Provident fund trusts get exemption plea warning

Private provident fund trusts of top public sector and private sector organisations enjoying income tax exemption will face action if their proposals for exemption do not make it to the Employees Provident Fund Organisation by November 15.

These trusts, about 295 in number, have a "deemed exempt" basis till now, for which EPFO has blamed its own regional offices. In future, it has said, no exemption would be granted on an ad hoc basis. Some of these exemptions date back to the 1960s but continue to be unverified for compliance with conditions specified in the I-T Act, in line with a 2006 amendment.

Deadlines for verification of proposals have been given since 2006 but the process has either not been initiated or not completed.

These exempt funds include those of government organisations such as Airports Authority of India, and Food Corporation of India, bourses such as National Stock Exchange and BSE, top companies in the private sector such as Nokia, Reliance, and Coca-Cola, media organisations, private schools, hospitals and non-government bodies.

The 2006 amendment provided that the chief commissioner or commissioner may accord recognition to any PF satisfying the conditions prescribed in Rule 4 of the Act and also may, at any time, withdraw such recognition for contravention. The deadline was March 2007, subsequently extended several times.

EPFO now says there will be no more extensions. Hence, all proposals are to be verified and sent by November 15.

In some of these cases, the establishments are enjoying relaxation though exemption proposals have not yet been sent. In others, proposals for relaxation/exemption have not yet been processed. In some cases, compliance with EPFO directions are still awaited.

The detailed circular, which almost accuses EPFO offices of colluding with private trusts, says: "In the past, field offices had granted relaxation without forwarding the exemption proposal in complete shape to the appropriate authority. As a result,establishments have been enjoying relaxation for years together and no steps were taken to process the exemption proposals pending for notification... the exemption proposals are submitted by regions to head office in a very casual way, without proper verification of all check points, without analysing the compliance audit reports and without all required documents."

It says there are instances wherein regional PF commissioners have recommended grant of exemption though the trusts had violated the mandatory conditions.

Covered by the deadline ultimatum include SOS Children's Villages of India, Bharat Heavy Electricals in Dehradun and Tamil Nadu, Dalmia Cement Bharatin Delhi, India Trade Promotion Organisation, GAIL, Airports Authority of India, State Trading Corporation, MMTC, National Seeds Corporation, Food Corporation of India, Confederation of Indian Industry, Housing and Urban Development Corporation and Living Media India Pvt Ltd.

Also UltraTech Cement, Ashok Leyland, Balco, IL&FS, American Express Bank, Forbes India, Oxford University Press, GIC Housing Finance, Maharashtra State Power Generation Co, Gem and Jewellery Export Council, Kudremukh Iron Co, Mother Dairy, Coca-Cola India, Nokia India, Reliance Industries, Reebok India, GE India, Genepact and Fortis Healthcare.