The Bombay High Court has come to the rescue of the Indian mutual fund industry that was staring at a R500-crore notice from the tax authorities.
The court has restrained the taxman from taking any coercive action against the fund houses till the petitions filed by various asset management companies (AMCs) have been disposed of.
Early this month, the authorities served a tax notice on most of the leading mutual funds for interest earnings from some of their earlier investments in securitised papers. Fund houses like UTI MF, Birla Sunlife, SBI Mutual Fund, HSBC AMC, Kotak MF and Religare AMC received the tax notice.
On Wednesday, a division bench of the Bombay High Court termed the action of the tax department as “unfortunately hasty” while barring them from taking any coercive action. More importantly, the court directed the taxman to vacate all account attachments that was done after issuing a notice to all the fund houses.
The counsel appearing on behalf of UTI MF, which filed the petition, has already filed an appeal with commissioner of Income-tax (appeals).
Interestingly, while MFs are exempted from paying tax on their income from investments, the tax department was of the view that income from securitised instruments —also known as pass through certificates (PTCs)—are taxable.
According to estimates, around 20 fund houses have received the tax notice.