Dy.Commissioner of Income Tax,(Exemptions) Circle-2, Ahmedabad V. Institute of Rural Management, Anand

ITA 2495/AHD/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 8012 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-12-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 24-08-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SANJAY SHAH
• Keywords: Competent authority

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD .., , BEFORE SHRI S.S. GODARA, JUDICIAL MEMBER & SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER ./ I.T.A. NO.2495/AHD/2015 ( / ASSESSMENT YEAR : 2011-12) DCIT (EXEMPTIONS) CIRCLE-2 AHMEDABAD / VS. INSTITUTE OF RURAL MANAGEMENT, ANAND POST BOX NO.60, ANAND 388 001 $ ./ ./ PAN/GIR NO. : AAATI 0767 N ( $' / APPELLANT ) .. ( ($' / RESPONDENT ) $') / APPELLANT BY : SHRI PRASOON KABRA, SR.DR ($'*) / RESPONDENT BY : SHRI SANJAY SHAH, AR +,*- / DATE OF HEARING 12/12/2017 ./0*- / DATE OF PRONOUNCEMENT 13/ 12 /2017 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTAN CE OF THE REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-4, VADODARA [CIT(A) IN SHORT] DATED 13/05/2015 ARISING IN THE MATTER OF ASSESSMENT ORDER PASSED UNDER S.143(3) OF THE INCOM E TAX ACT, 1961 (HEREINAFTER REFERRED TO AS 'THE ACT') DATED 21/03 /2014 RELEVANT TO ASSESSMENT YEAR (AY) 2011-12. ITA NO.2495/AHD /2015 DCIT VS. INSTITUTE OF RURAL MANAGEMENT ASST.YEAR 2011-12 - 2 - 2. THE EFFECTIVE GROUND OF APPEAL RAISED BY THE RE VENUE READS AS UNDER:- THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DE LETING ADDITION MADE OF RS.65,06,688/- ON ACCOUNT OF DISALLOWANCE M ADE BY THE A.O. DUE TO CONTRIBUTION MADE BY THE A.O. DUE TO CO NTRIBUTION MADE BY THE ASSESSEE TOWARDS UNRECOGNIZED PROVIDENT FUND . 3. WHEN THE MATTER WAS CALLED FOR HEARING IN THE RE VENUE APPEAL, THE LD.AR FOR THE ASSESSEE MR. SANJAY SHAH SUBMITTED, A T THE OUTSET, THAT THE ASSESSING OFFICER (AO) AT THE ASSESSMENT STAGE COMM ITTED ERROR IN DISALLOWING CONTRIBUTION OF RS.65,06,688/- MADE BY THE ASSESSEE AS EMPLOYER TO IRMA EPF TRUST SET UP AND CONTROLLED A ND MANAGED BY TRUSTEES APPOINTED BY THE ASSESSEE ON THE BASIS THA T SAID PROVIDENT FUND TRUST IS NOT A RECOGNIZED PROVIDENT FUND UNDER S. 2(38) R.W.S. 36(1)(IV) OF THE ACT. IT WAS THUS ALLEGED THAT CONTRIBUTION S MADE BY THE EMPLOYER IS NOT ELIGIBLE FOR DEDUCTION. THE LD.AR SUBMITTED THAT THE AO COMMITTED THE AFORESAID ERROR OWING TO MISAPPRECIAT ION OF FACTS. THE LD.AR POINTED OUT THAT THE FUND WAS ACCORDED RECOGN ITION BY THE CIT GUJARAT-III, AHMEDABAD VIDE ITS ORDER DATED 26/02/ 1981. THE LD.AR VEHEMENTLY SUBMITTED THAT THE AFORESAID APPROVAL WA S NOT WITHDRAWN BY THE CIT AT ANY POINT OF TIME THEREAFTER AND THUS TH E PROVIDENT FUND TRUST IS CONTINUING TO BE A RECOGNIZED PROVIDENT FUND. T HE LD.AR RELIED UPON THE ORDER OF THE CIT(A) WHEREAS THE CIT(A) GRANTED RELIEF PASSED ON THE EARLIER DECISION IN ASSESSEES OWN CASE IN AY 2010- 11. ITA NO.2495/AHD /2015 DCIT VS. INSTITUTE OF RURAL MANAGEMENT ASST.YEAR 2011-12 - 3 - 4. THE LD.DR, ON THE OTHER HAND, RELIED UPON THE OR DER OF THE AO AND SUBMITTED THAT INSTITUTE OF RURAL MANAGEMENT EPF TR UST IS RIGHTLY HELD AS UNRECOGNIZED PF SINCE IT WAS MANDATORY ON THE PART OF THE ASSESSEE TO OBTAIN APPROVAL OF THE SPECIFIED AUTHORITY NAMELY THE COMMISSIONER OF INCOME TAX HAVING REGARD TO PROVISIONS OF SECTION 2 (38) OF THE ACT. THE LAST APPROVAL WAS TAKEN WAY BACK IN NOVEMBER-2004. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE ORDERS OF THE AUTHORITIES BELOW. THE CIT(A) HAS DEALT WIT H THE ISSUE AS UNDER:- THESE GROUNDS OF APPEAL DEAL WITH THE DISALLOWANCE OF RS.65,06,688/- U/S.36(IV) OF THE ACT, THE ASSESSING OFFICER HAS DE ALT WITH THE ISSUE IN PARA 6 AND 7 OF HIS ASSESSMENT ORDER. RELEVANT PORT IONS ARE EXTRACTED BELOW FOR READY REFERENCE- '6. ON VERIFICATION OF THE INCOME AND EXPENDITURE A CCOUNT, IT IS FOUND THAT THE ASSESSEE DURING THE YEAR UNDER CO NSIDERATION HAS MADE CONTRIBUTION TOWARDS PF OF EMPLOYEES OF IR MA. THE ASSESSEE WAS THEREFORE ASKED TO FURNISH THE DETAILS OF CONTRIBUTION TO PF AND OTHER FUNDS RS.7,07,09.799/- . THE ASSESSED VIDE THEIR SUBMISSION DATED 21.03.2014, HA S SUBMITTED THEIR DETAILS OF CONTRIBUTION TOWARDS THE PF AND OT HER FUND. ON GOING THROUGH THE SAME, IS OBSERVED THAT THE IRMA A S EMPLOYER HAS CONTRIBUTED RS.65,06,088/- TO THEIR IRMA EPF TR UST, AND WHICH IS CONTROLLED AND MANAGED BY THE TRUSTEES OF IRMA EPF TRUST. IT IS PERTINENT TO NOTE THAT THE IRMA EFF TR UST HAS NOT OBTAINED THE APPROVAL FROM THE COMMISSIONER OF INCO ME TAX FROM NOVEMBER, 2004, SECTION U/S.2(3) CLEARLY INDIC ATES THAT 'RECOGNIZED PROVIDENT FUND MEANS A PROVIDENT FUND W HICH HAS BEEN AND CONTINUES TO BE RECOGNIZED BY THE (CHIEF COMMISSIONER OR COMMISSIONER) IN ACCORDANCE WITH TH E RULES CONTAINED IN PART-A OF THE FOURTH SCHEDULE AN D INCLUDES A ITA NO.2495/AHD /2015 DCIT VS. INSTITUTE OF RURAL MANAGEMENT ASST.YEAR 2011-12 - 4 - PROVIDENT FUND ESTABLISHED UNDER A SCHEME FRAMED UN DER THE EMPLOYEE'S PROVIDENT FUND ACT, 1952, THE ASSESSEE I S REQUIRED MANDATORILY TO OBTAIN THE APPROVAL FROM THE COMMISS IONER OF INCOME TAX HAVING JURISDICTION OVER THE ASSESSEE. T HE ASSESSEE ALSO DID NOT CARE OF OBTAINING THE APPROVAL OF THE AUTHORITY, AND APPROVAL BY SPECIFIED AUTHORITY IS MAIN CONDITION F OR GRAINING APPROVAL AS PER SECTION 2 (38). 6.1 SECTION 36(1)(IV) PRESERVERS AS UNDER: 'ANY SUM PAID BY THE ASSESSEE AS AN EMPLOYER BY WAY OF CONTRIBUTION TOWARDS A RECOGNIZED PROVIDENT FUND SUBJECT TO SUCH LIMIT AS MAY BE PROSCRIBE [OR THE PURPOSE OF RECOGNIZING THE PROVID ENT FUND AS THE CASE MAY BE, AND SUBJECT TO SUCH CONDITIONS AS THE BOARD MAY THINK FIT TO SPECIFY IN CASES WHERE THE CONTRIBUTIO NS ARE NOT IN THE NATURE OF ANNUAL CONTRIBUTIONS OF FIX AMOUNTS OR AN NUAL CONTRIBUTIONS FIXED ON SOME DEFINITE BASIS BY REFER ENCE TO THE INCOME CHARGEABLE UNDER THE HEAD SALARIES 01 TO THE CONTRIBUTION OR TO THE NUMBERS OF MEMBERS OF THE FUND.' 7. FROM THE ABOVE, IT IS CRYSTAL CLEAR THAT THE PAY MENT SHOULD BE MADE TO THE RECOGNIZED PROVIDENT FUND, IN THIS C ASE, THE PROVIDENT FUND PAYMENTS ARE MADE TO THE UNRECOGNIZE D PROVIDENT FUND. THEREFORE, THE PAYMENTS OF RS.65,06,688/- IS DISALLOWED U/S.36(IV) AND ADDED TO THE TOTAL INCOME OF THE ASS ESSES TRUST.' 6.2 DURING THE COURSE OF THE APPELLATE PROCE EDINGS, THE ASSESSEE SUBMITTED AS UNDER ON THE ISSUE- GR. NOS. GROUNDS BEFORE CIT(A) ASSTT. ORDER PARA NO. APPELLANTS SUBMISSION 2. DISALLOWANCE OF THE CONTRIBUTION OF RS.65,06,688/- PARA 6, 6.1 & 7 FOR RECOGNITION OF PF TWO CONDITIONS ARE REQUIRED TO BE FULFILLED- SECTION 2(38) OF THE ITA NO.2495/AHD /2015 DCIT VS. INSTITUTE OF RURAL MANAGEMENT ASST.YEAR 2011-12 - 5 - MADE AS EMPLOYER U/S.36(1)(IV) ON THE BASIS THAT PF TRUST IS ON UNRECOGNIZED PROVIDENT FUND. - PF SHALL BE RECOGNIZED BY CIT/CCT IN ACCORDANCE WITH THE RULES CONTAINED IN PARTN A OF THE FOURTH SCHEDULE AND -PF SHALL BE ESTABLISHED UNDER A SCHEME FRAMED UNDER THE EPF ACT, 1952 COPY OF THE RECOGNITION BY COMMISSIONER OF INCOME TAX - GUJARAT - CHARGE-III, AHMEDABAD UNDER RULE 3(1) OF PART A OF FOURTH SCHEDULE VIDE HIS ORDER DATED 26.02.1981 IS ENCLOSED HEREWITH AT ANNEXURE-1. FUNDS HAVE BEEN FRAMED UNDER THE EPF AND MP ACT, 1952. COPY OF LETTER DATED 27.04.1989 FROM REGIONAL PROVIDENT FUND COMMISSIONER FOR CONFIRMING THE APPLICATION OF PF ACT IS ENCLOSED HEREWITH AT ANNEXURE-2. AO TREATED THE FUND AS UNRECOGNIZED ONLY ON THE BASIS THAT PF TRUST HAS NOT OBTAINED APPROVAL FROM CIT FROM NOVEMBER, 2004 WHICH H ACCORDING TO HIS IS MANDATORY. AS PER RULE 3(1) OF PART A OF FOURTH SCHEDULE, THE POWER IS GIVEN TO CIT/CCIT TO ACCORD RECOGNITION AND TO WITHDRAW THE RECOGNITION IF IN HIS OPINION THE PROVIDENT NON- APPRECIATION OF THE FACT THAT TRUST IS RECOGNIZED BY CIT AND SAME HAS NOT BEEN WITHDRAWN. PARA 6, 6.1 & 7 4 MANDATORY APPROVAL FORM CIT(A) IS TOM BE TAKEN WHENEVER CHARGES ARE MADE PARA 6, 6.1 & 7 5 THE CHANGES MADE WERE FOR ADMINISTRATIVE PERSPECTIVE AND DO NOT AFFECT THE CONDITIONS MENTIONED IN RULE 4 OF PART A OF FOURTH SCHEDULE OF INCOME TAX ITA NO.2495/AHD /2015 DCIT VS. INSTITUTE OF RURAL MANAGEMENT ASST.YEAR 2011-12 - 6 - FUND CONTRAVENES ANY CONDITIONS MENTIONED IN RULE-4. SINCE NO SUCH WITHDRAWAL HAS TAKEN PLACE FOR THE YEAR UNDER CONSIDERATION, THE TRUST CONTINUES TO BE A RECOGNIZED PROVIDENT FUND AS ANY CONTRIBUTION MADE TO RECOGNIZED PF IS ALLOWABLE U/S. 36(1)(IV) OF THE ACT. THE AO COULD HAVE REFERRED THE WITHDRAWAL OF RECOGNITION TO THE COMMISSIONER IF HE FOUND ANY CONTRAVENTIONS IN CONDITIONS OF PROVIDENT FUND. THE AO HAS EXCEEDED THE JURISDICTION BY DENYING THE EXEMPTION U/S.36(1)(IV) TREATING THE SOME AS UNRECOGNIZED PROVIDENT FUND. RELIED ON JUDGMENT OF APEX COURT IN CASE OF GESLENDER DUPLICATORS PVT. LTD. V. COMMISSIONER OF INCOME TAX 1 TAXMAN 1 - COPY IS ATTACHED HEREWITH AT ANNEXURE-3. ALSO RELIED ON CIT(A)'S ORDER IN THE APPELLANT'S OWN CASE FOR A.Y. 2010-11 WHERE THE DISALLOWANCE MADE U/S.36(10(IV) HAS BEEN DELETED. COPY OF ORDER IS ATTACHED HEREWITH AT ANNEXURE-4. PLEASE NOTE THAT ITA NO.2495/AHD /2015 DCIT VS. INSTITUTE OF RURAL MANAGEMENT ASST.YEAR 2011-12 - 7 - AGAINST THE ORDER OF CIT(A), DEPARTMENT HAS NOT PREFERRED ANY APPEAL WHICH PROVES THAT IT HAS REACHED ITS FINALITY. ALSO CIT(A)'S ORDER IN THE CASE OF IRMA-EPF FOR A.Y. 2010-13 AND AO'S, ORDER FOR A.Y.2012-13, IT HAS BEEN ACCEPTED THAT IRMA-EPF TRUST IS A RECOGNIZED PROVIDENT FUND AND NO ADDITIONS U/S.10(25) HAS BEEN MADE. 6.3 I HAVE CONSIDERED THE FACTS AND CIRCUMSTANCES O F THE CASE, OBSERVATIONS OF THE ASSESSING OFFICER, SUBMISSIONS OF THE ASSESSEE, THE MATERIAL AVAILABLE ON THE RECORD AND THE RELEVANT J UDICIAL PRONOUNCEMENTS ON THE SUBJECT. THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE IN ITS OWN CASE IN A.Y.2010-11 BY THE ORDE R OF CIT(A) IN CAB/IV-A-114/2013-14, WHEREBY, CIT(A) HAS HELD AS U NDER ON THE ISSUE- '6.2 SECOND GROUND OF APPEAL PERTAINS TO THE DISALL OWANCES OF RS.39,80,993/- MADE WITH REGARD TO THE CONTRIBUTION MADE TOWARDS PF OF THE EMPLOYEES OF THE APPELLANT TRUST. THE ASSESSING OFFICER HAD DISALLOWED THE SAID CONTRIBUT ION BY HOLDING THAT THE APPELLANT (RUST HAS NOT OBTAINED T HE APPROVAL FROM THE CIT U/S.10(2B) OF THE ACT WHICH IS MANDATO RY ON THE PART OF EPF TRUST. THUS, THE IRMA EPF TRUST IS SO F AR NOT A RECOGNIZED EPF TRUST AND PAYMENTS MADE TO THE EPF T RUST IS NOT ELIGIBLE FOR DEDUCTION U/S.36(1)(IV) OF THE ACT . I HAVE GONE THROUGH THE CONTENTIONS OF THE AO AND THE SUBMISSIO NS OF THE APPELLANT. DURING THE COURSE OF HEARING THE AR BROU GHT TO MY NOTICE THAT THE IN CASE OF IRMA EPF TRUST LEARNED A O HAD DISALLOWED DEDUCTION CLAIMED U/S.10(25) OF THE ACT FOR THE A.Y. 2010-11 ON THE SAME GROUND THAT APPELLANT HAS NOT O BTAINED PRIOR PERMISSION OF COMMISSIONER OF INCOME TAX FOR MAKING THE ITA NO.2495/AHD /2015 DCIT VS. INSTITUTE OF RURAL MANAGEMENT ASST.YEAR 2011-12 - 8 - AMENDMENTS IN PP RULES, THEREFORE, SAME WAS CONSIDE RED AS UNRECOGNIZED PROVIDENT FUND. AGAINST THE SAID ORDER THE EPF TRUST WENT IN TO THE APPEAL AND THE CIT(A) VIDE ITS ORDER DATED 20-05-2014 ACCEPTED THE CONTENTION OF THE APPELLANT AND CONSIDERED IRMA EPF TRUST AS A RECOGNIZED PROVIDENT FUND AND ALLOWED THE DEDUCTION U/S.10(25). THE RELEVANT PARA OF THE SAID CIT(A) ORDER IS REPRODUCED HEREUNDER: 'IN THE PRESENT CASE, THE AO HAS CLEARLY EXTENDED H IS JURISDICTION BY DENYING EXEMPTION TO THE EMPLOYEE PROVIDENT FUND U/S.10(25) OF THE ACT WITHOUT REFERRING THE CONTRAVENTIONS MAD E BY THE APPELLANT FUND TO THE JURISDICTIONAL COMMISSIONER O F INCOME-TAX FOR HIS RELEVANT ORDER. THE CIT, ON THE BASIS OF SU CH CONTRAVENTIONS, COULD HAVE PASSED AN ORDER WITHDRAW ING THE EXEMPTION GRANTED TO THE APPELLANT AS PER THE PROVI SIONS OF RULE 79 OF THE INCOME-TAX RULES, 1962. ONLY, THEREAFTER AO COULD HAVE TAXED THE INCOME OF THE APPELLANT AS PER RULE 80 OF THE ACT. SINCE THE RECOGNITION GRANTED BY THE COMMISSIONER O F INCOME- TAX CONTINUED DURING THE FINANCIAL YEAR 2009-10, HE NCE, THE APPELLANT IS ELIGIBLE FOR DEDUCTION U/S.10(25) OF T HE ACT, 1961. ACCORDINGLY, EXEMPTION WITHDRAWN BY AO IS NOT CORRE CT. AS A RESULT, AO IS DIRECTED TO GRANT EXEMPTION TO T HE APPELLANT U/S.10(25) OF THE ACT.' IN VIEW OF THE AFORESAID ORDER OF CIT(A) WHERE IRMA EPF TRUST IS CONSIDERED AS A RECOGNIZED PROVIDENT FUND, FOLLO WING THE SAME THE ADDITION OF RS.39,80,993/- IS DELETED. THI S GROUND OF APPEAL IS ALLOWED.'' 6.4 SINCE THE FACTS OF THE PRESENT CASE ARE EXACTLY SIMILAR TO THE CASE DECIDED BY CIT(A) IN CAB/IV A-114/2013-14, FOLLOWIN G THE DECISION OF CIT(A) IN ASSESSEE'S OWN CASE IN A.Y. 2010-11, IT I S HELD THAT IRMA EPF TRUST IS CONSIDERED A RECOGNIZED PROVIDENT FUND . CONSEQUENTLY, ADDITION OF RS.65,06,688/- ON ACCOUNT OF DISALLOWAN CE OF CONTRIBUTION BY THE ASSESSEE TOWARDS EMPLOYEES PF TO IRMA PF TR UST, AS DISCUSSED SUPRA, IS DELETED. THE ASSESSEE SUCCEEDS ON THESE G ROUNDS OF APPEAL. ITA NO.2495/AHD /2015 DCIT VS. INSTITUTE OF RURAL MANAGEMENT ASST.YEAR 2011-12 - 9 - 6. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) WHERE RELIEF WAS GRANTED TO THE ASSESSEE ON THE GROUND TH AT APPROVAL GRANTED BY THE COMPETENT AUTHORITY CONSCIOUS TO SUBSIST AND RE MAIN IN FORCE AND HAS NOT BEEN WITHDRAWN. WE TAKE NOTE OF THE PLEA RAISE D ON BEHALF OF THE ASSESSEE THAT THE ORDER OF THE CIT(A) IN THE EARLI ER YEARS WERE NOT CHALLENGED BEFORE THE TRIBUNAL AND HAS ATTAINED THE FINALITY WHICH FACT HAS BEEN CONFIRMED BY THE REVENUE AT THE TIME OF HE ARING. IN SUCH A CIRCUMSTANCES, WE DO NOT SEE ANY REASON TO INTERFER E WITH THE ORDER OF THE CIT(A). 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. THIS ORDER PRONOUNCED IN OPEN COURT ON 13 / 12 /2017 SD/- SD/- (..) ( ) ( S.S. GODARA ) ( PRADIP KUMAR KEDIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 13/ 12 /2017 4..+,.+../ T.C. NAIR, SR. PS ITA NO.2495/AHD /2015 DCIT VS. INSTITUTE OF RURAL MANAGEMENT ASST.YEAR 2011-12 - 10 - !'#$%$' / COPY OF THE ORDER FORWARDED TO : 1. $' / THE APPELLANT 2. ($' / THE RESPONDENT. 3. 567- 8- / CONCERNED CIT 4. 8- ( ) / THE CIT(A)-4, VADODARA 5. 9:-+67 , 670 , 5 / DR, ITAT, AHMEDABAD 6. <, / GUARD FILE. / BY ORDER, (9-- //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 12.12.2017(DICTATION-PAD 6- PAGES ATTACHED AT THE END OF THIS APPEAL-FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 12.12.2017 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S .13.12.17 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 13.12.17 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER