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TMI Blog2021 (8) TMI 599X X X X Extracts X X X X X X X X Extracts X X X X ..... confirming the action of the Assessing Officer in making an addition of Rs. 9,66,170/- by holding that the share of the beneficiaries is taxable in the hands of the assessee trust. 3. The fact in brief is that the assessee has filed return of income declaring total income at Rs. nil on 11 Sep, 2015. The case was subject to scrutiny assessment and notice u/s. 143(2) of the Act was issued on 2nd August, 2016. During the course assessment, the Assessing Officer noticed that assessee is an association of persons and as per the disclosures made in the note to computation of income filed by the assessee, income earned by the assessee shall be charged to tax in the hands of the beneficiaries. During the year, the assessee trust earned interest ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld. Departmental Representative could not controvert this undisputed fact that similar issue on identical facts has been adjudicated by the Co-ordinate bench of the ITAT in favour of the assessee. 6. Heard both the sides and perused the material on record. The assessee is a special purpose trust created for the benefit of its beneficiaries and there were 38 members who were having definite shares as beneficiaries in the trust. During the course of assessment proceedings, the assessee has submitted that the shares of the persons who are entitled to are determinate and known and the recipients are only to be subjected to tax. It is also submitted that the trust in fact is only escrow mechanism in the form of specific trust created for the pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the payment was not made by the assessee due to some dispute. As the payment was not made by the trust to the beneficiaries amounting to Rs. 15,54,245/- the AO treated such amount as income of the assessee which was subsequently confirmed by the learned CIT(A). 15. However, in our considered view the revenue has taken contradictory stand by taxing the share of beneficiaries who have not claimed in the hands of the trust and allowing the deduction to the trust for the amount of share of the beneficiaries who have accepted the same. In our humble understanding, the revenue cannot pick and choose certain amount representing the share of the beneficiary's and tax in the hands of the trust and simultaneously not charging the tax in the h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of each Beneficiary; such trust shall be a determinate trust. 5.3 As per section 164(1), if the trust does not satisfy the above test of determinacy, then the income of trust would be chargeable to Maximum Marginal Rate (MMR), subject to certain exceptions as laid down in the section. However, if the trust satisfies the test, then the trust will be treated as "pass through" conduit subject to the provisions of section 160 of the IT Act. By virtue of section 160 of the IT Act, the ITD has an option to assess the tax in the hands of the beneficiary or in the hands of the trustee, as the case may be. Section 160 lays down the meaning of representative assessee who shall be deemed to be an assessee for the purposes of the IT Act. Section 160 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee being a trust in the present case cannot be chargeable to tax merely on the ground that the beneficiaries have not claimed their amount of share from the trust. As such the assessee in its books accounts has made the provisions for the amount payable to beneficiaries as per the mercantile system of accounting. The entries shown in the books of accounts have not been doubted by the authorities below. Accordingly we are not convinced with the finding of the authorities below. Hence we set aside the order of the learned CIT(A) and direct the AO to delete the addition made by him. Thus the ground of appeal of the assessee is allowed." It is noticed that same group of beneficiaries comprising of five members have also not claimed their ..... X X X X Extracts X X X X X X X X Extracts X X X X
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