Y. 2017-18 in the case of the above mentioned appellant/assessee provident fund, it is clearly noticed that the appellant/assessee had mentioned its "status" as a "TRUST" and the Ld. AO had, likewise, fully allowed the exemption claimed by the appellant/assessee for the said A.Y., le, 2017-18, It is also noticed from the assessment order for the above mentioned A.Y., 2017-18, that the appellant/assessee had not filed Form 10B/10BB. In the said order of assessment, the appellant/assessee had stated before the Ld. AO that the UTI Asset Management Company Limited Employees' Provident Fund is a fund set up to administer the provident fund of the employees of UTI AMC under the provisions of the Provident Fund Act, 1925. The entire income of the fund is exempt U/s. 10(25) of the I. T. Act, 1961. The appellant/assessee had A.Y. 2018-19 UTI Asset Management Company Ltd. Employees Provident Fund further stated that the fund is not a charitable trust or institution to which the provisions of Sec. 12A(b) of the Act, are applicable and hence the audit report in Form 10B/10BB was not required. Hence, the Ld. AO had passed the assessment order in the case of the appellant/assessee for the A.Y. 2017-18 preceding the present A.Y. 2018-19, as per its retumed income, fully allowing the amount exempt, as claimed by the appellant/assessee. In the present appellant's case for the A.Y., 2018-19 under appeal, it is apparent that the Ld. AO had disallowed the amount claimed by the appellant/assessee as exempt Uls. 10(25), i.e., Rs. 22,81,20,000/-pondering that it had filed its ROI (ITR 7) belatedly, i.e., the actual date of filing the said ITR 7 was 31/10/2018 and the appellant/assessee had filed the same on 24/01/2019. Considering this fact, the Ld. AO had fully disallowed the exempted amount claimed by the appellant/assessee to be exempt and in defence, the appellant/assessee had brought to light various jurisdictional decisions, asserting in favour of itself. During the appellate proceedings, the appellant/assessee has claimed relief before the appellate authorities, requesting it to direct the Ld. AO, to delete the addition aggregating to Rs. 22,81,20,000/-made to the total income of the appellant/assessee in the assessment order, completely ignoring the claim of the appellant/assessee of the exemption U/s. 10(25) of the Act against its declared income of Rs. 'NIL.' It may be pertinent here to mention that even in some cases, Form 10 was not filed on time. Even in some cases, return filed U/s, 139(4) was treated as filed U/s. 139(1) of the Act, since deduction/exemption are some beneficial provisions, they should be construed liberally, in the eye of Law. This is the Cardinal Rule. We have to respectfully submit that provisions setting out the time limit should not work as punitive ones, so that the purpose behind the relief [claimed by appellant/assessee) should not be foiled. The provisions of Sec. 139(1) & 139(4) of the Act, have to be read together and on such a reading, the inevitable conclusion is that a return filed within time specified in sub-sec. (4) has to be considered as having been made within the time prescribed U/s. (1) 8 (2) of the Act, as laid out in the case of CIT V.S KULU VALLEY TRANSPORT CO. PVT. LTD. [77 ITR 1518]. 6.2 From a communication dated: 07/05/2024, it is seen that the appellant/assessee had requested the CIT(A), NFAC (NAC) ITD, Delhi, to kindly dispose off the appeal at the earliest since the Department is pressing it for payment of the outstanding tax demand. It had also requested the CIT(A) to kindly allow the appeal and delete the addition made by the Ld. AO; and not to pass any adverse order in the present proceedings. Keeping the above plea of the appellant/assessee in mind, it will not be out of way to refer to that in the instant case of the appellant/assessee, Fund represents income from investments which is made from such contributions. During the year ending March, 2018, relevant to the present A.Y. i.e., 2018-19, the appellant/assessee has earned interest income and income from sale of securities to the tune of Rs. 22,81,20,000/-. As per sub-clause (i) of clause (25) of Sec. 10 of the Act, any interest on securities which are held by or are the property of any provident fund to which the Provident Funds Act, 1925 applies, and any capital gains of the fund arising from the sale, exchange or transfer of such securities shall not be included while computing the total incorne of the appellant/assessee. Since, the appellant/assessee in question is a fund to which Provident Fund Act applies, income earned by it is exempt U/s. 10(25) of the Act.

A.Y. 2018-19 UTI Asset Management Company Ltd. Employees Provident Fund It may be assumed that the Ld. AO, while framing the assessment order in the Instant case of the appellant/assessee for the year under consideration, i.e. A.Y. 2018-19, could not properly apply his judicious mind. It is apparent that the Ld. AO was grappling with the sole thought of filing a belated return by the appellant/assessee, while passing the impugned order of assessment which had led the Ld. AO to disallowing the full amount of the exempted amount that the appellant/assessee prayed for as a relief. It is a point of reason that the explanation put forth by the appellant/assessee before the Ld. AO (on not filing of Form 10B) that the requirement to file Form 10B is governed by Sec. 124(1)(b) of the Act: r.w.r. 178 of the IT Rules. The provisions of Sec. 12A are applicable only to those trusts or institutions claiming deductions Uis. 11 or 12 of the Act. Since the present appellant/assessee has not claimed deduction/exemption u/s. 11 or 12 of the Act, there is no requirement to file the said Form 108. This explanation has evidently been accepted by the Ld. AO since the assessment order does not refer to this aspect at all as a basis for making the disallowance. In fact, importantly, the assessment order states clearly that exemption has been claimed U/s, 10(25) of the Act, and, therefore, the sole reason for not allowing the said exemption is the filling of the ITR 7 belatedly by the appellant/assessee for the A.Y, under appeal. The impugned demand of Rs. 11,80,88,552/-has been raised pursuant to the said order. The appellant/assessee also submitted that the said disallowance was absolutely without any merit and deserves to be deleted on the grounds that there is no provisions under the 1. T. Act which denies an exemption to an entity u/s. 10(25) of the Act for filing the tax return belatedly. No other conditions were required to be fulfilled for claiming the exemption u/s, 10(25) and the exemption is automatic and unconditional, in the assessment order, the Ld. AO (astonishingly as also vividiy apparent) has not referred to any provisions as per the Act, or the Rules to uphold/sustain the denial of the impugned exemption claimed by the appellant/assessee. Actually speaking, in the case of the present appellant/assessee (an entity), even if a ROI is not filed at all, denial of the exemption U/s. 10(25) sought for by it, is not warranted. It is also clear that the appellant/assessee is not specifically required under any provisions of the I. T. Act/Rules, to file a ROI, (although belated in the instant case under appeal). In context to the citations supra, a reference to the Circular No. 18/2017 may be made wherein it has been unequivocally stated that certain entities are not required to file tax retums; and in this appeal, the appellant/assessee is such an entity. Further, in Para 4(xi), provident funds, claiming exemption u/s. 10(25) are fisted as one such entity. The appellant/assessee also submits that there is no mandatory requirement for it to file a ROI on account of the fact that it is a fund to which Sec. 10(25) of the Act rightly applies as is abundantly clear from the above sald Circular. If there is no mandatory requirement for the Appellant/assessee to file an ROI, then, there can be no question of denial of the exemption for merely late filing of the ROI.

A.Y. 2018-19 UTI Asset Management Company Ltd. Employees Provident Fund In the final result, the order of the Ld. AO. is considered unwarranted/unconvincing from the standpoint of what have been already elaborated above; leading to simultaneous confirmation of the grounds of appeal challenged by the appellant in this case. The appeal filed by the appellant is, therefore, allowed.”

5. Aggrieved with the order of Ld. CIT(A), the revenue is in appeal before the Tribunal. The sole ground of appeal is that the Ld. CIT(A) has wrongly allowed the claim of deduction u/s 10(25) to the assessee, for which it was mandatory that the return of income should be filed within the due date, and the assessee had filed its return on 24.01.2019, much after the due date of 31.10.2018.

6. Before us, Ld. DR has submitted that the decision of the Ld. CIT(A) is incorrect as for claiming the benefit of Section 10(25), the assessee should have filed the return within the due date.

7. On the other hand, Ld. AR has submitted that the assessee is not required to file any return, nor TDS was required to be deducted, as the impugned income is exempt u/s 10(25) of the Act, and does not form part of the total income. It has further been pointed out that in the previous and subsequent years, the assessee’s claim has been allowed by the Ld. AO. In this regard, Ld. AR has also drawn our attention to the CBDT Circular No. 18/2017 dated 29.05.2017, wherein it has been specifically provided that where income is unconditionally exempt u/s 10 and the assessee is not required to file a return of income as per section 139 of the Act, there would be no requirement for tax deduction at source since their income is anyway exempt. The assessee is fully A.Y. 2018-19 UTI Asset Management Company Ltd. Employees Provident Fund covered by the provisions of this circular, in terms of Para 4 clause xi, which reads as under: “4. Accordingly, it has been decided that in case of below mentioned funds or authorities or Boards or bodies, by whatever name called, referred to in section 10 of the Income-tax Act, whose income is unconditionally exempt under that section and who are also statutorily not required to file return of income as per section 139 of the Income-tax Act, there would be no requirement for tax deduction at source, since their income is anyway exempt under the Income-tax Act. ……………. …………… …………… …………... …………... (xi) Provident fund to which the Provident Funds Act, 1925 (19 of 1925) referred to in sub-clause (1), recognized provident fund referred to in sub- clause (ii), approved superannuation funds referred to in sub-clause (iii), approved gratuity fund referred to in sub-clause (iv) and funds referred to in sub-clause (v) of clause (25);”

8. In view of the above factual and legal position, Ld. AR has submitted that the decision of Ld. CIT(A) is correct and deserves to be upheld. Ld. AR has further placed reliance on the decision of the High Court of Gauhati in the case of North Eastern Electric Power Corpn. Employees Provident Fund Trust v/s Union of India in W.P. (C) No. 85 (SH) of 2011 dated 16.12.2011 (2013) 31 taxmann.com 62 Gauhati, wherein it has been held as under: “The assessee-trust was being deprived of a sum for which it could not be blamed at all: it had no liability whatsoever to pay this amount to the revenue. Yet, the revenue had refused to refund the same by taking a hypertechnical view of the matter. The revenue does not dispute that the assessee trust has no liability whatsoever to pay the amount in question. Therefore, the revenue has not properly applied its mind to the facts of the case and has in the process completely overlooked the provisions of section 119(1)(b). True, no specific or express provision is engrafted in this section to deal with refund of TDS erroneously deducted when there is admittedly no due from the assessee, but then, this is precisely the reason, for enacting section 119(1)(b): this is in the nature of an inherent power granted to the Central Board of Direct Taxes to entrust any income-tax authority other than a Commissioner (Appeals) to admit an application or claim for refund even belatedly and dispose of the same in accordance with law.

A.Y. 2018-19 UTI Asset Management Company Ltd. Employees Provident Fund Section 119(1)(b) is the appropriate provision to deal with cases of this nature. [Para 9] For what has been stated in the foregoing, this writ petition succeeds. The assessee is entitled to condonation of the delay in filing the claim for refund. Resultantly, the respondent authorities are directed to process the application of the assessee trust for refund in accordance with law. [Para 10]”