TMI Blog2015 (6) TMI 604X X X X Extracts X X X X X X X X Extracts X X X X ..... ved the income cannot be applied to a case where the amount credited by the assessee had been claimed by him from a source situated outside india such as Swizerland etc and to which country the assessisng officer does not have any jurisdiction as the Indian Income Tax Act is applicable to Indian Territory, it cannot be said that the onus is on the assessing officer to prove that the assessee has earned the income outside India. This in our opinion will be the mockery of the Indian Income Tax Act and every body just filing the documents which were out side the domain of the assessing officer can claim that the onus is on the assessing officer to prove that the assessee has received revenue receipts. We, accordingly, confirm the order of CIT(Appeals) and reject the claim of the assessee that the said amount is the capital receipt received as a beneficiary of a discretionary trust. - Decided against assessee. - ITA No. 1662/KOL/2009 - - - Dated:- 12-6-2015 - P. K. Bansal, AM And Mahavir Singh, JM,JJ. For the Appellant : Shri N K Poddar, Sr. Adv. For the Respondent : Smt Suchismita Palai, CIT ORDER Per P K Bansal : This appeal has been filed by the assessee aga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, (ii) No. of years for which the assessee is associated with the Trust, (iii) Duties and obligations as a beneficiary of the Trust, (iv) Purpose for which the Trust was set up, (v) Source of income of the Trust, (vi) Identification particulars of the Trust as per 11 Act of the Nation, (vii) Names of other beneficiaries receiving benefit from the Trust during the year, (viii) Whether the assessee received gift from the Trust in earlier years, (ix) Statement of account of Trust Bank statement. 3.1. In respect of Items No. 3, 6, 7 9, the assessee expressed his inability and stated that Trustees of the said Trust are bound by the secrecy laws of their country and, therefore, they are constraint to part with the financial statements of the Trust. Even the Trustees are reluctant to reveal their names due to the secrecy laws. There are no identification criteria for the Trust like Permanent Account Number as per the laws of Channel Islands. Subsequently the assessee submitted a letter from HSBC Trust Company (BVI) Limited in which it was explained that While Label Trust was established on 20.07.1993 under the laws of the Island of Jersey and is discretionary in nature. Dr. Som Datt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... certain the nature of the amount received by the assessee but the assessee did not produce these documents. The Assessing Officer, therefore, observed that in the absence of financial statements being produced by the Trust, which were specifically asked to be produced, it cannot be ascertained whether the distribution of the amount was made out of the income of earlier years, i.e. out of the corpus fund of the Trust or out of the income of current year. It is not ascertainable as to what is the source of income of the Trust, who was the settler of the Trust, who are the beneficiaries and how can one beneficiary, i.e. the assessee received benefit from the Trust on more than one occasion. The Assessing Officer felt that nothing had been divulged about the White Label Trust, its sources of income, the resolution adopted to benefit this particular assessee, the capacity of the Trust to benefit anybody and the legal status of the Trust in the country where it was incorporated and ultimately he concluded that the facts of the case were different from the facts of the case of Smt. Shantaben M. Patel in ITA No. 5000/Mum./2001 dated 17.02.2006 on which the assessee has relied. The assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at pages 40 to 60 of the paper book and on this basis he pointed out that the Trust Settlement Deed was executed on 20.07.1993 between the assessee as well as ANZ Grindlays Trust Corporation (Jersey) Limited. The assessee has paid up a sum of 10000 dollar. It was pointed out that as per clause (2) when query was made whether the settlement got registered as per law of the country where it was created that the settlement has been established under the laws of the island of Jersey and subject to any change in the proper Law of the Settlement duly made according to the powers and provisions declared the proper law of the settlement shall be the law of the Island of Jersey and the courts of the Island shall be the forum for the administration thereof. Thus it was contended that the settlement has been created in accordance with law of the Island of Jersey. When Bench asked the copy of the Trust (Jersey) Law, Island of Jersey regulating the settlement. Ld. Senior Counsel has expressed his inability to file the copy of such law or to explain whether the settlement is required to be registered with any authority under the law in that country relating to the settlement. Our attention was d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also been brought to our knowledge, which is available at page 73 of the paper book and on the basis of this it was submitted that the assessee has not made any withdrawn. Page 78 of the paper book shows the withdrawal of amounts which were given to the assessee. This statement called the Trust Ledger Transaction History Report. Our attention was drawn to page 79 of the paper book which contains a certificate dated 28.11.2003 that Trustees of the White Label Trust has remitted USD 10 lakhs to Dr. Som Datt on 28.11.2003 to his Bank account with Syndicate Bank, Nehru Place Branch, New Delhi. This certificate also certified that the said sum has been given out of the capital account of the Trust and is to be regarded as capital distribution to Dr. Som Datt. Our attention was drawn towards a letter dated 18.07.2006, which has been written by HSBC Trust Company (BVI) Limited to Mr. Dilip J. Thakkar clarifying that White Label Trust was established on 20.07.1993 under the laws of the Island of Jersey and is discretionary in nature. Dr. Som Datt has been a discretionary beneficiary since the Trust was established together with other discretionary beneficiaries. The Trust fund consists of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d be recoverable from him. The accumulated income cannot be regarded to be part of the income. Thus it was contended that its only income earned during the year which is received for the beneficiaries can be taxed in the hands of the beneficiaries. Any amount received out of the accumulated income cannot be taxed in the hands of the beneficiaries. Our attention was also drawn towards the decision of the Hon ble Supreme Court in the case of Commissioner of Wealth Tax vs.- Estate of Late HMM Vikramsinhji of Gondal reported in (2014) 363 ITR 679 (SC) for the proposition of the law that in the case of a Discretionary Trust executed outside India for the beneficiaries in India, income not distributed to the beneficiaries in the relevant accounting years is not assessable during the impugned assessment year. Our attention was also drawn towards the decision of H.H. Maharaja Shri Jyotindrasinhji vs.- ACIT reported in (2010) 326 ITR 594 (SC) at the Head Notes that in case of a Discretionary Trust executed in UK for benefit of persons in India, if the trustees in UK do not distribute income to beneficiaries in the relevant accounting years and trustees are assessed in UK, the income from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pointed out that the accounts relate only to the year and it is not being approved or authenticated by any person. They are not audited. The accounts for the earlier year were not filed so as to justify whether the amount has been paid to the assessee out of the capital funds. Even neither the minutes nor copy of the Resolution was filed so as to justify the payment being made to Dr. Som Datt as beneficiary out of the capital fund. Initially the Trustee is ANZ Grindlays Trust Corporation (Jersey) Limited. Subsequently the assessee has claimed that the Trustee is HSBC Republic Trust Company (BVI) Limited. The onus is on the assessee to prove that he has received the money out of the capital funds. On the basis of the documents filed by the assessee, it cannot be said that the assessee has discharged his onus. 12. So far as the decisions relied on by the ld. A.R. is concerned, it was submitted that in all these decisions the assessee has duly discharged his onus. The question does not relate to the discharging of the onus. Therefore, those decisions are not applicable. 13. We have heard the rival submissions and carefully considered the same along with the order of tax authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... following information/documents:- (i) Nature of While Label Trust-founder of the Trust,(ii) No. of years for which the assessee is associated with the Trust,(iii) Duties and obligations as a beneficiary of the Trust,(iv) Purpose for which the Trust was set up,(v) Source of income of the Trust,(vi) Identification particulars of the Trust as per 11 Act of the Nation,(vii) Names of other beneficiaries receiving benefit from the Trust during the year,(viii) Whether the assessee received gift from the Trust in earlier years, (ix) Statement of account of Trust Bank statement. The assessee in reply thereto in respect of the Items No. 3, 6, 7 9 expressed his inability and stated that the trustees of the said Trust are bound by the secrecy laws of their country and, therefore, they are constraint to part with the financial statements of the Trust ignoring the fact that the assessee is Indian citizen and resident during the impugned assessment year and assessee is chargeable to tax on all the income earned or received by him. We were surprised to see such a plea specially when the assessee himself is the settler and he has established the trust himself, such information must be w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ersey) Limited of Philip Malzard House, 15, Union Street, St. Helier, Jersey, Channel Islands (hereinafter called the Original Trustees ) of the other part. Whereas the Settlor being desirous of making such Settlement as is hereinafter contained has had transferred or delivered to the Original Trustees or otherwise placed under their control the property specified in the second schedule hereto . The name of the HSBC Trust Company (BVI) Limited is not appearing as trustee. He explained that M/s. HSBC Trust Company (BVI) Limited became the trustee on 08.08.2003 but expressed its inability to file copy of any Resolution or Minutes or deed of appointment which may prove how HSBC Trust Company (BVI) Limited became the trustee of the Trust and from which date. On a question whether the Trust Deed, the copy of which is available in the paper book executed on 20.07.1993, has been registered in accordance with law of Trust (Jersey) Law, 1983 as Clause 1(f) defines the law means the Trusts (Jersey) Law, 1984 as amended. Even the copy of the Trusts (Jersey) Law, 1984 was also not filed before us even though we specifically asked to produce the copy so that we can ascertain whether the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r appointment of new or additional trustees which can be appointed to be the trustee in view of the Power of Appointment of New or Additional Trustees given under clause 15(a). This clause reads as under:- 15(a) If any trustee hereof whether original additional or substituted shall die or being a company shall be dissolved or shall give notice of desire to withdraw and be discharged from the trusts hereof under the provisions of sub-clause (b) of this clause or shall refuse or become unfit to act then the persons specified in the fifth schedule hereto in order to priority may by deed appoint one or more other persons wheresoever resident but subject to any exclusions or provisions specified in the said fifth schedule to be a trustee hereof in place of the trustee so deceased dissolved desiring to withdraw and be discharged refusing or becoming unfit to act . 20. From the reading of the said Clause it is apparent that new Trustee can be appointed whether the original, additional or substituted trustee expires or in case of a Company got dissolved and /or if given the notice of desire to withdraw from the trusteeship or had become unfit to act as a trustee or refuse to work ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ange in the trusteeship a memorandum has to be endorsed and has to be permanently annexed to the Settlement Deed stating the names of the trustees for the time being and it has to be signed by the persons named as a trustee so that any person dealing with the Trust may rely upon such memorandum. But in this case, we have gone through the Trust Deed, but we do not find the copy of any such memorandum, even the ld. Sr. Advocate could not produce such copy before us. In view of this fact, we are of the view that the assessee has not discharged his onus how M/s. HSBC Republic Trust Company (BVI) Limited had become the trustee of the said Settlement, in our opinion, the onus is on the assessee to prove that HSBC Republic Trust Company (BVI) Limited is the trustee of the Trust Deed as on behalf of the assessee ld. Sr. Advocate entirely relies on the certificate issued by HSBC Republic Trust Company (BVI) Limited that the amount has been received by the assessee from the discretionary trust as beneficiary out of the accumulated income of the earlier year and therefore the said amount is a capital receipt. It is a case where, in our opinion, the assessee could not prove that the trusteeshi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these facts as narrated by us , can it be said that the assessee has discharge his onus to prove the nature and source of the credit. 24. We have specifically during the course of hearing asked the ld. Sr. Advocate how this account has not been approved. The account has to be approved by the trustee in a meeting and as a token thereof they have to sign the accounts. But these accounts have been certified to be a true copy as a trustee of M/s. White Label Trust on behalf of M/s. HSBC Trust Company (BVI) Limited. That certificate also we noted is just below the accounts and on a separate sheet. In the absence of approval of the accounts by the trustee in a meeting and also without mentioning the date when these accounts have been approved, we are of the view that these accounts cannot be accepted as an evidence that the assessee has received the funds out of the capital funds. Whether the Trust is a genuine Trust and has complied with all the legal requirements of the country in which it has been incorporated cannot be ascertained. The bonafide of the Trustee itself, in our opinion, is not proved. Merely stating that M/s. HSBC Trust Company (BVI) Limited has become the trustee of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... received by the assesese is on him. If he disputes liability for tax, it is for him to show either that the receipt was not income or that if it was, it was exempt from taxation under the provisions of the Income Tax Act. In the absence of such proof, the Income Tax Officer is entitled to treat it as taxable income . Since, in our opinion, it is a case where the assessee even though claimed that the amount received by him is a capital receipt and has arrived out of a Discretionary Trust, the White Label Trust in which the assessee is a beneficiary, but the assessee could not adduce the evidence to discharge his burden, the case of the assessee is duly covered by the decision of the Hon ble Supreme Court referred to supra. On this basis itself, the appeal of the assessee is bound to be dismissed. 26. We have also gone through the various case laws as has been relied on by the ld. Sr. Advocate. These case laws, in our opinion, will not apply to the facts involved in the impugned case as in those cases the assessee has duly discharged his onus. There is no such finding in those cases that the assesse has not discharged its burden of proof. In the case of Trustees of the Will of H. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see has not discharged his onus that the money received by the assessee out of the said Discretionary Trust has come out of capital funds. In the case of CIT vs.- Infosys Technologies Limited reported in 297 ITR 167 (SC); the Hon ble Supreme Court no doubt took the view that unless benefit or receipt made taxable- not taxable as income. This decision also, in our opinion, will not assist the assessee as the issue before us was not disputed that capital receipt is not chargeable to tax until and unless it comes under the definition of the income as given under section 2(24) of the Income Tax Act. In the case before us, the question is whether the assessee has discharged his onus and assessee has proved that the amount received by him is a capital receipt. 27. In the case of CIT vs.- Chrestian Mica industries Limited reported in 109 ITR 517 (Cal.), in our opinion, this decision also will not help the assessee. In this case, we noted that the Hon ble Jurisdictional High Court took the view that the question whether a transaction is or is not in the nature of trade is a question of law the answer to which depends on the total impression and effect of all relevant facts and circums ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax. 29. In the case of Jyotendrasinhji vs.- Tripathi (S.I.) reported in 201 ITR 611 (SC) we noted that the Hon ble Supreme Court took the view that in case of a Discretionary Trust, Revenue has option to tax income in the hands of the beneficiary or trustee. This decision has dealt with the provision of section 160(1)(iv), 164(1) vis-a-vis 166 of the Indian Income Tax Act. This decision relates to a Trust which has been executed. The question involved does not relate to the genuinity of the amount received from the Trust created outside India. No doubt in this decision the Hon ble Supreme Court referred to page 129 of Snell s Principles of Equity, 25th Edn. (1965) which defines a Discretionary Trust in the following words:- A discretionary trust is one which gives the beneficiary no right to any part of the income of the trust property, but vests in the trustees a discretionary power to pay him, or apply for his benefit, such part of the income as they think fit.....The beneficiary thus has no more than a hope that the discretion will be exercised in his favour . There is no dispute so far this proposition of law is concerned, we do not dispute the said proposition of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the income to beneficiaries in the relevant accounting year. The Trustees are assessed in UK. The Hon ble Supreme Court held that the income from the Trusts not assessable in the hands of the beneficiaries in India. The decision in our opinion will not assist the assessee. This decision will apply to the assessee once the assessee proves that M/s. White Label Trust is a genuine Trust and has been genuinely constituted in accordance with the law prevailing in that country and has duly complied with the laws of the Island of Jersey wherein it has been established, the sum received by the assessee is out of the accumulated income of the Trust, which has been earned by the Trust in the earlier year and the Trust is assessed in accordance with the laws of Island of Jersey. The assessee before us has proved none of these facts therefore, this decision, in our opinion, will not apply to the facts of the assessee s case. 32. In the case of CWT vs.- Estate of Late HMM Vikramasinhji of Gondal reported in 363 ITR 679 (SC), the facts involved in this decision are different from the facts involved in the case before us. We do not deny to the proposition of the law that in the case of Disc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll reasoned order and we do not see any reason to interfere with the same as such the appeal of the Revenue is dismissed . In that case, we noted that the assessee has given sufficient evidences that the income has been distributed to the beneficiaries out of the income of the earlier years or out of corpus fund of the Trust. Even copy of the Resolution passed on 02.04.1997 was also placed on record. The genunity of the trustee was not in dispute. The Cit(A) who has the co-terminus jurisdiction with the assessisng officer has given clear cut finding about the discretionary trust and the amount has been received by the assessee out of the earlier income accumulated. The question of the genuinety of the trust or trustee has not been in dispute. The Tribunal did not examine the facts as well as the rules and regulations stipulated in the trust deed even though the tribunal is the final fact finding authority. The tribunal simply agreed with the finding of the CIT(A). In the case before us, we have already held that the assessee could not prove the genunity of the Trust as well as of the trustee, even the fact that the amount has been distributed by the assessee out of the earlier y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... den lies on the Income Tax Officer to show that income is from any particular source. It is for the assessee to prove that, even if the cash credit represents income, it is income from a source which has already been taxed. Decision of the Allahabad High Court in Devi Prasad Vishwanath Prasad vs.- Commissioner of Income Tax [1963] 50 ITR 641 reversed . Similar view has been taken by the Hon ble Supreme Court in the case of Roshan Di Hatti vs.- CIT reported in 107 ITR 938 (SC), in which the Hon ble Supreme Court took the view as under:- The law is well settled that the onus of proving the source of a sum of money found to have been received by an assessee is on him. If he disputes the liability for tax, it is for him to show either that the receipt was not income or that if it was, it was exempt from taxation under the provisions of the Act. In the absence of such proof, the revenue is entitled to treat it as taxable income. To put it differently, where the nature and source of a receipt, whether it be of money or of other property, cannot be satisfactorily explained by the assessee, it is open the revenue to hold that it is the income of the assessee and no further burd ..... X X X X Extracts X X X X X X X X Extracts X X X X
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