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M/s. TVS Investments i Fund Versus The Income Tax Officer, Business Ward XV (2) , Chennai

2015 (9) TMI 1289 - ITAT CHENNAI

Taxation on interest whether interest income received by the assessee has already been transferred to the beneficiaries? - Held that:- We find it appropriate to remit the issue back to the Assessing Officer to consider the issue afresh, particularly, whether, the assessee has transferred the income earned by it to the beneficiaries or not? If the very same income is taxed in the hands of beneficiaries, then it cannot be taxed in the hands of the assessee. Further, if the assessee has not able to .....

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istical purposes. - I.T.A.No.276/Mds/2014 - Dated:- 2-9-2015 - Shri Chandra Poojari, Accountant Member and Shri V. Durga Rao, Judicial Member For The Appellant : Shri R. Vijayaraghavan, Advocate For The Respondent : Shri A.V. Sreekanth, JCIT ORDER PER V. DURGA RAO, JUDICIAL MEMBER: This appeal filed by the assessee is directed against the order of the ld. Commissioner of Income Tax (Appeals) V, Chennai, dated 10.10.2013 relevant to the assessment year 2009-10. 2. Brief facts of the case are that .....

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amounting to ₹.40,35,34,375/-. These contributors are classified as High Net Individuals by the assessee. This contribution has been called-up and received by the assessee on various dates during the course of the relevant previous year. A perusal of the details indicates that the assessee has collected the contribution in a concerted, systematic manner. Out of the above collection, an amount of ₹.39,60,84,375/- (639 Contributors) was transferred by the assessee to TVS Shriram Growth .....

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observed that the activity of the assessee of collecting contributions and transferring a part of it to TVS Shriram Growth Fund predicates a profit motive that pervades the whole series of transactions carried out by the assessee during the accounting year. 3. Further, the Assessing Officer has noted that the assessee is an asset management company and has roped in TVS Shriram Growth Fund as an investment manager. The assessee manages the assets of the contributors and by diverting the contribu .....

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possession of the Growth Fund, it is the assessee who is answerable to the Contributors and therefore, the assessee s point of view is not tenable. It would be worthwhile to note, in this regard, that even the TDS Certificates issued by the respective banks on the deduction of tax on the interest paid has been issued only in the name of the assessee and not in name of the Growth Fund. In the circumstances, the interest income derived by the assessee from Banks is assessable in the assessee s han .....

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tributed Trust under the Indian Trust Act 1882 by way of a Trust Deed and is registered under the Indian Registration Act 1908. Its beneficiaries are known and shares of each individual beneficiary are determinate. The main purpose in forming a contributed trust is to mobilize capital from various individuals to carry on the Venture Capital Fund activities and accordingly collected contributions from various persons and invested in the fixed deposits of various banks pending commencement of vent .....

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and apportioned the income and expenditure as per their share of beneficial interest for including the same in the return of income filed by the respective beneficiaries. All the beneficiaries are having their PAN indicated the share of beneficial interest in the return of income filed by the appellant. The appellant being a representative assessee filed its return of income as Nil Indicating the fact the income/expenditure is being offered by the respective beneficiaries in their return of inc .....

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. The appellant has objected to the addition made as the beneficiaries are known and their share of beneficial interest is determinate. Thus the Assessing Officer has brought an amount of ₹ 1,38,83,203/-representing the interest income earned out of fixed deposits on which TDS was made and claimed as refund by the appellant was brought to tax as income of the appellant. The appellant further submitted that the said income was already offered in the return of income filed by TVS Shriram Gro .....

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butors for its operational activities as on 31.03.2009 apart from the obtaining a loan of ₹ 73.02,478/- itself indicating continuous of business activities. The assessee has parked its funds amounting to ₹ 1.13.70.729/- in HDFC Bank in a current account. In order to earn interest for meeting its operational expenses thus makes it clear the objective of earning profit. I concur with the view taken by the Assessing Officer that because of the appellant commercial activities, it is carr .....

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449 (Lakshminarayan). Hence, the appellant s version that the appellant is a representative assessee is rejected. Similarly the assessee manages the assets of contributors and by diverting the contributions to the investment manager i.e. TVS Shriram Growth Fund, the assessee cannot escape the interest income arising from the contributions made by the High Network Individuals hence, it is held that the assessee is answerable to the contributors and has to responsible for the income earned on acco .....

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ore the Tribunal. 6. The ld. Counsel for the assessee has submitted that the amount received by the assessee in the form of interest is not the income of the assessee. It is the income of the beneficiaries and the same has been transferred to them. Alternatively, he has submitted that whatever tax rate applicable to the beneficiaries, the same tax rate may be applied to the assessee. He further argued that if the activity of the assessee is treated as business activity, then the expenditure incu .....

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below. The assessee, M/s. TVS Investments I Fund - a private trust, collected Unit Contributions from 65 Contributors amounting to ₹.40,35,34,375/-. These contributors are classified as High Net Individuals by the assessee. This contribution has been called-up and received by the assessee on various dates during the course of the relevant previous year. Out of the amount collected above, an amount of ₹.39,60,84,375/- (639 Contributors) was transferred by the assessee to TVS Shriram G .....

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