Kerala High Court
Commissioner Of Income-Tax vs Kerala State Road Transport ... on 15 January, 1986
Equivalent citations: [1986]161ITR681(KER)
Author: M. Fathima Beevi
Bench: M. Fathima Beevi
JUDGMENT P.C. Balakrishna Menon, J.
1. The Income-tax Appellate Tribunal, Cochin Bench, has referred the following questions arising out of the order of the Tribunal in regard to the assessment of the Kerala State Road Transport Corporation General Provident Fund Trust, Trivandrum, for the assessment year 1971-72 :
"1. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal is right in law in holding that the interest amount of Rs. 62,280 receivable by the assessee-trust, namely, the Kerala State Road Transport Corporation General Provident Fund Trust, Trivandrum, could not be assessed to income-tax under Section 164 of the Income-tax Act, 1961, for the assessment year 1971-72 ?
2. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal is right in law and had materials before it in finding that the total of the member's separate accounts constitute the fund of the trust ?"
2. The following questions are referred with respect to the assessment years 1972-73 and 1973-74 :
"1. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in holding that the interest receivable by the assessee-trust, namely, the Kerala State Road Transport Corporation General Provident Fund Trust, Trivandrum, could not be assessed to income-tax under Section 164 of the Income-tax Act, 1961, for the assessment years 1972-73 and 1973-74 ?
2. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal is right in law and had materials before it in finding that the total of the member's separate accounts constitute the fund of the trust ?"
3. As per a deed of trust dated January 5, 1967, the Kerala State Road Transport Corporation transferred the general provident fund of its employees to the assessee-trust. The liability to pay the provident fund, according to the Rules, was thereafter taken over by the trust. The employees are to contribute a part of their salary to the provident fund administered by the trust. There was no contribution by the employer. The contributions to the provident fund by the employees are to be returned to them with interest at the time of retirement. The provident fund remained with the trustees and they had invested the same in interest-yielding securities. The interest accrued is the subject-matter of assessment for the three years referred to above. The Income-tax Officer rejected the claim of the trust that the interest is not taxable and the income by way of interest was brought to tax. In appeal, the Appellate Assistant Commissioner upheld the contention of the Department that the interest accrued is taxable but allowed deduction of the aggregate of the interest credited to the account of the beneficiaries. The Department appealed to the Tribunal against the orders of the Appellate Assistant Commissioner allowing such deductions and the assessee filed a memorandum of cross-objections in all these appeals. The Income-tax Appellate Tribunal held that the income accrued by way of interest is received on behalf of and for the benefit of the contributories to the provident fund and it is not liable to assessment in the hands of the provident fund trustees. Annexure C, dated August 27, 1975, is the order of the Tribunal with respect to the assessment for the year 1971-72. The same view was taken for the years 1972-73 and 1973-74, as per the order of the Tribunal, annexure C, dated June 29, 1976.
4. The contention of the counsel for the Department is that the income accrued by way of interest on the amounts contributed by the employees of the K.S.R.T.C. to the provident fund account is exigible to income-tax in the hands of the trust as representative assessee under Section 164 of the Income-tax Act. We do not agree. The interest is received on behalf of and for the benefit of the employees of the K.S.R.T.C. who contribute part of their salary towards the provident fund. The individuals who contribute to the provident fund account and the share of interest due to them are determined at the end of each year. The trust has to work out the balance standing to the credit of each member and adjust the interest thereon towards his account. No income is received by the trust which is not receivable by the contributories to the provident fund. Each member has got his separate account to which the contributions and interest are credited. The trust fund is constituted of the total contributions of the members and interest accrued thereon. We, therefore, answer the questions referred to us in the affirmative, i.e., in favour of the assessee and against the Department.
5. A copy of this judgment under the signature of the Registrar and the seal of the court will be forwarded to the Income-tax Appellate Tribunal, Cochin Bench.