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2017 (6) TMI 781 - ITAT BANGALORE

2017 (6) TMI 781 - ITAT BANGALORE - TMI - Income relating to minor beneficiaries of the trust.- Addition to the total income of the parents of minor beneficiaries u/s 64(1)(a) - interest claimed by the co-owners of the property - Held that:- The assessee has preferred appeals before the Tribunal and during the course of hearing, he could not establish that the recipient i.e., trust has ever offered the receipt of interest to tax. This issue was thoroughly examined by the Tribunal and the Hon’ble .....

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trust. - Despite clear directions of the Hon’ble High Court, the assessee could not place the relevant evidence in this regard. The scope of enquiry was limited as it has to be done as per the directions of the Hon’ble High Court. Since the assessee could not place any relevant evidence with regard to taking into account the interest received by the trust from the assessee while computing its income, the AO has rightly disallowed the claim of the assessee and the CIT(Appeals) confirmed the s .....

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l are common in these appeals, I extract the grounds of appeal raised in the appeal ITA No.495/Bang/2017 hereunder :- That the impugned order of assessment made by the Respondent is liable to set aside in so far as the impugned order made by the Respondent Officer is irregular, incorrect, improper, unlawful and is opposed to facts of the case and law. 2. The Learned Commissioner of Income Tax (Appeals) erred in upholding the validity of the impugned proceedings by the Respondent Assessing Office .....

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CIT (Appeals) erred in holding that the Dr. Nayeema Khan Trust had income of ₹ 5,47,561/- which is assessable in the A.Y.1993-94 disregarding the provisions of Section 5 r.w.s. 145 (1) of the Income Tax Act, 1961. 5. The Learned CIT (Appeals) erred in upholding the addition of ₹ 3,65,040/- made by the Respondent Officer to the Total Income of the Appellant u/s 64 (l)(a) of the Income Tax Act, 1961 when in fact the provisions of Section 64 has no application in the instant case. 6. Th .....

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facto becomes the income taxable in the hands of the beneficiaries which in turn is liable to addition to the total income of the parents of minor beneficiaries u/s 64(1)(a) of the Act with complete disregard to the provisions Section 160(1)(iv) rws 161(1) of the Income Tax Act,1961. 8. The Learned CIT (Appeals) erred in upholding the interest of ₹ 1,19,230/- levied by the Respondent u/s 234A of the Act. 9. The Learned CIT (Appeals) erred in upholding the interest of ₹ 1,58,973/- le .....

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e is a partner along with her husband, Mr. Maqsood Ahmed. The children of the partners viz., Master Mohamed Iqbal, Ms. Nadia Ahmed and Master Mohamed Jesim have been admitted to the benefits of partnership. It was also provided in the partnership deed that benefits of partnership shall be distributed among the partners and 3 beneficiaries in equal shares of 1/5th of the profit of the firm. The partnership firm was dissolved on 11.07.1989 and it was provided that all the 5 partners would possess .....

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n Trust for computing the income from property at 29, Cunningham Road. The income was reduced on account of interest on principal and compounded at the accumulated figure of loan amount from Dr. Nayeema Khan Trust. The AO further noted that Dr. Nayeema Khan Trust had filed return of income for the AYs 1990-91 & 1991-92 on account of interest received from INJ Enterprises, but return was not filed for subsequent years as no interest income was received by the trust. 4. The AO further noted th .....

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during the relevant previous year. 5. The assessee preferred an appeal before the CIT(Appeals) against the assessment order, but did not find favour with him and again appeal was filed before the Tribunal and the Tribunal has held that the arrangement amounted to payment and receipt of amount by the same person in different capacities. It was further held that interest expenses in the hands of appellant was to be treated as paid to the trustee or to herself and income accrued to the minor childr .....

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de provisions for payment of interest in the Return filed by her, and if the interest paid by the assessee is taken into account of the Trust, in the next assessment year or in subsequent years, it is for the Revenue to compare both the accounts and pass appropriate order, in order to find out whether the interest shown in the return of income is reflected in the accounts of the Trust. 7. Accordingly, the matter was remanded back to the AO and he has called for the details of interest claimed in .....

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was added to appellant s income. 8. Thereafter, the appellant has filed appeals before the CIT(Appeals) disputing the additions and the CIT(Appeals) further re-examined the claim of assessee in the light of directions of the Hon ble High Court and confirmed the additions. The relevant observations of the CIT(Appeals) is extracted hereunder for the sake of reference:- The undisputed facts are that two beneficiaries out of the three in Dr. Nayeema Khan Trust were minors. All the three beneficiarie .....

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ing: (a) Manilal Dhanji v. CIT[1962] 44 ITR 876 (SC) (b) Yogindraprasad N. Mafatlal v CIT [1977] 109 ITR 602 (Bom) (c) CIT v D.V. Narasimhan [1992]196 ITR 499 (Kar) In the case of CIT v Manilal Dhanji(supra), the assessee had set up a trust in respect of ₹ 25,000/- of which the trustees included his wife, his brother and himself. The scheme of the trust deed provided that interest on the sum of ₹ 25,000/- should be accumulated and added to the corpus. On attaining the age of 18 years .....

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(3) of the Income-tax Act of 1922. Therefore, it would not be correct to apply the ratio of this case to a taxing issue covered under the Income Tax Act of 1961. In Yogindraprasad N. Mafatlal v CIT(supra), the assessee, an individual, created three separate trusts by three deeds executed by him on the same day in favour of his three minor daughters. In the relevant accounting year, all the three daughters were minors and unmarried. The trustees to whom the shares constituting the trust fund were .....

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majority and during that period the accruing income had to the accumulated and added on to the corpus of the trust fund. The scheme of the trust deeds, therefore, appeared to be that so long as all the three daughters were minors, the income under each of the deeds was accumulated for the benefit of the principal of beneficiary concerned when she attained majority. The Court held that the instant case was a case of a single transfer of interest to minor daughters upon condition of their attainin .....

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assessee as section 64(v) would be clearly inapplicable. This case is distinguishable from the present case as in the present case there was no such provision for obligatory accumulation till majority of the beneficiaries. It was left to the discretion of the trustees whether to add entire income of a year to the corpus or to spend any part of the income for the welfare of the beneficiaries such as education and general welfare of the beneficiaries in the ratio specified under the Trust. In CIT .....

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aries, the ratio does not apply to the present case. 10. The appellant has in written submissions dated 06.12.2016, it has been submitted that she was agreeable to an addition of Rs, 1,99,360/- in assessment years 1993-94 and 1994-95 or buying peace and in consonance with the assessment for assessment years 1995-96 to 2004-05 wherein assessments were made in the case of Dr. Nayeema Khan Trust in respect of the income of beneficiaries, each of whom was assessed at ₹ 99,980/- The assessments .....

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e relevant previous year. The same amount has been taken as basis for computing income in the hands of the beneficiaries having 1/3rd share each. Out of it, the two beneficiaries were minors and therefore the assessing officer has arrived at an income of ₹ 3,65,040/- as income includable under section 64(1A) of the Act. As the income of the Trust depends on the claim of expenditure made by the co-owners, the working of assessing officer in the assessment order is fair and reasonable. In vi .....

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considered by various authorities up to the High Court in the previous round of proceedings. It was in this context, the Hon'ble High court of Karnataka in order dated 17.03.2010 had directed the assessing officer to compare the interest paid by the appellant with the interest income reflected in the accounts of Dr. Nayeema Khan Trust and complete the assessment accordingly. The present assessment order has been framed in accordance with the directions of the Hon'ble Court as discussed .....

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