TaxTMI 
TaxTMI 
2024 (1) TMI 790
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....a lead Assessment year. ITA NO. 1859/MUM/2022 (A.Y. 2014-15) C.O. No. 92/MUM/2023 (A.Y. 2018-19) 3. Brief facts of the case are, Assessee filed its return of income on 24.09.2014 along with the Income & Expenditure Account, Balance Sheet and Audit Report in Form No. 10B declaring total income at Rs.. Nil. The case was selected for scrutiny and notices u/s. 143(2) and 142(1) of Income-tax Act, 1961 (in short "Act") were issued and served on the assessee. In response Authorised Representative of the assessee attended and submitted the relevant information as called for. 4. During the course of the assessment proceedings, Assessing Officer observed that the assessee has claimed exemption under section 10(23D) of the Act and observed that the section 10(23D) of the Act itself confirms that the Mutual Fund should be registered with Securities and Exchange Board of India (SEBI). In this regard, he observed that assessee submitted copy of Certificate of Registration received from SEBI. However, the Certificate of Registration submitted by the assessee is for UTI Mutual Fund and not for assessee Trust. Further, vide order sheet dated 15.12.2016, the assessee was informed that c....
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.... UTI Mutual Fund (all its Schemes) is totally exempt under section 10(23D) of the Income Tax Act, 1961. 7) The UTI India Fund Unit Scheme 1986 was launched in June 1986. There are other offshore schemes of UTI Mutual Fund also, UTI India Pharma Fund Unit Scheme and India Debt Opportunities Fund Unit Scheme which were launched in March 2005 and January 2006 respectively. For the UTI India Fund Unit Scheme 1986, necessary permissions of the RBI was received by letter dated 17^th June 1986 (including approval of Government of India, as mentioned therein) (Copy of the RBI approval letter is enclosed as Annexure IV) SEBI by its letter dated 20 September 2004 provided its approval for the jogher offshore schemes of UTI Mutual Fund, UTI India Pharma Fund Unit Scheme and India Debt Opportunities Fund Unit Scheme (Copy enclosed as Annexure V. The UTI India Fund Unit Scheme 1986 was launched prior to the SEBI (Mutual Funds) Regulation 1996, hence no SEBI approval is applicable for this offshore scheme of UTI Mutual Fund. 8) The following is very clearly provided in clause 2 of the SEBI approval letter dated 20 September 2004: "UTI Mutual Fund shall launch two schem....
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....e of the assessee as under: - Particular Rs. Income 783804409 Less: Total Operating Expenses 48625763 Profit and Gains of Business or Profession 735178646 Income from Other Source Misc. Income 221 TOTAL Income 735178867 Rounded Off to 735178870 8. Accordingly, he assessed the income under section 143(3) of the Act at Rs.. 73,51,78,870/-. 9. Aggrieved assessee preferred appeal before the Ld. CIT(A) and before Ld. CIT(A) assessee has raised various grounds of appeal and filed detailed submissions which is reproduced in the appellate order. After considering the submissions of the assessee, Ld. CIT(A) allowed the appeal of the assessee by observing as under: - "5. Finding & Decisions: - 5.1 Ground 1 is generic in nature and does not require any specific adjudication. Ground 2 to 5 5.2 I have gone through the assessment order and the grounds of appeal raised by the appellant The mood point of appeal by the appellant is that the learned AO has contested that the appellant does not satisfy the conditions prescribed under....
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....AMC along with list of schemes which were managed by UTI mutual fund, in said application the appellant scheme was also enlisted. Basis this application UTI mutual fund was granted approval of SEBI with specified mentioning of appellant scheme as debt opportunities fund scheme. 5.12 The appellant had also received RBI scheme. 5.13 The appellants also submitted financial statements which were signed as UTI asset Management Company limited and not as UTI India fund unit scheme 1986. 5.14 Having regard to above detailed finding in appellant submission it is to be mentioned that the appellant is duly recognised scheme as per SEBI and the registration granted to UTI mutual fund is also valid for appellant scheme Nearly opting separate PAN for statutory requirement under Income Tax Act shall not lead to a conclusion that the appellant is a separate legal entity vis a vis its originator mutual fund. 5.15 In view of the above and having regard to the finding that when the appellant has valid SEBI approval and RBI approval, the findings of learned AO that the appellant is not eligible for deduction under section 10(23D) are not acceptable. Therefore the a....
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....h/ step through trust and in terms of section 161(1) of the Income Tax Act, 1961, the appellant could not be assessed qua income earned on behalf of its beneficiary" 2. On the facts and circumstances of the case and in law the ld CIT(A) has erred in not deliberating ground No. "D" read as 1) The ld. AO gravely erred in assessing the appellant despite the tax exemption available to the Appellant u/s 32 of UTI Act, r.w.s. 18 of the Repeal Act and the notification issued there under." 2) Without to the above grounds and without admitting any liabilities it is submitted that in view of the facts of the present case and in law the appellant could even otherwise be not assessed for the income in reference" 12. At the time of hearing, Ld. DR submitted that assessee is a separate legal entity. He brought to our notice Page Nos. 2 to 4 of the assessment order and brought to our notice detailed findings of the Assessing Officer. He vehemently argued that the assessee has a separate PAN and not a same entity for which SEBI has granted Certificate of Registration. It clearly shows that assessee does not have any registration to get exemption under section 10(23D) ....
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.... India was having the authority to launch various unit schemes under section 21 of the Unit Trust of India Act 1963. These unit schemes were also permitted to be launched for investment by persons resident outside India. The UTI to augment the offshore funds, came out with scheme for offshore fund under the scheme named UTI India Fund Unit Scheme 1986 (hereinafter referred to as "UTI India Fund Scheme 1986"/"Scheme"), since the Scheme was related to offshore fund, the PAN was obtained for UTI India Fund Scheme 1986, to facilitate foreign remittance. UTI India Fund Scheme 1986 was launched by UTI as one of the schemes under section 21 of Unit Trust of India Act 1963. It would be relevant to note that though the PAN was obtained for its Scheme named UTI India Fund Scheme, 1986 launched in 1986. date of establishment (date of Birth) is taken as 1 February, 1964 which is the date when the Unit Trust of India was established by Unit Trust of India Act, 1963. (Copy of the same (PAN Card) is attached for ready reference and record. (Ref. Page No. 101) Since the UTI India Fund Scheme, 1986 was an offshore fund, approval from the Central Government and al....
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....tions issued thereunder the UTI was succeeded, by its following successors, with effect from 01^st February 2003: (1) The Administrator of the Specified Undertaking of the Unit Trust of India (SUUTI), and (ii) UTI Trustee Company Pvt. Ltd., being the trustee company of UTI Mutual Fund. (Ref. Page No. 106 to 121) As a part of the Repeal Act, the specified company was formed by State Bank of India, Punjab National Bank, Bank of Baroda and Life Insurance Corporation of India subscribing in equal proportion to the share capital of the specified company namely UTI Trustee Company Private Limited a company incorporated under The Companies Act, 1956 having its registered office 13, Sir Vitthaldas Thackersey Marg, New Marine Lines, Mumbai - 400020, in its capacity as Trustee of the UTI Mutual Fund and by notification dated 15th January, 2003 issued by Department of Economic Affairs, the Company was notified as specified company being a Trustee of UTI Mutual Fund. (Ref. Page No. 124) (b) Pursuant to the restructuring of the UTI, all the Schemes of the UTI were transferred to and vested in its above mentioned two successors with effect from 01^st February 2003. The Schemes ....
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...."scheme" means a scheme of a mutual fund launched under Chapter V;" It may be observed from the above definitions that schemes are part of a mutual fund and thus schemes are not separate from a mutual fund but an integral part of a mutual fund, thus there is no question of a scheme being separate from a mutual fund. All the Schemes are an integral part of the mutual fund. Regulation 9: "Grant of Certificate of Registration - The Board may register the mutual fund and grant a certificate in Form B on the applicant paying the registration fee as specified in Second Schedule This clearly provides that the registration is granted to Mutual Fund and not the scheme as such, Other regulation like Regulation 3, 10, 14, 17 etc. also clearly depict that schemes are part of a mutual fund and the registration certificate is applied and issued to a mutual fund and not to schemes individually. Thus, the offshore schemes including the UTI India Scheme, 1986 is the Scheme of UTI Mutual Fund. Further post SEBI approval In compliance to the SEBI requirements the then Chairman had written to SEBI a letter dated 3rd February, 2003 and also sent dra....
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....a (Transfer of Undertaking and Repeal) Act 2002. On behalf of the Government of India, the agreement was signed by Shri U.K. Sinha, Joint Secretary (DEA) and on behalf of the Sponsors, the agreement was signed by Shri A.K Purwar, CMD-State Bank of India, Shri S.S. Kohli, CMD-Punjab National Bank Shri P.S Shenoy, CMD-Bank of Baroda and Shri SB. Mathur, CMD-Life Insurance Corporation of India. The salient features of the agreement are: The Sale Consideration for the transfer and vesting payable by the sponsors to the Government will be determined within 4 months and payable within 3 years on the basis of valuation exercise by two sets of consultants/valuers. The sponsors will be free to sell the rights to manage assets held by them to any third party complying with the statutory requirements including protecting the interest of the employees Sponsors will be indemnified for a period of 3 years in respect of any liability, loss or damage that may be incurred by the sponsors, for actions pertaining to the period prior to the Appointed Day Interest of the employees/officials will be protected by complying with Section 6 of the Act. This opera....
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....ndian Accounting Standards (IND AS) and any addendum thereto, as notified by the Companies (Indian Accounting Standards) Rules, 2015, as amended from time to time:" It is in this regards that separate books of accounts were maintained and the same were also audited a as an independent scheme. Regulation 54 and 56 of the SEBI (MUTUAL FUNDS) REGULATIONS, 1996 are also in the same context under and these regulations require annual report/financial statements to be prepared scheme wise and the investors/unit holders of the Scheme are provided accounts of the schemes in which they are unit holders and not of the Schemes where they have not invested. Section 18 of The Repeal Act, also provides as under: "Section 18. Substitution in every Act, rule, regulation or notification by specified company or Administrator in place of Trust In every Act, rule, regulation or notification in force on the appointed day, for the words "Unit Trust of India", wherever they occur, the words, brackets and figures "specified company referred to in the Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002 or "Administrator of the specified undertaking....
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....ssion "Securities and Exchange Board of India" shall have the meaning assigned to it in clause (a) of sub-section (1) of section 2 of the Securities and Exchange Board of India Act, 1992 (15 of 1992);" By virtue of the Unit Trust of India (Transfer of Undertaking and Repeal) Act 2002, UTI Mutual Fund came into existence. UTI Mutual Fund was set up by LIC, State Bank of India, Punjab National Bank and Bank of Baroda who are also the sponsors of UTI Mutual Fund under the SEBI (Mutual Funds) Regulations 1996. All the four institutions are banks and financial institutions which have set up UTI Mutual Fund. UTI Mutual Fund has been registered with SEBI having registration no. MF/048/03/01 dated 14 January 2003. The Unit Trust of India, established under section 3 of the Unit Trust of India Act, 1963 (52 of 1963) was also itself a Public Financial Institution as per provisions of section 4A of the Companies Act, 1956. May it be so it is not in dispute that UTI India Fund Scheme,1986 did not have any independent identity de-horse the erstwhile Unit Trust of India when it was launched and there after UTI Mutual Fund in which this Scheme was vested by Unit Trust O....
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.... of the Act for the reason that there was no Certificate of Registration from SEBI as per the requirement of the Act. We observe from the record submitted before us that the erstwhile Unit Trust of India which is an investment body under the Unit Trust of India Act of 1963 and it was having the authority to launch various unit schemes under section 21 of the Unit Trust of India Act 1963. Under this authority it was also permitted to launch for investment by persons resident outside India, with that authority UTI India Fund Unit Scheme 1986 (assessee) was launched which is one of the approved scheme under the Unit Trust of India Act, 1963 especially for investments by persons resident outside India and this scheme was launched to augment the offshore funds. Therefore, it is required to register for a separate PAN to facilitate foreign remittance. Further, it is important to note that these offshore funds were approved by Central Government as well as Reserve Bank of India and the income earned therefrom was always exempt and so pursuant to the provisions of section 32 Unit Trust of India Act, 1963. 16. The Securities and Exchange Board of India (SEBI) was established as a statuto....