Page 18 - Banking Finance June 2024

MUTUAL FUND

Mutual Fund

Shares given as gift may and filed its objections against reopen- lio count as of March 2024. The share
ing of assessment, which the assessing of assets under management of these
escape capital gains tax officer had rejected. categories has increased from 45% in
If shares are transferred as a gift, The assessee challenged it through a March 2019.
there may not be capital gains tax on writ petition in the court. Debt funds saw moderate growth of
them, provided a recent Bombay High around 7% in FY24 to close with assets
Court ruling sets a precedent. Manish Garg, transfer pricing and liti-
gation expert at AKM Global, said the of 12.62 lakh crore, after contracting
In a case related to Mumbai-based Jai judgment is likely to provide clarity on 2% and 9% in the previous two finan-
Trust versus Union government, the transactions where capital assets are cial years, 2022 and 2023, respectively,
court ruled that a gift is a consider- transferred without consideration. showed data from the mutual fund in-
ation-less transaction, and hence, not dustry body.
liable for capital gains tax. He said the tax department often
views these transactions as tax plan- The category also gained in folios, al-
It quashes the reassessment notice is- ning tools and tries to plug the under- beit a small number of over 5,000 fo-
sued by the tax authorities alleging lying evasion. lios in fiscal FY24, after declines in the
that a specific income has escaped as- previous two fiscals, according to the
sessment on transfer of shares as gift industry body. In terms of asset
by the trust. MF industry assets grow growth, money market and liquid funds

The court held that a gift is a voluntary 35% in FY24 saw the highest absolute asset gain of
transfer and does not require a consid- The mutual fund industry's assets un- 40,000 crore and 31,000 crore respec-
eration, and when there is a consider- der management grew by 35% in tively, it said.
ation received, only then can the profit FY24, recording the highest gain since
or gain be measured. The assessee fiscal FY21 when the industry grew by Incomplete KYC: 1.3 crore
being a trust, had filed a 'zero' return 41%, said the Association of Mutual investor a/cs on hold
of income, which was accepted and Funds India (AMFI).
processed. The number of folios closed at a record KYC registration entities, KRAs in mar-
ket parlance, said out of nearly 11
The assessee had transferred shares of high of 17.78 crore, with the investor crore investors under Sebi's regulatory
United Phosphorus (UPL) and Uniphos base standing at around 4.46 crore. purview, about 1.3 crore accounts are
Enterprises Limited (UEL), both public AMFI said individual investors domi- 'on hold' (meaning these investors
listed companies, to one Nerka Chemi- nated mutual fund categories such as can't transact in stocks, MFs and com-
cals Private Limited (NCPL). It was by equity, hybrid and solution-oriented modities using these KYCs) since these
way of a gift without any consider- schemes with the three categories to- do not conform to Sebi rules for vari-
ation. gether accounting for nearly 58% of ous reasons. The five KRAs jointly came
Thereafter, the trust received notice the industry assets and 80% of the fo- out with a detailed release as there

16 | 2024 | JUNE | BANKING FINANCE