Whether Return of Income needs to be filed by an Approved Gratuity fund

[mmg...@gmail.com]

Dear All ,

A partnership firm had received approval under Rule 2(1) of Part C of the Fourth schedule of the income Tax Act 1961 from the Commisioner of Income Tax for its Employees Gratuity Fund constituted under a Trust Deed . The Trustees are getting the accounts regularly audited and complying with the provisions of the Trust Deed . The income earned on investments is transferred to the fund and being utilised only for the purpose of giving gratuity to their own employees on their retirement .

They have however never filed any income tax return. Is there any requirement of filing any return of income ? If so under what section ? The ITO has now sent a letter wanting to know why no return has been filed so far .

An early response will be much appreciated .
Thanks in advance

CA Madhumita Ghose
Sent on my BlackBerry® from Vodafone

[KIRTI TULSYAN]

REPLY 1

In my view an obligation to file a return does exist for a Gratuity fund.As we are aware a gratuity fund has to be approved by the CIT so that the contributions to the fund can be claimed as a deduction u/s 36(1)(v).A gratuity fund has to comply with the requirements laid down under Schedule IV Part C. 
in addition Section 139 casts an obligation on every person to file his Return of Income.The term"Person' is inclusively defined by Section 2(31) to include a body of individuals whether incorporated or not.A gratuity fund has to be set up as a Trust.The term body of individuals includes a trust.A Trust is under obligation to file its return.so is the case with a gratuity trust. 
regards 
kalidas 

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Best Regards, 
Kirti Tulsyan
B.Com.,ACA,CS


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[Biswa Ranjan Pattnaik]

Dear Sri Kalidas,

 

I beg to differ slightly with your view due to the following reason:

a.       139(1) is applicable only when income exceeds the threshold limit. Any income of approved gratuity trust is exempt u/s 10(25)(iv) and therefore its income does not exceed the threshold limit.

b.      139(4A) is not applicable as the approved gratuity trust does claim benefit u/s 11 / 12,

c.       139(4B) is not applicable as it is not a political party,

d.      139(4C) is also not applicable as it does not fall under any of the categories specified under clauses (a) to (h) of 139(4C)

e.      139(4D) is also not applicable as it is not a college, university, etc.

f.        None of the provisions as contained in Part-C of Schedule-IV stipulates filing of income-tax returns.

g.       Similarly, Rules 98 to 111 of Income tax Rules is also silent on filing of return of income.

 

Hence, in my view, approved gratuity trust need not file its return of income.

 

Biswa Ranjan Pattnaik, FCA, LL.B,

Kar & Pattnaik

Chartered Accountants,

N2/171, IRC Village, Nayapally,

Bhubaneswar-751015,Orissa.

Tel: 9437011066;0674-2558051

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[Kalidas Ramaswami]

I am respectfully in disagreement with your views.if the obligation to file a return were restricted in application to only those whose incomes exceed the taxable threshold entities such as PF trusts will not have to file a return.In reality they do file.A gratuity trust is under the administration of the commissionser since approval is granted to it by the Commissioner.Hence it has to file a return even if it can conceivably have no income at all unless the monies received by it in settlement of claims are miused and channe;ized to taxable investments.
regards
kalidas 
 

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From: brp_...@yahoo.co.in
To: foru...@googlegroups.com
Subject: RE: [SPAM]- [CA RUNGTA PD] Whether Return of Income needs to be filed by an Approved Gratuity fund
Date: Fri, 15 Mar 2013 19:27:48 +0530

[Biswa Ranjan Pattnaik]

Dear Sri Kalidas,

I fully agree with your view that, in reality, IT returns are filed by PF/Gratuity Trusts. However, I have expressed my view strictly as per the provisions of income-tax law as it stands today.

 

Regarding misuse of trust funds it may be mentioned that Rule-8A of Part-C of SCH-IV empowers  AO to call for any information, statement and particulars etc. from the Trust and this acts as a deterrent mechanism.

 

Finally, I must also accept the fact that, being a professional, you have every right to express your view which may be in sharp contrast to my view.

 

Thanking you,

Yours faithfully,

 

Biswa Ranjan Pattnaik, FCA, LL.B,

Kar & Pattnaik

Chartered Accountants,

N2/171, IRC Village, Nayapally,

Bhubaneswar-751015,Orissa.

Tel: 9437011066;0674-2558051

to misutilisation l However, I have expressed my view strictly as per the provisions of income-tax law as it stands today. isation of trust funds.

trustees  incase of such eventuTrustees this acts as a mechanism can be in case of non-filing of return.

 

I may also add here that

[shriy...@gmail.com]

Hi there,

Can anybody mention the entries to be passed in books of the gratuity trust and the books of the company for this..

Please reply urgently