M/s. ACI Worldwide Solutions Private Limited, Bengaluru V. Deputy Commissioner of Income Tax, Circle-1(1)(1), Bangalore

ITA 06/BANG/2019

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 3422 (ITAT-BANGALORE)
• Duration Of Justice: 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-02-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2007-2008
• Appeal Filed On: 02-01-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: NARENDRA JAIN

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC C BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN , VICE PRESIDENT ITA NO. 06/BANG/2019 ASSESSMENT YEAR : 2007 - 08 ACI WORLDWIDE SOLUTIONS PVT. LTD. EMPLOYEES GROUP GRATUITY FUND, (FORMERLY M/S. VISUAL BANKING SOLUTIONS (INDIA) PVT. LTD. EMPLOYEES GROUP GRATUITY FUND), NO.9, SALARPURIA, CAMBRIDGE ROAD, ULSOOR, BENGALURU 560 008. PAN: AAETA 3123C VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 1(1)(1), BANGALORE. APP ELLANT RESPONDENT APP ELL ANT BY : SHRI NARENDRA JAIN, ADVOCATE RESPONDENT BY : SHRI RAJENDRA CHANDEKAR, JCIT DATE OF HEARING : 29 .01.2019 DATE OF PRONOUNCEMENT : 20 .0 2 . 201 9 O R D E R THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER DATED 30.10.2018 OF THE CIT(APPEALS)-I, BENGALURU RELATING TO ASSESS MENT YEAR 2007-08. 2. THE ONLY ISSUE THAT ARISES FOR CONSIDERATION IN THIS APPEAL IS AS TO WHETHER THE AO WAS RIGHT IN TAXING THE INCOME OF TH E APPELLANT/ASSESSEE. THE APPELLANT IS AN EMPLOYEES GROUP GRATUITY FUND C REATED FOR THE EXCLUSIVE BENEFIT OF THE EMPLOYEES OF M/S. VISUAL BANKING SOLUTIONS (INDIA) PVT. LTD. THE TRUST WAS CREATED DURING THE FINANCIAL YEAR ITA NO. 06/BANG/2019 PAGE 2 OF 4 1996-97. SUBSEQUENTLY, THE APPELLANT ENTERED INTO A GROUP GRATUITY SCHEME WITH LIC AND THE SAID SCHEME WAS APPROVED BY THE CIT(APPEALS), BANGALORE. HOWEVER, IN FINANCIAL YEAR 1998-99 AND IN 2008-09 UPON TAKING OVER OF VISUAL BANKING SOLUTIONS GROUP BY ACI WORLD WIDE GROUP THERE WERE CHANGES IN THE MANAGEMENT OF THE COMPANY AND CONSEQ UENTLY THE SAID TRUST COMPOSITION ALSO CHANGED INCLUDING VARIOUS AS PECTS OF THE TRUST DEED. HOWEVER, THE SAID CHANGES IN THE COMPOSITION OF THE TRUST AND THE TRUST DEED WERE NOT INFORMED TO THE CIT, BANGALORE AND NO APPROVAL WAS SOUGHT. THE CIT PASSED AN ORDER DATED MARCH 27, 20 14 UNDER RULE 2(3) OF THE PACT C OF SCHEDULE IV OF THE ACT WITHDRAWING TH E RECOGNITION EARLIER GRANTED TO THE APPELLANT. CONSEQUENTLY, THE AO P ROCEEDED TO TREAT THE INTEREST INCOME ACCRUED TO THE TRUST AS TAXABLE IN THE HANDS OF THE APPELLANT. 3. BEFORE THE CIT(APPEALS), THE ASSESSEE SUBMITTED THAT IT HAD FILED AN APPEAL BEFORE THE CBDT CHALLENGING THE WITHDRAWAL O F RECOGNITION OF TRUST BY THE CIT, BANGALORE. THE ASSESSEE REQUESTED THE PROCEEDINGS BEFORE THE CIT(APPEALS) TO BE KEPT IN ABEYANCE TILL DISPOS AL OF THE APPEAL BY THE CBDT. THE PLEA OF THE ASSESSEE WAS, HOWEVER, REJEC TED BY THE CIT(APPEALS) FOR THE FOLLOWING REASONS:- DURING THE COURSE OF THE APPEAL PROCEEDINGS THE AP PELLANT MAINLY RELIED ON ITS APPLICATION MADE TO THE CBDT C HALLENGING THE WITHDRAWAL OF RECOGNITION TO THE SAID TRUST BY THE CIT, BENGALURU AND REQUESTED FOR ORDERING THE GROUNDS OF APPEAL IN ITS FAVOUR AND IN THE ALTERNATIVE TO KEEP THE PRESENT A PPEAL IN ABEYANCE. 2.3 HAVING CONSIDERED THE SUBMISSIONS. I AM OF THE VIEW THAT THERE HAVE BEEN MAJOR CHANGES IN THE COMPOSITION AN D THE TERMS OF THE TRUST AND TRUST DEED NECESSITATING FRESH APP ROVAL OF THE CIT, BENGALURU. THE ORDER DATED MARCH 27, 2014 UNDE R RULE 2(3) OF THE PART C OF SCHEDULE IV OF THE ACT WITHDRAWING THE RECOGNITION PASSED BY THE CIT IS BINDING ON THE AO. CONSIDERING THE SAME, ONE CANNOT FIND FAULT WITH THE ACTION OF THE AO IN THIS ITA NO. 06/BANG/2019 PAGE 3 OF 4 REGARD. THEREFORE, THE APPEAL FILED BY THE APPELLAN T CHALLENGING THE ACTION OF THE AO IN THIS REGARD STANDS DISMISSE D. 4. AGGRIEVED BY THE ORDER OF CIT(APPEALS), THE ASSE SSEE IS IN APPEAL BEFORE THE TRIBUNAL. 5. THE ASSESSEE MADE TWO PRAYERS BEFORE US THAT THE ASSESSEE WAS AN AOP AND FILED ITS RETURN OF INCOME AS SUCH AND W AS ASSESSED IN THE STATUS OF AOP. HE ALSO BROUGHT TO OUR NOTICE THAT THE ENTIRE INTEREST INCOME WAS BROUGHT TO TAX WITHOUT ALLOWING BASIC EXEMPTION . HIS REQUEST WAS TO DIRECT THE AO TO ALLOW BASIC EXEMPTION AND ALSO TAX THE APPELLANT AT THE RATE OF TAX AS APPLICABLE TO AOP AS PROVIDED IN CLA USE (IV) OF THE FIRST PROVISO TO SECTION 164 OF THE INCOME-TAX ACT, 1961 ['THE ACT']. 6. I AM OF THE VIEW THAT THE REQUEST MADE BY THE AS SESSEE IS IN ACCORDANCE WITH LAW AND DESERVES TO BE ACCEPTED. I ACCORDINGLY DIRECT THE AO TO ALLOW THE BASIC EXEMPTION AND APPLY THE APPRO PRIATE RATE OF TAX APPLICABLE TO AOP. 7. ALL OTHER GROUNDS RAISED BY THE ASSESSEE WAS NOT PRESSED AND THEREFORE DISMISSED AS SUCH. 8. IN THE RESULT, THE APPEAL BY THE ASSESSEE IS PA RTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 20 TH DAY OF FEBRUARY, 2019. SD/- ( N.V. VASUDE VA N ) VICE PRESIDENT BANGALORE, DATED, THE 20 TH FEBRUARY, 2019. / D ESAI S MURTHY / ITA NO. 06/BANG/2019 PAGE 4 OF 4 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.