2015 (10) TMI 2308 - HC - Income Tax

Pension fund trust - Whether the assessee had contributed funds need not be approved by the Jurisdictional Commissioner or Chief Commissioner? - whether Tribunal was right in holding that the income would crystallize on approval of assessee s claim for reimbursement by competent authority while dealing with the issue of reimbursement of the amount relating to the issue of free passes for traveling of freedom fighters, etc., by the assessee? - Held that - Tribunal has recorded a finding that State Transport Corporations operating in different districts in the State are signatories to the Trust Deed for setting up the Pension Fund Scheme and that the said fund has been recognized by the CIT-VII, Chennai. A bare reading of the above provision clearly and unambiguously states that recognised provident fund means a provident fund which has been and continues to be recognised by the Chief Commissioner or Commissioner and nowhere it states that it should be recognised by the jurisdictional Commissioner. Therefore, it is not open to the Department to take a plea that the provident fund trust should be recognised by the Commissioner/Chief Commissioner of Income Tax, Salem, which is not the purport of the provision. Accordingly, this contention of the Revenue is also negatived. No question of law, much less substantial questions of law arise for consideration in this appeal. Accordingly, this appeal, filed by the Revenue/appellant, fails and the same is dismissed confirming the order passed by the Tribunal. - Decided against revenue.

Summary

Issues:
1. Recognition of pension fund trust without approval by jurisdictional Commissioner.
2. Treatment of income related to reimbursement of free passes.

Analysis:
1. The case involved a dispute where the Commissioner of Income Tax initiated revision proceedings under Section 263 of the Income Tax Act, finding that the assessee had not applied for recognition of the Pension Fund Trust to the Commissioner/Chief Commissioner. The Tribunal held that Section 36(1)(iv) does not mandate approval by the jurisdictional Commissioner for a recognised pension fund. The Tribunal also directed the assessing officer to scrutinize the issue of reimbursement of free passes, stating that income crystallizes upon approval by the competent authority. The High Court upheld the Tribunal's decision, emphasizing that the Act does not require recognition by the jurisdictional Commissioner for a pension fund trust, as the fund was recognized by the CIT-VII, Chennai.

2. The Tribunal's order was challenged by the Revenue on the grounds that the income from reimbursement should be recognized in the year of claim due to the mercantile system of accounting. However, the High Court found no error in the Tribunal's decision, stating that the income crystallizes only upon approval by the competent authority. The Court highlighted that the definition of a recognised provident fund in Section 2(38) does not specify recognition by the jurisdictional Commissioner. As a result, the Court dismissed the appeal, confirming the Tribunal's order in favor of the assessee.