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TMI Blog2024 (7) TMI 728X X X X Extracts X X X X X X X X Extracts X X X X ..... the respondent/Revenue that LIC Mutual Fund Trust qualifies the two conditions mentioned in Sub-section (2) of Section 4A of the Companies Act, 1956. Since LIC Mutual Fund is not Public Financial Institution under Section 43B of the Act, 1961 read with Section 4A of the Companies Act, therefore, the interest on unsecured debentures payable by the appellant-assessee to the LIC Mutual Fund is not covered by Section 43B of the Act, 1961. Consequently, it could not be disallowed in the hands of the appellant-assessee on the ground of non-compliance of conditions of Section 43B. The above discussion leads to an irresistible conclusion that the Income Tax Appellate Tribunal has committed a manifest error of law to hold that LIC Mutual Fund is a public financial institution u/s 43B. Therefore, the disallowance invoking the provisions of Section 43B cannot be sustained and consequently, the impugned order to that extent deserves to be set aside - Substantial questions of law are answered in favour of the assessee - HON BLE JUSTICE SURYA PRAKASH KESARWANI AND HON BLE JUSTICE AJAY KUMAR GUPTA Appearance : For the Appellant : Sri J.P. Khaitan, Sr. Adv. Sri Saurabh Bagaria, Adv. Sri Pranav S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant/assessee is allowable. 4. Aggrieved with the order of the CIT(A), the revenue filed ITA/2627/Kol/2013 (DCIT, Circle -10, Kolkata Vs. M/s. Vishal Metal Limited) before the Income Tax Appellate Tribunal, Kolkata Bench A , Kolkata. The ITAT allowed the appeal of the revenue by the impugned order dated 15.3.2017 and held in para 13 as under :- A plain reading of the above provision reveals that the Life Insurance Corporation of India comes within the ambit for public financial institution. The name of LIC mutual fund is not appearing in the definition of public financial institution as defined u/s 4A of the Companies Act, 1956. However, the fact that the LIC mutual fund is an arm of the Life Insurance Corporation of India cannot be ignored. When the Life Insurance Corporation of India is covered under the definition of public financial institution being a parent company then also the same analogy shall be extended to the arm of it. Hence, we are of the view that the definition of public financial institution should also cover the LIC mutual fund being an arm of Life Insurance Corporation of India. It is also important to note that LIC mutual fund was established on 20th April 1989 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ees from time to time. The corpus of the Trust amounting to Rs. 10 lakhs was contributed by the LIC. The Trust Deed provides that a further sum not exceeding Rs 25 crores shall be made available as initial contribution to the Trust by the LIC. The LIC has floated the Mutual Fund to map up the additional savings from the public in rural and semi-urban areas and it would be receiving considerable, amount of insurance business from the Mutual Fund. LIC of India for the give purpose provides to the Mutual Fund all suitable help and guidance which includes payment of initial corpus of the Trust, financial assistance to the Trust, renting out premises after housing the Mutual Fund, provision of initial office equipment and deputation of suitable employees etc: the Chairman of LIC is authorized to take such administrative decisions as may be required periodically so as to ensure the smooth launching of the LIC Mutual Fund and its successful operation. 39. Now coming to GK Housing Finance Limited, the Commission's finding is not any different. The shareholding of six Public Authorities in GIC Housing Finance is 4.68% and coupled with the control they exercise over the GIC Housing Finan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts Management Company Limited incorporated under the Companies Act, 1956 and the Life Insurance Corporation of India has been established under the Act of Parliament i.e. Life Insurance Corporation Act, 1956. She submits that since the trust has been established/sponsored by the Life Insurance Corporation, therefore, the Tribunal has correctly held the LIC Mutual Fund to be an extended arm of Life Insurance Corporation of India. Therefore, the LIC Mutual Fund being a constituent of Life Insurance Corporation of India shall fall within the ambit of Section 4A of the Companies Act, 1956 and, consequently, Section 43B of the Act, 1961 is attracted. She submits that the Tribunal has lawfully reversed the order of the CIT(A) and held that the interest in question is not deducted in view of Section 43B of the Act, 1961. Discussion and Findings : 8. We have carefully considered the submissions of the learned counsel for the parties and perused the paper book. 9. As per definition clause 2 (q) of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 (hereinafter referred to as the SEBI Mutual Funds Regulations, 1996 ), Mutual Fund means the fund established in the for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l institution, namely:- (i) the Industrial Credit and Investment Corporation of India Limited, a company formed and registered under the Indian Companies Act, 1913 (7 of 1913); (ii) the Industrial Finance Corporation of India, established under section 3 of the Industrial Finance Corporation Act, 1948 (7 of 1948); (iii) the Industrial Development Bank of India, established under section 3 of the Industrial Development Bank of India Act, 1964 (18 of 1964); (iv) the Life Insurance Corporation of India, established under section 3 of the Life Insurance Corporation Act, 1956 (31 of 1956); (v) the Unit Trust of India, established under section 3 of the Unit Trust of India Act, 1963 (52 of 1963); (vi) the Infrastructure Development Finance Company Limited, a company formed and registered under this Act.] [***] (2) Subject to the provisions of sub-section (1) the Central Government may, by notification in the Official Gazette, specify such other institution as it may think fit to be a public financial institution: Provided that no institution shall be so specified unless- (i) it has been established or constituted by or under any Central Act, or (ii) not less than fifty-one per cent. of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rest of Rs. 9,75,16,996/- on unsecured debentures payable by the appellant-assessee to the LIC Mutual Fund is not covered by Section 43B of the Act, 1961. Consequently, it could not be disallowed in the hands of the appellant-assessee on the ground of non-compliance of conditions of Section 43B. 14. The above discussion leads to an irresistible conclusion that the Income Tax Appellate Tribunal has committed a manifest error of law to hold that LIC Mutual Fund is a public financial institution under Section 43B of the Act, 1961. Therefore, the disallowance of Rs. 9,75,16,996/- invoking the provisions of Section 43B of the Act, 1961 cannot be sustained and consequently, the impugned order to that extent deserves to be set aside. 15. For all the reasons afore-stated, the appeal is Allowed to the extent indicated above. The impugned order dated 15.03.2017 in ITA No. 2627/Kol/2013 (AY 2009-10) passed by the Income Tax Appellate Tribunal, Kolkata Bench A , Kolkata, to the extent it relates to the disallowance of Rs. 9,75,16,996/- under Section 43B of the Act, 1961, is hereby set aside. The substantial questions of law are answered in favour of the assessee and against the Revenue. - ..... X X X X Extracts X X X X X X X X Extracts X X X X
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