ACIT(E), CIRCLE- 1(1), NEW DELHI V. INDIAN AIRLINES EMPLOYEES PROVIDENT FUND, NEW DELHI

ITA 1687/DEL/2018

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 6394 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 4 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-08-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 09-03-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NAJMI
• Assessee Lawyers: RAJHESH AGGARWAL
• Keywords: Retrospective amendment
• Section: 10

Judgement Text

PAGE | 1 INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F : NEW DELHI BEFORE SHRI KUL BHARAT , JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER (THROUGH VIDEO CONFERENCING) ITA NO. 1687 /DEL/2018 (ASSESSMENT YEAR: 2013 - 14 ) ACIT(E), CIRCLE - 1(1), NEW DELHI VS. INDIAN AIRLINES EMPLOYEES PROVIDENT FUND, 113, AIRLINES HOUSE, GURUDWARA RAKAB GANJ ROAD, NEAR SANSAD MARG, NEW DELHI PAN: AAATI2893R (APPELLANT) (RESPONDENT) REVENUE BY : SHRI NAJMI, CIT DR ASSESSEE BY: SHRI RAJHESH AGGARWAL, CA DATE OF HEARING 03/08 / 2021 DATE OF PRONOUNCEMENT 0 3 / 08 / 2021 O R D E R PER PRASHANT MAHARISHI, A. M. 1. THIS APPEAL IS FILED BY THE LD AO AGAINST THE ORDER OF THE CIT(A) - 14, NEW DELHI FOR ASSESSMENT YEAR 2013 - 14 RAISING FOLLOWING GROUNDS OF APPEAL: - I) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) WAS JUSTIFIED IN HOLDING THAT THE ASSESSEE IS ENTITLED FOR EXEMPTION U/S 10(25)(II) OF THE ACT ON ACCOUNT OF (A) REPAYABLE WITHDRAWALS (B) DELAYED PAYMENTS (C) INTEREST PAID PRIOR PERIOD, WHEREAS THE ASSESSEE HAS CATEGORICALLY STATED DURING THE ASSESSMENT PROCEEDINGS THAT IT HAS CLAIMED EXEMPTION U/S 10(25)(I) OF THE ACT. II) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) IS JUSTIFIED IN ALLOWING THE EXEMPTION U/S 10(25)(II) WHICH IS NOT SQUARELY APPLICABLE, LOOKING TO THE NATURE OF RECEIPTS, WHICH IS NOT CONSIDERED ELIGIBLE FOR EXEMPTION BY THE A. O. 2. BRIEF FACTS OF THE CASE SHOWS THAT THE ASSESSE E IS A PROVIDENT FUND CREATED FOR THE BENEFIT OF THE INDIAN AIRLINES EMPLOYEES . IT IS DULY APPROVED UNDER THE PROVIDENT FUND ACT AND ALSO RECOGNIZED U/S 58B(1) OF THE INCOME TAX ACT, 1922 VIDE ORDER DATED 17 . 0 5 .1958. IT IS ALSO ENTITLED TO EXEMPT ION U/S 10(25) OF THE ACT. 3. THE ASSESSEE FILED ITS RETURN OF INCOME ON 26 .03.2015. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND THE LD AO QUESTIONED THE EXEMPTION UNDER SECTION 10 ( 25 ) OF THE ACT. ACCORDING TO THE LD AO THE ASSESSEE HAS REPAYABLE WIT HDRAWAL PAGE | 2 OF RS. 13.31CRORES, DELAYED PAYMENTS OF RS. 8 .25 CR ORES AND INTEREST PAID FOR PRIOR PERIOD OF RS. 5.5 3 CRORES , TOTALING ALL TO RS. 2 1.6 2 CRORES WHICH ARE NOT COVERED BY PROVISIONS OF SECTION 10 ( 25 )(I) OF THE ACT AS ONLY INTEREST OF GOVERNMENT SECUR ITIES AND PUBLIC SECURITIES IS EXEMPT. THEREFORE , THE ABOVE SUM OF RS. 2 1.62 WAS DISALLOWED IN THE HANDS OF THE ASSESSEE VIDE ORDER DATED 09.03.2016 U/S 143 ( 3 ) OF THE ACT . 4. THE ASSESSEE P REFERRED AN APPEAL BEFORE THE LD CIT (A), WHEREIN THE ASSESSEE SUBMITT ED A DETAILED EXPLANATION. THE LD CIT(A) CONSIDERING THE EXPLANATION OF THE ASSESSEE AND HELD THAT ASSESSEE CONTINUES TO BE A RECOGNIZED PROVIDENT FUND CLAIMING EXEMPTION U /S 10 ( 25 )(II) OF THE ACT WHICH HAS BEEN ALLOWED TO THE APPELLANT IN THE PAST SEVERAL ASSESSMENT YEARS WHICH ARE ASSESSED U /S 143 (3) OF THE ACT . HE DIRECTED THE LD AO TO DELETE THE DISALLOWANCES. 5. THE LD AO AGGRIEVED WITH THE ORDER AND HAS PREFERRED THIS APPEAL . THE LD CIT DR SUPPORTED THE ORDER OF THE LD AO. THE LD AR REFER RED TO THE ORDER OF THE LD CIT (A) AND SUPPORTED IT. 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE ORDER OF THE LOWER AUTHORITIES. THE BRIEF FACTS OF THE CASE SHOWS THAT THE ASSESSEE IS A PROVIDENT FUND CREATED FOR BENEFIT OF INDIAN AIRLI NES EMPLOYEES. IT IS REGISTERED UNDER THE PROVIDENT FUND ACT AND AS WELL AS UNDER INCOME TAX ACT . IT FILE D ITS RETURN OF INCOME DECLARING A LOSS SHOWING THE EXCESS OF EXPENDITURE OVER INCOME OF RS. 1.17 CROSS. THE ASSESSEE HAS EARNED GROSS INTEREST INCOME OF RS. 231 CROSS AND HAS ALSO EXPENDITURE OF INTEREST OF RS. 232 CRORES. OVER AND ABOVE THE INTEREST ON SECURITIES THE ASSESSEE HAS EARNED INTEREST O N REPAYABLE WITHDRAWS FROM ITS MEMBERS OF RS. 13.31 CRORES , INTEREST OF DELAYED PAYMENTS OF RS. 8.25 CRORES AND PRIOR PERIOD INTEREST OF RS. 5 , 53 , 000 / - . THE AO NOTED THAT ACCORDING TO THE PROVISION OF SECTION 10 ( 25 )(I) ONLY THE INTEREST ON GOVERNMENT SECURITIES IS EXEMPT . THE ABOVE THREE INTEREST ARE NOT EXEMPT AND ARE CHARGEABLE TO TAX . THE NATURE OF THE INTEREST ON REPAYABLE WITHDRAWAL IS THAT EMPLOYEES WHO ARE CONTRIBUTING THE PROVIDENT FUND ARE ALLOWED TO WITHDRAW FROM THE PROVIDENT FUND ACCOUNT FOR SPECIFIED PURPOSES AND ON THIS WITHDRAWAL IT IS CONSIDERED AS PROVIDENT FUND LOAN ON W HICH THE INTEREST IS CHARGED BY THE ASSESSEE . IN FACT THE INTEREST RECEIVED IS REDUCED FROM THE INTEREST PAYABLE TO SUCH EMPLOYEES IN SUCH PROVIDENT FUND ACCOUNT. THE INTEREST ON DELAYED PAYMENTS AND INTEREST ON PRIOR PERIOD ARE ALSO TWO DIFFERENT TRANSACT IONS. WHEN INDIAN AIRLINES DELAYS IN REMITTING ITS MANDATORY CONTRIBUTION TO THE TRUST THE ASSESSEE TRUST ALSO RECEIVES THE INTEREST FROM THE INDIAN AIRLINES. THIS INTEREST ON DELAYED CONTRIBUTION MADE PAGE | 3 BY INDIAN AIRLINES ON PROVIDENT FUND TO THE ASSESSEE T RUST . THE OTHER ITEM INTEREST PAID OF PRIOR PERIOD IS INTEREST CHARGED AND RECEIVED BY THE TRUST FROM THE INDIAN AIRLINES FOR DELAY IN REMITTING CONTRIBUTION PERTAINING TO PRIOR PERIOD . IN FACT THE AMOUNT OF INTEREST RECEIVED BY THE ASSESSEE TRUST HAS BE EN UTILIZED FOR PAYMENT OF INTEREST TO THE EMPLOYEES ON THEIR CONTRIBUTION. ACCORDING TO THE PROVISION OF SECTION 10 ( 25 ) INTEREST ON SECURITIES OF THE PROVIDENT FUND TRUST IS NOT INCLUDED ANY INCOME U /S 10 ( 25 )(I) OF THE ACT. SECTION 10 ( 25 )(II) EXEMPT INCOM E RECEIVED BY THE TRUSTEES ON BEHALF OF THE RECOGNISED PROVIDENT FUND . IN THE PRESENT CASE THE ASSESSEE IS A RECOGNISED PROVIDENT FUND AND THEREFORE IT IS ELIGIBLE TO CLAIM EXEMPT ION U /S 10 ( 25 )(II) OF THE ACT WHERE ANY INCOME IS RECEIVED BY THE TRUSTEES ON BEHALF OF THE PROVIDENT FUNDS. SINCE ALL THE INTEREST S ARE RECEIVED ON BEHALF OF THE PROVIDENT FUND SAME IS NOT CHARGEABLE TO TAX IN THE HANDS OF THE TRUST. THE TRUST IS REGISTERED ACCORDING TO THE PROVISION OF PR OVIDENT FUND LAW AND INCOME TAX ACT. FURTHER, THE ABOVE INCOME WHICH HAS BEEN ADDED BY THE AO IN THE HANDS OF THE ASSESSEE BY THIS ORDER IS ALSO RECEIVED IN PAST YEARS WHEREIN SAME IS NOT HELD TO BE CHARGEABLE TO TAX . THEREFORE , THERE IS A CONSISTENT STAND OF THE REVENUE ALSO THAT THE ABOVE INCOME IS NOT CHARGEABLE TO TAX IN THE HANDS OF THE ASSESSEE. FURTHER, THE RELIANCE WAS ALSO PLACED ON CIRCULAR NO. 108 DATED 2 0.03.1973 WHEREIN, IT HAS BEEN STATED THAT THE INCOME OF THE RECOGNIZED PROVIDENT FUND ARE CO MPLETELY EX EMPT . BASED ON ALL THESE SUBMISSIONS THE LD CIT(A) HAS ALLOWED EXEMPTION TO THE ASSESSEE AS PER PARA NO. 5.1 TO 5.1.3 OFFICE ORDER AS UNDER : - 5.1 GROUNDS OF APPEAL NOS. 1 TO 3 AND THE REVISED GROUND NO. 4 CHALLENGE THE DENIAL OF EXEMPTION UNDER SECTION 10(25)(II) AND ALLOWING EXEMPTION UNDER SECTION 10(25)(I). SINCE THESE GROUNDS OF APPEAL ARE INTERLINKED, THESE ARE BEING ADJUDICATED TOGETHER. 5.1.1 I HAVE CONSIDERED THE ASSESSMENT ORDER AND THE SUBMISSIONS OF THE APPELLANT. FROM THE ASSESSMENT ORDER AS WELL AS DETAILS SUBMITTED IT IS APPARENT THAT THE APPELLANT IS TRUST IS NOT ONLY DULY APPROVED UNDER THE PROVIDENT FUND ACT, 1925, BUT HAS ALSO BEEN GRANTED RECOGNITION BY THE ID. CIT UNDER SECTION 58B(1) WITH RETROSPECTIVE EFFECT FROM 01.08.1953. HENCE, THE INCOME OF THE APPELLANT IS EXEMPT BOTH UNDER 10(25)(I) AND 10(25(II). THERE IS NOTHING ON THE RECORD TO SHOW THAT THE RECOGNITION GRANTED BY THE LD. COMMISSIONER OF INCOME TAX HAS BEEN WITHDRAWN AND THAT THE SAID PROVIDENT FUND IS NOT A RECOGNI ZED PROVIDENT FUND. IN FACT, THE ASSESSING OFFICER HAS ACKNOWLEDGED THE FACT THAT THE PROVIDENT FUND IS A RECOGNIZED ONE. IT IS ALSO SEEN FROM THE SUBMISSIONS MADE THAT EXEMPTION UNDER SECTION 10(25(II) HAS BEEN GRANTED IN ASSESSMENT MADE UNDER SECTION 143 (3) FOR ASSESSMENT YEARS 2011 - 12 AND 2012 - 13. 5.1.2 THERE IS NO CHANGE IN THE FACTS AND CIRCUMSTANCES OF THE CASE FROM THE EARLIER YEARS AND IT IS A FACT THAT THE APPELLANT CONTINUES TO BE A RECOGNIZED PROVIDENT FUND AND IN VIEW OF THIS, IT IS ENTITLED TO CLAIM PAGE | 4 EXEMPTION UNDER SECTION 10(25)(I) AS WELL AS SECTION 10(25(II) - EVEN OTHERWISE, AS HAS BEEN SUBMITTED BY THE APPELLANT EVEN, IF, INTEREST ON ACCOUNT OF REPAYABLE WITHDRAWALS, INTEREST ON DELAYED PAYMENTS, INTEREST PAID PRIOR PERIOD HAD BEEN BROUGHT TO TAX, DEDUCTION SHOULD HAVE BEEN ALLOWED ON ACCOUNT OF INTEREST PAID TO THE MEMBERS WHICH IS APPARENT FROM THE INCOME & EXPENDITURE ACCOUNT. 5.1.3 IN VIEW OF THE DISCUSSION ABOVE AND IN VIEW OF THE FACT THAT THE APPELLANT CONTINUES TO BE A RECOGNIZED PRO VIDENT FUND AND HAS BEEN CLAIMING EXEMPTION UNDER SECTION 10(25)(II) AND WHICH HAS BEEN ALLOWED TO THE APPELLANT IN THE PAST IN ASSESSMENTS MADE UNDER SECTION 143(3), THE ASSESSING OFFICER IS DIRECTED TO DELETE THE ADDITION MADE AND ALLOW EXEMPTION TO THE APPELLANT UNDER SECTION 10(25(II). GROUNDS OF APPEAL NOS. 1 TO 3 AND REVISED GROUND OF APPEAL NO. 4 ARE ALLOWED. 7. THE LD DR COULD NOT SHOW US ANY REASON TO DEVIATE FROM THE ORDER OF THE THE LD CIT(A). WE FIND THAT THERE IS NO INFIRMITY IN THE ORDER . ACCORDINGLY , WE DO NOT FIND ANY MERIT IN THE APPEAL OF THE LD AO AND HENCE WE CONFIRM THE ORDER OF THE LD CIT(A) HOLDING THAT THE INCOME OF THE ASSESSEE COMPRISING OF INTEREST O N REPAYABLE WITHDRAW ALS DELAYED PAYMENTS AND INTEREST ON PRIOR PERIOD IS NOT CHARGEABLE TO TAX U/S 10 ( 25 ) OF THE ACT. THUS, BOTH THE GROUNDS OF APPEAL ARE DISMISSED. 8. IN THE RESULT, APPEAL OF THE LD AO IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 0 3 / 08 / 2021 . - SD/ - - SD/ - ( KUL BHARAT ) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 0 3 / 08 / 2021 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI