2008 (10) TMI 259 - AT - Income Tax

Summary

Issues Involved:

1. Whether the addition of Rs. 32,84,310 as taxable income from other sources was justified.
2. Whether the contributions made by the member establishments to the trust were exempt u/s 10(25) r/w s. 2(38) of the IT Act.

Summary:

Issue 1: Addition of Rs. 32,84,310 as Taxable Income from Other Sources

The Revenue contended that the learned CIT(A) erred in deleting the addition made by the AO, treating Rs. 32,84,310 as taxable income from other sources. The AO argued that the recognized Provident Fund (PF) should operate within the employer-employee framework and should not accept deposits from other employers. The AO held that the income from such contributions was outside the ambit of exemption u/s 10(25) and brought Rs. 32,84,309 to tax in the assessment completed u/s 143(3).

Issue 2: Exemption of Contributions Made by Member Establishments

The assessee trust argued that the PF scheme was for the benefit of employees of M/s Sahara India and other Sahara Group entities. The trust was registered with the Regional Provident Fund Commissioner under the Employees' Provident Fund Act, 1952, and was entitled to have multiple participating establishments. The CIT(A) accepted the assessee's submissions, holding that the trust's income was exempt from tax u/s 10(25) r/w s. 2(38) of the IT Act. The CIT(A) noted that the definition of "recognized PF" includes a PF established under a scheme framed under the Employees' Provident Fund Act, 1952, and does not mandate recognition by the Chief CIT or CIT.

Tribunal's Decision:

The Tribunal upheld the CIT(A)'s order, stating that the definition of "recognized PF" in s. 2(38) includes a PF established under a scheme framed under the Employees' Provident Fund Act, 1952, irrespective of recognition by the Chief CIT or CIT. The Tribunal found no merit in the Revenue's contention that such recognition was required. Consequently, the Tribunal dismissed the Revenue's appeal and the assessee's cross-objection, affirming that the income received by the trust was exempt u/s 10(25).

Conclusion:

The appeal of the Revenue and the cross-objection of the assessee were dismissed, confirming that the contributions made by the member establishments to the trust were exempt from tax u/s 10(25) r/w s. 2(38) of the IT Act.