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2013 (3) TMI 350 - HC - Income TaxRecovery of Outstanding demand u/s 177(3) to the extent of share of investment in a securitization trust, called the Indian Corporate Loan Securitization Trust 2008 Series 24 - whether the Petitioner has, prima facie, a serious triable case to urge on the basis of which a stay can be sought on the enforcement of the notice pending disposal of the appeals by the CIT (A) being preferred by the trusts who have been assessed under Section 143(3) - Held that:- Foundation of the notice is Section 177(3) where every person who was at the time of such discontinuance or dissolution a member of the association of persons shall be jointly and severally liable for the amount of tax, penalty or other sum payable. As the previous judgment of this Court in UTI Mutual Fund (2012 (3) TMI 333 - BOMBAY HIGH COURT) notes there are two Division Bench judgments in CIT v. Marsons Beneficiary Trust (1990 (7) TMI 37 - BOMBAY HIGH COURT) and L.R. Patel Family Trust v. ITO (2003 (3) TMI 85 - BOMBAY HIGH COURT) in which it has been held that a beneficiary of a trust cannot be construed as having set up the trust or having authorized the trustees to carry on the business. Thus the law laid down indicates that the beneficiaries who are named in the trust as recipients of the income of the trust cannot be considered as an association of persons. If that be the position, prima facie, the question as to whether Section 177(3) would apply to the Petitioner raises a serious issue for consideration. Whether Section 161(1A) lays down only the rate of tax without affecting the basic principle underlying Section 161(1) - Held that:- The nature of the controversy in the present case is adverted in order to elucidate that the questions on which there is a controversy, which is still to be resolved, involves serious triable issues. The contention of the Petitioner, prima facie, cannot be rejected out of hand particularly having regard to the fact that the earlier judgment of this Court for Assessment Year 2009-10 also took the same position. Moreover, the issue as to whether the income in question is business income is a matter which would have to be determined. Finally, on this aspect of the matter, it may be necessary also to note the submission of the Petitioner with reference to the provisions of Section 161 which stipulate that all income arising to any person by virtue of a revocable transfer of assets shall be chargeable to income tax as the income of the transferor and shall be included in his total income. Section 63(a)(i) stipulates when a transfer shall be deemed to be revocable and the contention of the Petitioner is that in the case of a revocable transfer of assets, the income as in the present case would be income in the hands of the transferor which is exempt under Section 10(23D). The Appeals for Assessment Year 2009-10 are pending, the Court being informed that the Appeals are in the course of being heard. In this view of the matter, and for the reasons which indicated already in the earlier judgment of this Court in UTI Mutual Funds (supra) and for the reasons indicated in this judgment, a prima facie case raising serious triable issues has been made out for stay of the enforcement of the demand in the hands of the Petitioner in pursuance of the impugned notices dated 25 February 2013. Also direct that pending the disposal of the appeals which have been filed by the trusts for Assessment Year 2010-11 and for a period of six weeks thereafter, no coercive steps shall be taken against the assessee for the recovery of the demand in pursuance of the impugned notices dated 25 February 2013 calling upon the Petitioner to pay an outstanding demand under the provisions of Section 177(3).
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