Relief to UTI India Fund Unit Scheme: ITAT grants Exemption u/S 10(23D) of Income Tax Act as Offshore Fund Scheme maintained is approved unit by SEBI [Read Order]

The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has granted relief to UTI India Fund Unit Scheme by exempting it under section 10(23D) of the Income Tax Act 1961. This decision stems from the acknowledgment that the offshore fund scheme maintained by UTI India Fund Unit Scheme was an approved unit according to the Securities and Exchange Board of India (SEBI).

During the assessment, the Assessing Officer had noted that the assessee claimed exemption under section 10(23D) of the Income Tax Act 1961. However, it was observed that section 10(23D) of the Income Tax Act 1961 stipulated that the Mutual Fund should be registered with the Securities and Exchange Board of India (SEBI). The officer had highlighted that although the assessee submitted a copy of the Certificate of Registration from SEBI, it pertained to UTI Mutual Fund, not the assessee Trust. Subsequently, on December 15, 2016, the assessee was notified that the conditions specified under section 10(23D) of the Income Tax Act 1961 were not met, raising questions about the legitimacy of the exemption claimed.

The counsel for the Revenue Ujjawal Kumar Chavan asserted that the assessee constitutes a distinct legal entity. The counsel for the Revenue highlighted the detailed findings of the Assessing Officer. He passionately argued that the assessee possesses a separate PAN and is not the same entity for which SEBI granted a Certificate of Registration. This distinction indicates that the assessee lacks the necessary registration to qualify for exemption under section 10(23D) of the Income Tax Act 1961.

The counsel for the Assessee Jayant Bhatt argued that the Cross objection would become irrelevant if the grounds raised by the revenue were decided in favor of the assessee. He highlighted that the mentioned Cross objection was raised in response to the appellate authority's non-adjudication of other grounds raised by the assessee.

 The bench observed that post the Repeal Act, a specified company, UTI Trustee Company Private Limited, was established with equal subscriptions from State Bank of India, Punjab National Bank, Bank of Baroda, and Life Insurance Corporation of India. This company, formed under The Companies Act, 1956, facilitated the restructuring of UTI. Consequently, all UTI Schemes were transferred to two successors, SUUTI and UTI Mutual Fund, effective February 1, 2003, as outlined in Schedules I and II of the Repeal Act.

 The two member bench of the tribunal comprising Narendra Kumar Chaudhary (Judicial member) and S. Rifaur Rahman (Account member) noted that the assessee fund was part of Schedule II (Sr. No. 37) of the Repeal Act, vested with UTI Mutual Fund. Despite the Act's restructuring, the assessee, established for offshore funds, retained its distinct identity, maintained separate books of accounts, and used the same PAN. The assessee was registered under various schemes in Schedule II of UTI Mutual Fund, with its scheme approved by SEBI. The assertion that separate SEBI registration was necessary, as suggested by the Assessing Officer for section 10(23D) of the Income Tax Act 1961. Exemption, was unwarranted. The documents submitted by the assessee confirmed SEBI's approval of its offshore fund scheme.

 Consequently, there was no basis to contest the CIT (A)'s findings, and the revenue's appeal was dismissed.

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