Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2019 (9) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2019 (9) TMI 766 - ITAT MUMBAIAssociation of person (AOP) - assessment of trust - HELD THAT:- In an ideal condition Trusts are created by a Settlor and the Settlor ought to contribute its assets / property in the Trust called the Trust Property for the benefits of the persons, referred to as the beneficiaries. Here there is no trust property to which the trustee needs to manage. A trustee is appointed to manage the affairs of the trust. Thus in the case of a real trust, the Settlor, Trustee and the beneficiaries would never be the same persons. In the instant case, the settler and the beneficiaries are the same and identical. This so called trust has been created for the sole motive to the benefit of the settler / contributor. AO observed that the investors comprising of two or more persons had come together for contribution of sufficient funds into an entity in order to invest in the specific entities with a sole intention to earn profits and accordingly the said entity should be construed as an ‘Association of Persons (AOP)’ and not Trust. Hence the AO observed that the assessee is not entitled for exemption from tax. AO observed that the trust created herein is a special purpose vehicle for doing commercial transactions and further observed that the trust is not a revocable trust within the meaning of sections 61 to 63 of the Income Tax Act. Accordingly, AO invoked the provisions of section 161(1A) of the Act by treating the assessee as an AOP as against the status of ‘Trust’ claimed by the assessee. AO observed that merely because the contributors had paid taxes in their returns with regard to the subject mentioned transactions with the assessee trust cannot exonerate the assessee trust from its taxation. The ld AO further observed that the assessee had not shown that the income earned by the beneficiaries have been offered for taxation by each of the beneficiaries in their respective returns of income at the correct rates. We find from the details of income offered by ISARC (Security Receipt Holders) for taxation as detailed in the table hereinabove during the financial yea₹ 2012-13 to 2017-18, that those Security Receipt Holders had duly considered the gains arising from realisation of acquired NPAs as their income / gains in their respective returns in the year of redemption of Security Receipts. In view of the aforesaid observations, it could be safely concluded that the trust is revocable and hence the observations made by the lower authorities contrary to this is dismissed. In any case, we find that the AO had not even bothered to deduct the purchase consideration of acquired NPAs in the sum of ₹ 5,31,09,000/- while determining the income, which had been rightly granted relief by the ld CITA. We hold that the assessee cannot be taxed as an AOP and that the shares of each beneficiaries are determinate and known and accordingly the income shall be taxed only in the hands of such beneficiaries and not in the hands of the assessee trust. Accordingly, the grounds raised by the assessee in this regard are allowed and grounds raised by the revenue in this regard are dismissed.
|