9911796707
TMI Blog2015 (2) TMI 1025X X X X Extracts X X X X X X X X Extracts X X X X ..... aside. 2. On the facts & circumstances of the case the Learned Commr. of Income Tax (Appeals) has held that the income is chargeable to tax in the hands of the appellant amounting to Rs. 7,95,15,873/- as the maximum marginal rate. The conclusion reached by the Learned Commr. of Income Tax (Appeals) is erroneous and contrary to the provisions of law and the appellant prays that the said order may be set aside. 3. On the facts & circumstances of the case the Learned Commr. of Income Tax (Appeals) has invoked the provisions of Section 164(1) and the Learned Assessing Officer had invoked the provisions of Section 161(1A) of Income Tax Act, 1961. On the same set of facts the different stands are taken by two different authorities. The appellant prays that on the facts & circumstances of the case neither the provisions of Section 161(1A) is applicable nor the provisions of Section 164(1) is applicable. The appellant prays that the addition made in the hands of the appellant amounting to Rs. 7,95,15,873/- is not justified and be deleted. 4. On the facts & circumstances of the case the Learned Commr. of Income tax (Appeals) has erred in rejecting the claim of the appellant that this is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the sole beneficiary. The appellant prays that the addition made by the Learned Commr. of Income Tax (Appeals) may be deleted. 9. The Learned Commr. of Income Tax (Appeals) has erred in confirming the levy of interest u/s 234B at Rs. 88,09,740/-. The appellant denies the liability of payment of interest u/s 234B. On the facts & circumstances of the case the appellant submit that levy of interest u/s 234B at Rs. 88,09,740/- is not justified and be deleted." 2. The assessee trust was created by indenture of trust dated 01/02/2008 by its Settlor M/s. Infrastructure Licence & Financial Services Ltd. Under the Trust Deed, M/s. IL & FS Trust Co. Ltd. was appointed as trustee with an initial settlement of Rs. 10,000/-. The trust was set up with the object of seeking contribution from qualified investors for making investment in the portfolio companies. Subsequently the assessee trust was also registered with the SEBI as a venture capital fund (VCF) vide certificate dated 21/07/2009 issued by the SEBI. The share of the contributors and beneficiaries are given in Schedule A of the Trust Deed under which there are 4 classes of contributors/beneficiaries under A,B, C and P categories of U ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 164(1) would come into play and entire income of the trust shall become liable to tax at the maximum marginal rate of Income tax Act, in its capacity as a representative assessee. 3. Before us, the ld. AR of the assessee has submitted that the assessee is an irrevocable trust but the AO and the CIT(A) have proceeded on the basis of wrong assumptions of facts regarding the beneficiaries of "P" units. The name of beneficiaries namely IL & FS is mentioned in the trust deed and is also the sole beneficiary having 100% share. He has further contended that the clauses of trust deed defines IL & FS services as beneficiaries being the sole contributors. The assessee trust was formed with the object of making investment to achieve long term capital appreciation primarily through private negotiated equity and equity linked investment. The trust has made only two investment in shares of two unlisted companies namely Multi Commodity Exchange of India and Maithan Ispat Ltd. There was no other activity carried out by the trust. Out of two investments only one investment in MCX is sold during assessment year under consideration. Since the assessee trust got registration from SEBI as ven ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eived for the assessment year under consideration in its total income and the said income has already been taxed in the hands of IL & FS Financial Services Ltd. as per assessment order passed u/s. 143(3). The ld. AR has filed copy of assessment order dated 12/3/2013 in case of IL & FS Financial Services Ltd.. Once the income on account of sale of shares has been taxed in the hands of the beneficiaries as long term capital gain the same cannot be assessed as business income in the hands of the assessee . Even otherwise the same income has been taxed twice once in the hands of the assessee and also in the hands of the beneficiary. He has further submitted that the AO has wrongly treated the assessee as AOP. In the case of the assessee the Settlor has settled the trust and thereafter, the Settlor has no role to play. The trustee manages the affairs of the trust and they are considered to be legal owner of the trust property. IL & FS Financial Services Ltd. is the sole contributor and beneficiary, therefore, when the beneficiary, trustee and Settlor are distinct persons/entities and the share of the beneficiary is determinate then the a trust cannot be considered as AOP. The ld. AR has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P. The assessee is also earning interest income from lending of money which is a clear activity of business and profession. He has relied upon the judgment of Hon'ble High Court of Madras in the case of 260 ITR 433 CIT vs. ECC Holding and submitted that as per provisions of section 161(1A) the income received by the trust is assessable as representative assessee and liable at the maximum marginal rate of tax. He has further submitted that there was no scrutiny assessment in the earlier assessment year and therefore, the return of income filed by the assessee in the earlier assessment years cannot operate as resjudicata. Even there was no activity in the earlier assessment years and therefore, there was no question of assessment. 4. We have considered the rival submissions as well as perused the relevant material on record. As we have mentioned in the foregoing paras the assessee trust was created by the indenture of trust dated 01/02/2008 by the Settlor M/s. Infrastructural Licensing & Financial Services Ltd. appointing IL & FS Trust Co. Ltd. as trustee under the said trust deed. The object and purpose of creating the trust is given in recital of the trust deed as under :- "T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... name of the beneficiary appears in schedule-A. The ld. AR of the assessee has pointed out that the name of the beneficiary appearing in schedule A is IL & FS meaning IL & FS Financial Service Ltd. as per definition clause of the indenture of trust. It appears that the Settlor and beneficiary are two separate entities though having similar confusing names in the deed of trust. (ii) The second factual controversy is regarding the beneficiary has offered its income to tax as long term capital gain . The assessee claimed that this amount has been offered by IL & FS Financial Services Ltd. to tax as long term capital gain whereas CIT(A) has held that though the said amount was shown in the return of income but it was claimed as exempt under section 10(38). The relevant finding of the CIT(A) in para -6, is as under :- "6. ... 6.1..... i) .... ii) ... iii) ... iv) ... v) ... vi) .. vii) ... viii) The appellant vide letter dated 20.05.2013 filed during the course of appellate proceedings, vide para no. 9 of the letter has stated that in the assessment order passed for A.Y. 2010-11 in its case, i.e. IL & FS Financial Services Ltd, the AO has taxed the long term capital gain of Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
