DCIT, CIRCLE - 19(1), DELHI V. PUNJAB NATIONAL BANK EMPLOYEES PROVIDENT FUND TRUST, DELHI

ITA 3151/DEL/2024

AI Insights

The case involves the Deputy Commissioner of Income Tax (Dy. CIT) as the appellant and the Punjab National Bank Employees Circle \\u2013 19(1) Provident Fund Trust as the respondent. The dispute centered on the addition of Rs. 3,28,48,346 to the income of the Provident Fund Trust, which was alleged to be interest earned on investments exceeding the prescribed limit of 55% of total assets. The Assessing Officer initially added this amount to the income of the Trust after reopening the assessment under Section 147 of the Income-tax Act, 1961. However, the CIT(A) later deleted this addition, leading to the Revenue's appeal before the Tribunal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 314385 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-05-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2016-2017
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V.K. DUBEY
• Assessee Lawyers: K.V.S.R KRISHNA
• Keywords: TDS; Earning of tax free income; Assessment record
• Section: 147; 148; 143(3); 142(1); 139; 10

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI ‘F’ BENCH, NEW DELHI BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER, AND SHRI NAVEEN CHANDRA, ACCOUNTANT MEMBER ITA No. 3151/DEL/2024 [A.Y 2016-17] The Dy. C.I.T Vs. Punjab National Bank Employees Circle – 19(1) Provident Fund Trust New Delhi III Floor, Rajendra Bhawan Rajendra Place, New Delhi PAN – AAATP 0342 E (Appellant) (Respondent) Assessee By : Shri K.V.S.R Krishna, CA Department By : Shri V.K. Dubey, Sr. DR Date of Hearing : 07.05.2025 Date of Pronouncement : 07.05.2025 ORDER PER NAVEEN CHANDRA, AM :- This appeal by the Revenue is directed against the order of the ld. NFAC, Delhi dated 21.02.2024 for A.Y 2016-17. 2 ITA No. 3151/DEL/2024 Punjab National Bank [A.Y 2016-17] 2. The grounds raised by the Revenue pertain to: (i) deletion of addition of Rs. 3,28,48,346/- on account of interest earned on the investment; and (ii) income earned on surplus funds was not exempt income. 3. Brief facts of the case are that the assessee has filed its ITR for A.Y. 2016-17 on 31.10.2016 declaring total income at Rs. Nil and claimed exempt interest as a trust. Subsequently, case was selected under CASS and order u/s 143(3) has been passed on 09.12.2018 at returned income. The Assessing Officer reopened the case of the assessee u/s 147 of the Income-tax Act, 1961 [the Act, for short] and added a sum of Rs. 3,28,48,346/- being interest earned on investment on the basis that the investment was beyond the prescribed limit of 55% of the total assets. 4. During the course of scrutiny assessment proceedings, the Assessing Officer found on further examination of assessment record: Investment in Govt. Securities Rs. 4,37,46,56,825/- Investment in State Govt. Securities Rs. 13,49,02,34,927/- Total investment in Govt./State Govt. Securities Rs. 17,86,48,91,752/- Total assets as on 31.03.2016 Rs. 29,68,38,00,728/- 55% of assets comes to कोष मुलो द ड Rs. 1632,60,90,400/- The difference of investment in Govt. Securities is Rs.153,88,01 3 ITA No. 3151/DEL/2024 Punjab National Bank [A.Y 2016-17] Further, the interest earned on investment of Rs. 1786,48,91,752/- is Rs. 38,13,56,658/- whereas, the interest on investment of Rs. 1632,60,90,400/- works out to Rs. 34,85,08,312/-. In purview of notification No. 24/2009, the difference of Rs.3,28,48,346/- (i.e. 38,13,56,658 34,85,08,312 Rs. 3,28,48,346) has escaped from tax for AY 2016-17. Hence proceeding u/s 147 was initiated and notice u/s 148 issued on 30.03.2021 and the same was duly served on the assessee. Notices u/s 142(1) was issued time to time. In response to notices appellant submits its reply. The Assessing Officer completed the assessment u/s 147 r.w.s.144 of the I.T. Act on 26.03.2022, determining the appellant's total income at Rs. 3,28,48,346/- after making addition of Rs. 3,28,48,346/- on account interest earned on the investment beyond the prescribe limit of 55% of investment. 4. When the assessee went in appeal before the ld. CIT(A), the ld. CIT(A) allowed the appeal of the assessee by deleting the addition made by the Assessing Officer. 5. Now the department is in appeal before us. 4 ITA No. 3151/DEL/2024 Punjab National Bank [A.Y 2016-17] 6. Both the rival representatives reiterated what has been submitted before the lower authorities. 7. We have heard the rival submissions and have perused the relevant material on record. We find that the ld. CIT(A) has quashed the assessment order as follows: “5. I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order. The contentions/submissions of the appellant are being discussed and decided as under:- Ground No. 6: This ground of appeal relates to the issue whether Provident Fund Trust is required to file return of income or not (in absence of any specific requirement in Section 139 and exemption under section 10(25)(ii)). In this regard CBDT Circular No. 18/2017 dated 29th May 2017 may be referred: \"Circular No. 18/2017 F. No. 385/01/2015-IT(B) Subject: Requirement of Tax Deduction at Source in case of entities whose income is exempted from section 10 of the Income Tax Act, 1961-Exemption thereof The Central Board of Direct Taxes (the Board) had earlier issued Circular No. 4/2002 dated 16.07.2002 and Circular No. 7/2015 dated 23.04.2015 which laid down that in case of such entities, whose income is unconditionally exempt under section 10 of Income tax Act, 1961 (the Act) and who are also statutorily not required to file return of income as per section 139 of the Act, there would be no requirement for tax deduction at source (TDS) from the payment made to them since their income is anyway 5 ITA No. 3151/DEL/2024 Punjab National Bank [A.Y 2016-17] exempt from tax under the Act. The issue of whether exemption from TDS can be extended to more entities on these principles and whether the exemption is needed to be withdrawn in respect of some of the exempted entities was examined by the Board. 2. Examination of the eligible entities for exemption from TDS on the principle of unconditional exemption and no requirement to file return revealed that Circulars No. 4/2002 and 7/2015 are required to be updated to make the following changes: Entities that meet both the above mentioned conditions but are not mentioned in the aforesaid circulars need to be included in the list of exempted entities. Entities that are mentioned in Circular No. 4/2002 but their exemption from income tax has since been withdrawn need to be removed from the list of exempted entities. Entities that are mentioned in Circular No. 4/2002 but because of subsequent amendment they are now required to mandatorily file their return of income u/s 139 need to be removed from the list of exempted entities. 3. In view of the above from TDS has been drawn by adding entities in the first category listed above to the entities mentioned in Circular No. 4/2002 and Circular No. 7/2015 and removing entities in the second and third categories from the list of existing entities eligible for exemption from TDS. 4. Accordingly, it has been decided that in case of below mentioned funds or authorities or Board 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- 6 ITA No. 3151/DEL/2024 Punjab National Bank [A.Y 2016-17] (xi) Provident fund to which the Provident Funds Act, 1925 (19 of 1925) referred to in sub-clause (i), 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); 4. This circular supersedes earlier Circulars on this issue e.g. Circular No. 4/2002 dated 16.07.2002 and Circular No. 7/2015 dated 23.04.2015 with effect from the date of issue of this Circular. (emphasis supplied) More specifically the following portion is worth mentioning: \"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 (i), 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);\" Considering the above it is held that as the total income of RPF (recognized provident fund) is exempt from tax and these funds are not required to file return of income. Moreover there is no provision in the Act to levy tax for violation of Rule 67(2) on interest earned by RPF. 7 ITA No. 3151/DEL/2024 Punjab National Bank [A.Y 2016-17] When the income of RPF is unconditionally exempt under Section 10(25)(ii) and it is also statutorily not required to file return of income as per section 139 of the Income-tax Act; in my View no action u/s 148 can be taken against such RPF. Considering the above the proceeding and the assessment order is quashed.” 8. The ld. CIT(A) has relied on various provisions of the Act and case law together with the CBDT Circular No. 18/2017 dated 29th May, 2017 and allowed the appeal of the assessee. Finding no reason to interfere with the well-reasoned findings of the ld. CIT(A), we dismiss the grounds taken by the Revenue. 9. In the result, appeal of Revenue in ITA No. 3151/DEL/2024 is dismissed. Order pronounced in open court on 07.05.2025. Sd/- Sd/- [SATBEER SINGH GODARA] [NAVEEN CHANDRA] JUDICIAL MEMBER ACCOUNTANT MEMBER Dated : 07th MAY, 2025. VL/ 8 ITA No. 3151/DEL/2024 Punjab National Bank [A.Y 2016-17] Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) Asst. Registrar, 5. DR ITAT, New Delhi Sl No. PARTICULARS DATES 1. Date of dictation of Tribunal Order 2. Date on which the typed draft Tribunal Order is placed before the Dictation Member 3. Date on which the typed draft Tribunal Order is placed before the other Member 4. Date on which the approved draft Tribunal Order comes to the Sr. P.S./P.S. 5. Date on which the fair Tribunal Order is placed before the Dictating Member for pronouncement 6. Date on which the signed order comes back to the Sr. P.S./P.S 7. Date on which the final Tribunal Order is uploaded by the Sr. P.S./P.S. on official website 8. Date on which the file goes to the Bench Clerk alongwith Tribunal Order 9. Date of killing off the disposed of files on the judiSIS portal of ITAT by the Bench Clerks 10. Date on which the file goes to the Supervisor (Judicial) 11. The date on which the file goes for xerox 12. The date on which the file goes for endorsement 13. The date on which the file goes to the Superintendent for checking 14. The date on which the file goes to the Assistant Registrar for signature on the Tribunal order 15. Date on which the file goes to the dispatch section 16. Date of Dispatch of the Order "