TMI Blog2012 (7) TMI 701X X X X Extracts X X X X X X X X Extracts X X X X ..... Therefore the addition cannot be upheld on the applicability of clause (vi) of sub-section (2) of section 56 as the money received by the assessee is not "without consideration". Disallowing expenses u/s 14A - Held that:- As disallowance has been computed with reference to rule 8D, which is not applicable to the year under consideration therefore, this issue has to be restored to the file of AO to re-compute the same in accordance with the judgment of Hon'ble Jurisdictional High Court rendered in Godrej & Boyce Mfg. Co. Ltd. v. DCIT [2010 (8) TMI 77 - BOMBAY HIGH COURT]Rule 8D not retrospective and is applicable from Assessment Year 2008-09. - IT Appeal NO. 4615 (MUM.) OF 2011 - - - Dated:- 18-7-2012 - G.E. VEERABHADRAPPA, I.P. BANSAL, JJ. ORDER I.P. Bansal, Judicial Member The present appeal preferred by the assessee, is directed against the impugned order dated 15th March 2011, passed by the learned Commissioner (Appeals)-III, Mumbai, for assessment year 2007-08, on the following grounds:- "Addition u/s 56[1] and 56[2][vi] on account of receipts from dissolution of Sant Trust: 1.1 The Learned Commissioner of Income Tax [Appeals] misdirected herself in law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed with reference to rule 8D, which is not applicable to the year under consideration and, therefore, this issue has to be restored to the file of Assessing Officer with a direction to re-compute the same in accordance with the judgment of Hon'ble Jurisdictional High Court rendered in Godrej Boyce Mfg. Co. Ltd. v. DCIT [2010] 328 ITR 081 (Bom.). 6. After hearing both the parties, we restore this issue to the file of the Assessing Officer and direct him to re-compute the disallowance under section 14A, in accordance with the judgment of Hon'ble Jurisdictional High Court in Godrej Boyce Mfg. Co. Ltd. ( supra ). Consequently, this ground is allowed for statistical purposes. 7. We now left with the main issue which is expressed in ground no. 1. It is necessary to narrate few facts to understand the issue. 8. The Assessing Officer has discussed this issue in Para-6 of his order. A private Trust namely "Sant Trust" was created by Mrs. Vinodini C. Pratap, mother of the assessee by trust deed dated 19th January 1978. The trustees of the said trust were the assessee and his wife namely Mrs. Sandhya A. Pratap, and the beneficiaries were two daughters of the assessee nam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prohibit the action of the original two beneficiaries. By their first action, the original beneficiaries diluted their beneficiary rights from the said trust and requested for the trust to be made a discretionary trust. Section 11 of the Indian Trust Act which empowers the trustee to execute the trust. The trustees were bound to act in consonance with the consent of all the beneficiaries. The original two beneficiaries, by their action on 30th March 2001, had completely relinquished their rights, title, interest, share and benefits in to and from the property and assets of the said trust including accumulated income. She further observed that though in the letter of relinquishment, which is named as release of Sant Trust, it is not stated but in effect the said relinquishment has resulted in the trust receiving the entire rights, title, interest, share and benefits in to and from the property and assets of the said trust including accumulated income of the original two beneficiaries. She observed that neither there is specific transfer nor gift by Ms. Natasha and Ms. Tanya, to their parents. The modification in the terms of contract by consent of all the beneficiaries is in accord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he learned Commissioner (Appeals) has accepted the validity of the trust after referring to the relevant sections of Indian Trust Act. He submitted that the learned Commissioner (Appeals) has also accepted the validity of the amendment and dissolution of trust, etc. The learned Commissioner (Appeals), having accepted all these things, has wrongly concluded that the amount received by the assessee on dissolution of trust is liable to be assessed under section 56(2)(vii), as the same is a money the aggregate of which is exceeded to Rs. 50,000, was without consideration and it was not from relative. He submitted that the said amount cannot be said to be received without consideration as the same was received by the assessee as per the terms of dissolution deed. He submitted that it is not even the case of the assessee that the said trust was ever registered under section 12AA of the Act or it was the institution described in clause (23C) of section 10. Even if it is not so, the amount received by the assessee on dissolution of trust in the capacity of its beneficiaries, it cannot be taxed under section 56(2)(vi) as the same is not a money received without consideration. He submitted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ole of the aggregate value of such sum: Provided that this clause shall not apply to any sum of money received ( a ) from any relative; or ( b ) on the occasion of the marriage of the individual; or ( c ) under a will or by way of inheritance; or ( d ) in contemplation of death of the payer; or ( e ) from any local authority as defined in the Explanation to clause (20) of section 10; or ( f ) from any fund or foundation or university or other educational institution or hospital or other medical institution or any trust or institution referred to in clause (23C) of section 10; or ( g ) from any trust or institution registered under section 12AA. Explanation . For the purposes of this clause, "relative" means ( i ) spouse of the individual; ( ii ) brother or sister of the individual; ( iii ) brother or sister of the spouse of the individual; ( iv ) brother or sister of either of the parents of the individual; ( v ) any lineal ascendant or descendant of the individual; ( vi ) any lineal ascendant or descendant of the spouse of the individual; ( vii ) spouse of the person referred to in clauses (ii) to (vi);]" 16. The afor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eficiaries. The status of beneficiary has already been accepted by the learned Commissioner (Appeals) when she has held that "in the background of the provisions of Indian Trust Act and the dissolution of the trust, appellant did not receive the sum of Rs. 1,36,595, in his capacity as a trustee i.e., representative assessee for the purpose of trust". The fact that the assessee has received the amount in the capacity of beneficiaries has also not been controverted, therefore, the amount received by the trust is in pursuance of dissolution of trust. The amount received in pursuance of dissolution of trust cannot be termed to be an amount received by the beneficiaries "without consideration". The fact that the trust had borne the tax at maximum marginal rate on its income has also not been controverted. Therefore, in our considered opinion, the addition cannot be upheld on the applicability of clause (vi) of sub-section (2) of section 56 of the Act, as the money received by the assessee is not " without consideration ". 17. In view of our aforementioned findings, we do not consider it necessary to go into the other submissions of the learned Sr. Advocate, which, inter-alia, includ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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