Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2014 (10) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2014 (10) TMI 614 - AT - Income TaxApplicability of the provisions of Sec.60, 61 and 63 - Obligation to pay tax by the trust – Tax obligation has been fully discharged by beneficiaries of the assessee trust or not – Held that:- Assessee contended that the AO has not disputed in his remand report the fact that the Assessee trust is revocable but only says that beneficiaries are assessed at different places in India and it is very difficult to monitor all these beneficiaries as to whether they have filed their returns and even if filed, whether correct share of income received/receivable from the Assessee are admitted - To avoid such eventuality it would be correct to Assessee the trustee/representative Assessee - once the trust is accepted to be revocable then there is no question of assessing the transferee and it is only the transferor who can be assessed - It Sec.61 mandates that income arising to any person by virtue of a revocable transfer of assets shall be chargeable to income tax as income of the transferor and therefore the assessment in the hands of the transferee/representative assessee is not proper. U/s 164 as so replaced, a `representative assessee' who receives income for the benefit of more than one person whose shares in such income are indeterminate or unknown, will be chargeable to income-tax on such income at the flat rate of 65% or the rate which would be applicable if such income were the total income of an AOP, whichever course would be more beneficial to the Revenue – the object of the amendments to the provision was only that the distribution of the income should not be entirely at the discretion of the trustees and that the trust deed should regulate the shares. The power of revocation under Clause 13 of the Deed of Trust is a general power of revocation and the same would be sufficient for construing the transfer in the present case as a revocable transfer - it is not necessary that the power of revocation should be at the instance of the contributors/beneficiaries/ transferor and it can be at the instance of any person either settlor, trustee, transferee or the beneficiaries - Provisions of Sec.61 of the Act do not contemplate a power of revocation only at the instance of the transferor – relying upon Additional Commissioner of Income-Tax, Gujarat Versus Surat Art Silk Cloth Manufacturers Association (And Other References) [1979 (11) TMI 1 - SUPREME Court] - the existence of a power to revoke the transfer that has to be seen and not the manner in which/ or at whose instance such revocation is brought about. Following the decision in Jyotendrasinhji Versus SI Tripathi And Others [1993 (4) TMI 1 - SUPREME Court] - Sec. 63(1) of the Act does not say that the deed of transfer must confer or vest an unconditional or an exclusive power of revocation in the transferor - the fact that concurrence of the trustee had to be obtained by the transferor/settler for revocation will not make the trust an irrevocable transfer - the deed contains a provision giving the transferor a right to re-assume power directly or indirectly over the whole or any part of income or assets within the meaning of s. 63(a)(ii) of the Act – thus, Sec.61 read with Sec.63 of the Act which mandates that income arising to any person by virtue of a revocable transfer of assets shall be chargeable to income tax as income of the transferor will apply to the facts and circumstances of the present case and therefore the assessment in the hands of the transferee/representative assessee was not proper. Applicability of provisions of Sec.164(1) - Charge of tax where share of beneficiaries unknown – Held that:- There are two aspects to be noticed, the first aspect is the identification of the beneficiaries while the second aspect is with regard to ascertainment of the share of the beneficiaries - Clause 1.1.13 of the Trust Deed clearly lays down that beneficiaries means the Persons, each of whom have made or agreed to make contributions to the Trust in accordance with the Contribution Agreement – the clause is sufficient to identify the beneficiaries - share income of the beneficiaries cannot be determined or known from the trust deed – if the trust deed sets out expressly the manner in which the beneficiaries are to be ascertained and also the share to which each of them would be entitled without ambiguity, then it cannot be said that the Trust deed does not name the beneficiaries or that their shares are indeterminate - The persons as well as the shares must be capable of being definitely pin-pointed and ascertained on the date of the trust deed itself without leaving these to be decided upon at a future date by a person other than the author either at his discretion or in a manner not envisaged in the trust deed - Even if the Trust deed authorises addition of further contributors to the trust at different points of time, in addition to initial contributors, than the same would not make the beneficiaries unknown or their share indeterminate - Even if the scheme of computation of income of beneficiaries is complicated, it is not possible to say that the share income of the beneficiaries cannot be determined or known from the trust deed – thus, the provisions of Sec.164(1) of the Act would not be attracted in the present case - identity by reference to the terms of the trust deed is sufficient and it is not necessary that the beneficiaries should be specifically named in the deed of trust – Decided against revenue. Assessee trust to be assessed as AOP or not – Held that:- The beneficiaries contributed their money to the Assessee and a separate agreement was entered into between the Assessee and each beneficiary - There is no inter se arrangement between one contributory/ beneficiary and the other contributory/beneficiary as each of them enter into separate contribution arrangement with the Assessee - it cannot be said that two or more beneficiaries joined in a common purpose or common action and therefore the tests for considering the Assessee as AOP was satisfied - The beneficiaries have not set up the Trust - Therefore it cannot be said that the beneficiaries have come together with the object of carrying on investment in mezzanine funds which is the object of the trust - The beneficiaries are mere recipients of the income earned by the trust - They cannot be regarded as an AOP – Decided against revenue. Income of a person has to be assessed in the correct and appropriate status – Held that:- Sec.161(1) by implication permits assessment of either the beneficiary or the Trustee - When the Trustee is assessed as representative assessee in respect of income received on behalf of the beneficiary, the section provides that tax shall be levied upon and recovered from him in like manner and to the same extent as it would be leviable upon and recoverable from the person represented by him – the order of the CIT(A) is upheld – Decided against revenue.
|