M/S EXPLEO SOLUTIONS EMPLOYEES GROUP GRATUITY SCHEME, CHENNAI V. DCIT, CPC, BENGALURU

ITA 98/CHNY/2022

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 9830 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-09-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2016-2017
• Appeal Filed On: 13-02-2022
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Section: 10; 154; 11; 139; 10B; 143(1)

Judgement Text

आयकर अपीलीय अिधकरण, ‘बी’ Ɋायपीठ, चेɄई IN THE INCOME-TAX APPELLATE TRIBUNAL ‘B’ BENCH, CHENNAI ŵी वी दुगाŊ राव Ɋाियक सद˟ एवं ŵी जी. मंजुनाथा, लेखा सद˟ के समƗ Before Shri V. Durga Rao, Judicial Member & Shri G. Manjunatha, Accountant Member आयकर अपील सं./I.T.A. No.98/Chny/2022 िनधाŊरण वषŊ/Assessment Year: 2016-17 M/s. Expleo Solutions Employees Group Gratuity Scheme, 6A, No. 283/3, 283/4, Prince Infocity – II, Rajiv Gandhi Salai, OMR Kandanchavadi, Chennai 600 096. [PAN:AABTT3195L] Vs. The Deputy Commissioner of Income Tax, Central Processing Center, Post Bag No. 2, Electronic City Post Office, Bangalore 560 500. (अपीलाथŎ/Appellant) (ŮȑथŎ/Respondent) अपीलाथŎ की ओर से / Appellant by : Shri M. Viswanathan, CA ŮȑथŎ की ओर से/Respondent by : Shri Hema Bhupal, JCIT सुनवाई की तारीख/ Date of hearing : 29.08.2022 घोषणा की तारीख /Date of Pronouncement : 28.09.2022 आदेश /O R D E R PER V. DURGA RAO, JUDICIAL MEMBER: The appeal filed by the assessee is directed against the order of the ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), New Delhi dated 21.12.2021 relevant to the assessment year 2016-17. 2. Facts are, in brief, that the assessee M/s. Expleo Solutions BFSI Employees Group Gratuity Trust [Formerly SQS India BFSI Employees’ Group Gratuity Scheme] was established on 23.07.2002 to manage and I.T.A. No.98/Chny/22 2 administer the Company’s group gratuity scheme. The assessee is an approved gratuity trust under Rule 2(1) of Part ‘C’ of IV Schedule of the Income-tax Act, 1961 and its income is exempt under section 10(25)(iv). The assessee filed ITR-7 for the assessment year 2016-17 on 27.07.2016 claiming exemption under section 11(1)(c) of ₹.42,43,398/-. The assessee received 143(1) intimation dated 21.02.2018, wherein the exemption claimed was not allowed. The gross total income was determined at ₹.42,43,400/- and a demand of ₹.14,32,911/- was raised. 3. On appeal, it was submitted before the ld. CIT(A) that the assessee trust is an approved gratuity trust under Rule 2(1) of Part ‘C’ of IV Schedule of the Income Tax Act, 1961 and the income of an approved gratuity trust is exempt under section 10(25)(iv) of the Act. It was further submission that the section 10 talks about incomes not included in total income and clause 25(iv) of section 10 excludes any income received by the trustees on behalf of an approved gratuity fund; shall not be included in computing the total income of a previous year of any person. After considering the explanations of the assessee, the ld. CIT(A) confirmed the order of the Assessing Officer by observing as under: “6. I have carefully considered the facts of the case, grounds of appeal as well as the written submissions filed by the appellant. As per the appellant, it is an approved Gratuity Trust under Rule 2(1) of Part C of Schedule 4 of the Act and its income is exempt u/s 10(25)(iv) of the Act. The appellant had filed its return of Income for A.Y. 2016-17 in ITR 7 claiming exemption u/s 11(1)(c) of Rs.42,43,398/-. I.T.A. No.98/Chny/22 3 While processing the return the exemption u/s 11 was not allowed to the assessee. The rectification application filed was also rejected by the CPC, Bangalore. The appellant has submitted that being an approved Gratuity Fund Trust, its income was exempt u/s 10(25)(iv) and thus it was not statutorily required to file its return of income u/s 139 of the Act and therefore the exemption claimed should have been allowed. 6.1. I have perused the relevant sections of the Act as well as the circulars cited by the appellant. It is seen that the appellant filed its return of income in ITR 7, claiming exemption u/s 11(1)(c) of the Act. ITR 7 is required to be filed by every person in receipt of income derived from property held under trust or other legal obligation wholly for charitable or religious purposes or in part only for such purposes. The appellant filed ITR 7 without filing the attendant Audit Report and therefore the exemption was correctly disallowed by the AO, CPC during processing the return. It is further seen that the appellant has claimed exemption u/s. 11(1)(c) which was disallowed. Section 11(1)(c) of the Act is reproduced as under- “Section 11(1)(c) in The Income- Tax Act, 1995 (c) income derived from property held under trust- (i) created on or after the 1st day of April, 1952, for a charitable purpose which tends to promote international welfare in which India is interested, to the extent to which such income is applied to such purposes outside India, and (ii) for charitable or religious purposes, created before the 1st day of April, 1952 , to the extent to which such income is applied to such purposes outside India: Provided that the Board, by general or special order, has directed in either case that it shall not be included in the total income of the person in receipt of such income" Since the appellant was claiming exemption u/s 11(1)(c) of the Act, which is for a specific purpose, and the prescribed Form 10B was not filed along with the return, I see no error in the action of the AO in rejecting the rectification application u/s 154 of the Act filed by the appellant. There is no mistake apparent from record. The action of the AO is therefore upheld and the appeal of the assessee is dismissed. The ld. CIT(A) has observed that the assessee has filed its return of income in ITR 7 and claimed exemption under section 11(1)(c) of the Act. ITR 7 is required to be filed by every person in receipt of income derived from property held under trust or other legal obligation wholly for charitable or religious purposes or in part only for such purposes. In this I.T.A. No.98/Chny/22 4 case, the assessee filed ITR 7 and claimed exemption under section 11(1)(c) of the Act, which is for a specific purpose, and the prescribed Form 10B was not filed along with the return. Therefore, the ld. CIT(A) has upheld the denial of exemption claimed under section 11(1)(c) of the Act by the assessee. 4. On being aggrieved, the assessee is in appeal before the Tribunal. By referring to the grounds of appeal, the ld. Counsel for the assessee prayed for allowing the exemption claimed by the assessee. 5. On the other hand, the ld. DR strongly supported the orders of authorities below. 6. We have heard both the sides, perused the materials available on record and gone through the orders of authorities below. The case of the assessee is that the assessee trust is an approved gratuity trust under Rule 2(1) of Part ‘C’ of IV Schedule of the Income Tax Act, 1961 and the income of an approved gratuity trust is exempt under section 10(25)(iv) of the Act and not necessary to file return of income and also any audit report is required to be filed. The authorities below have rejected the exemption claimed under section 11(1)(c) of the Act by the assessee on the ground that the audit report is not filed along with return of income. I.T.A. No.98/Chny/22 5 We find that the assessee need not file return of income and also any audit report. Therefore, non-filing of audit report and denial of exemption on that count is not justified, where; the assessee is not required to file any return of income itself. The ld. Counsel for the assessee also submitted that in subsequent years, the claim of the assessee was allowed by the Department without insisting any audit report. Under the above facts and circumstances, we are of the opinion that the claim of the assessee under section 11(1)(c) of the Act is to be allowed. Therefore, we direct the Assessing Officer to allow the claim of exemption under section 11(1)(c) of the Act. 7. In the result, the appeal filed by the assessee is dismissed. Order pronounced on 28 th September, 2022 at Chennai. Sd/- Sd/- (G. MANJUNATHA) ACCOUNTANT MEMBER (V. DURGA RAO) JUDICIAL MEMBER Chennai, Dated, 28.09.2022 Vm/- आदेश की Ůितिलिप अŤेिषत/Copy to: 1. अपीलाथŎ/Appellant, 2.ŮȑथŎ/ Respondent, 3. आयकर आयुƅ (अपील)/CIT(A), 4. आयकर आयुƅ/CIT, 5. िवभागीय Ůितिनिध/DR & 6. गाडŊ फाईल/GF.