Latest Expert Exchange Queries
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
 
 
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Service Tax | Sales Tax | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Indirect Tax | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing
 
 
 
 
Popular Search: form 3cd :: ACCOUNTING STANDARD :: TDS :: ACCOUNTING STANDARDS :: empanelment :: cpt :: VAT Audit :: articles on VAT and GST in India :: TAX RATES - GOODS TAXABLE @ 4% :: VAT RATES :: Central Excise rule to resale the machines to a new company :: list of goods taxed at 4% :: ARTICLES ON INPUT TAX CREDIT IN VAT :: due date for vat payment :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes
 
 
From the Courts »
  Vatsala Shenoy vs. JCIT (Supreme Court)
  Vatsala Shenoy vs. JCIT (Supreme Court)
 M.K.Overseas Pvt. Ltd. Vs. Pr.Commissioner Of Income Tax-06
 Arshia Ahmed Qureshi Vs. Pr. Commissioner Of Income Tax-21
 CHAUDHARY SKIN TRADING COMPANY Vs. PR. COMMISSIONER OF INCOME TAX-21
  Sushila Devi vs. CIT (Delhi High Court)
  Vatsala Shenoy vs. JCIT (Supreme Court)
 Deputy Director Of Income Tax Vs. Virage Logic International
 Commissioner Of Income Tax-3 International Taxation Vs. Virage Logic International India
 Pr. Commissioner Of Income Tax-06 Vs. Moderate Leasing And Capital Services Pvt. Ltd.
 ITO vs. Vikram A. Pradhan (ITAT Mumbai)

Smt. Alpana Kirloskar New Delhi. Vs. ACIT Circle 31(1), 26, Ferozshah Road, New Delhi-110001.
May, 01st 2014
            IN THE INCOME TAX APPELLATE TRIBUNAL
                  DELHI BENCH "A" NEW DELHI
           BEFORE SHRI R.P. TOLANI: JUDICIAL MEMBER
                                AND
             SHRI J.S. REDDY : ACCOUNTANT MEMBER

                         ITA No. 2670/Del/2013
                         Asstt. Yr: 2009-10
Smt. Alpana Kirloskar                 Vs. ACIT Circle 31(1),
26, Ferozshah Road,                         New Delhi.
New Delhi-110001.
PAN: AARPK 0165 B

( Appellant )                               ( Respondent )

            Appellant by       :      Shri H. Mittar CA
            Respondent by      :      Ms. Y. Kakkar Sr. DR

                   Date of Hearing: 05-02-2014
                   Date of order:   28th April, 2014.


                                ORDER

PER R.P. TOLANI, J.M::


      This is assessee's appeal against the order dated 28-02-2013 passed by
the ld. CIT(A)-XXVI, New Delhi in appeal no. 412/2011-12, pertaining to A.Y.
2009-10. Assessee has challenged the levy of income tax again on beneficial
share received from a private discretionary " Fair Value Trust" which is already
assessed by department at maximum marginal rate u/s 164.
2.    Various repetitive issues are raised, the controversy can be addressed by
one of the ground raised which is as follows:
      (1) The learned AO having made the addition of Rs.
      99,50,000/- u/s 56(2)(vi) holding the same as gift without
      consideration received by the appellant from the trust and not
      by exercising his option to assess the appellant as beneficiary
      u/s 166 or otherwise, in respect of share of income received by
      the appellant as a beneficial owner under the trust instead of
                                        2                           ITA 2670/Del/2013
                                                                  Smt. Alpana Kirloskar



       assessing the same in the hands of the trustees as a
       representative assessee u/s 161, the action of the learned
       Commissioner (Appeals) in holding that the AO had assessed
       the income not u/s 56(2)(vi) but as normal income u/s 166 or
       otherwise and in confirming the addition on the ground that
       section 56(2) had been inadvertently mentioned by the AO is
       entirely wrong on facts and in law and the addition made u/s
       56(2)(vi) should have been deleted."

3.     Brief facts are: The assessee is one of the beneficiaries of a private
discretionary trust, known as "Fair Value Trust" ("FVT"), which has been
settled way back on 11-12-20000. The trust's income is from dividends,
which are exempt in this year under sec 10(34 ). As the nomenclature of the
trust suggests, the shares of the beneficiaries are indeterminate and trust
income is distributed among the respective beneficiaries at the end of the
year as per the discretion of trustees. The said FVT submitted its return of
income at Pune, offering the exempt dividend income. As already mentioned
the private discretionary trust income is assessed at maximum marginal rate
u/s 164 in the hands of the trustees as provided by sec. 164 vide assessment
order for impugned AY dated 23-03-2011.
3.1.   In this year the assessee received her beneficial share out of said
dividend income of the trust, amounting of Rs. 1 crores and claimed it as
exempt u/s 10(34) having been already taxed in the hands of the trustees u/s
164. During the course of assessment proceedings ld. AO however, issued
show cause notice to explain how this income was claimed as exempt.
Assessee vide its reply dated 2-12-2011 submitted as under:

       "Brief note on the taxability of Rs. 1 Crore received from
       Fairvalue Trust along with the copy of Trust Deed and specific
       provision under which this income has been treated as exempt
       in the hands of the recipient is desired.

       A detailed note on distribution of Rs. 1 Crore received during
       the year from Fair Value Trust has already been submitted in
                                         3                              ITA 2670/Del/2013
                                                                      Smt. Alpana Kirloskar



       my letter dated 15.11.2011. Your good self has wrongly
       interpreted that distribution is an income of beneficiary
       whereas distribution is out of Trust Fund. Income of trust has
       already been offered for tax per provisions of Income Tax Act
       1961 in respect of income of private discretionary Trust where
       share of beneficiaries are indeterminate and not specified in
       Trust instrument. Copy of Trust deed dated 11.12.2000 is
       enclosed which shows that as per clause l.2(iii) myself being
       wife of Sh. Kirloskar is a beneficiary and my share is not
       defined in the trust instrument.




       As per provisions of Section 164(1) Trustees as 'Representative
       Assessee' u/s 160(1)(iv) of Fairvalue Trust has submitted its
       return of income showing taxable income of Trust and paid tax
       at Maximum Marginal Rate of tax. Copy of return of income of
       Fairvalue Trust has already been submitted along with my
       letter dated 15.11.2011. As explained above, my share in
       Income from Fairvalue Trust as a beneficiary has already been
       taxed as per provisions of Income Tax Act, 1961. Distribution
       of surplus fund of Rs. 1 Crore is not an income hence it is not
       taxable.

3.2.   AO, however, was of the view that 164 interpretation provided that it
is only when no income is distributed amongst the beneficiaries by a private
discretionary trust then the trust income is taxable in the hands of the trust as
a separate taxable entity. However, when the surplus is distributed by such
trust, the receipt in the hands of beneficiary will be taxable as it becomes
"income from other sources" in the hands of the beneficiary. Therefore, it
was held to be in the nature of "income from other sources" in the hands of
the assessee in terms of sec. 56(2)(vi). Further, since the trust does not fall
within the meaning of the term `relative' as provided in the explanation
thereto, the same was taxed as taxable gift after giving a statutory deduction
of Rs. 50,000/-. Thus, the resultant beneficial share amounting to Rs.
99,50,000/- was added and taxed in the hands of the assessee. While doing
so ld. AO relied on various judgments mentioned in his order.
                                          4                              ITA 2670/Del/2013
                                                                       Smt. Alpana Kirloskar



3.3.   Aggrieved, assessee preferred first appeal before the CIT(A), raising
mainly following contentions:

       (i)     The FVT was a discretionary trust in as much the share of
       individual beneficiaries on whose behalf and for whose benefit the
       income was receivable were indeterminate and u/s 164(1), the tax
       was already charged to tax by department at the maximum marginal
       rate in the hands of the trustees as representing the beneficiaries. Thus
       the option of taxing the trust income in the hands of trustees stands
       already exercised by the department.

       (ii) Apart from exercising the option of directly taxing the income in
       the hands of FVT, in the case of another beneficiary of the same trust
       Shri Atul Kirloskar the beneficial share from the same trust has been
       exempted by accepting assesses claim that the income has been taxed
       in the hands of the trust. This is demonstrated by the return,
       computation and assessment order in Atul Kirloskar's case u/s 143(3)
       dated 1-12-2011. Both the assessment orders i.e. Trust and Shri Atul
       Kirloskar are passed before assessee's order. The action of assessing
       trust and beneficiaries income should be uniformly and correctly
       exercised for all the beneficiaries in a uniform manner and not at the
       whim and fancy of deferent officers assessing them.

       (iii)   The income distributed by the trust was the income received by
       the trustees for and on behalf and for the benefit of beneficiaries and
       the trustees were assessable only as 'representative assessees' on
       behalf of the beneficiaries in respect such income. Such receipt could
       not by any stretch of imagination be regarded as gift in the hands of
       beneficiary. The share from a fiduciary arrangement is received by
       the beneficiaries by virtue of the his/her rights as enshrined in the trust
                                  5                            ITA 2670/Del/2013
                                                             Smt. Alpana Kirloskar



deed along with provisions of Indian Trust Act and that it was not a
gratuitous receipt.

(iv)   The sum of Rs.1 crores received by the beneficiary (appellant)
was out of the trusts current year's total income i.e. Rs.20.84 crores,
which was received by way of dividend income, which is exempt u/s
10(34) of the Income-tax Act.

(v)    That the amount received being not a gift, the addition of this
amount as an alleged gift u/s 56 of the Income-tax Act was totally
illegal, baseless, erroneous and unsustainable.

(vi)   Without prejudice, even if it is held to be taxable income then
also for any reason the impugned addition, even otherwise is wholly
illegal and totally unwarranted in law and on facts. The income being
received under the trust for and on behalf of and for the benefit of the
beneficiaries could be assessed in accordance with the provisions of
section 161 to 166 of the Income-tax Act. An income which is
exempt in the hands of trust, on distribution, its share cannot be held
as taxable in the hands of beneficiary as it is part of the exempt
income.

(vii) U/s 166 of the Income-tax Act the revenue has an option to
assess the income either in the hands of the trustees as representative
assessees or directly in the hands of the beneficiary. The trustees has
been already assessed prior to beneficiaries assessment, as evidenced
by the aforementioned order of the trust, there is no provision in the
Act to review the option by beneficiary's AO, Besides there is no loss
to the revenue whether the income was assessed in the hands of the
trustees as representative assessees or in the hands of the individual
                                   6                          ITA 2670/Del/2013
                                                            Smt. Alpana Kirloskar



beneficiaries as in both cases same provisions about maximum
marginal rate and exemption u/s 10(34) are applicable . The revenue
in all the earlier assessment years, has adopted this course of action
and exercised the option of assessing the entire trust income in the
hands of trustees and allowing claim of exemption of dividend income
and direct assessment has been made on the beneficiaries. The
exercise of option has been already exercised by department, which
cannot be reviewed under any provision of the Act. In the garb of
interpretation of sec 164 and 166 which is contrary to CBDT circulars
and settled legal position AO has taken a somersault and added the
income once again in the hands of assessee. This has resulted in
double assessment of the same very income which is wholly illegal,
unsustainable and unwarranted and also contrary to the Board's
Circular   No.    157    (F.No.228/8/73-IT(A-II)   dated   26.12.1974
specifically provided for this situation.

(viii) Without prejudice and even assuming for the sake of argument
that the income was directly taxable in the hands of the beneficiary
[appellant], the learned A.O. failed to appreciate that the income
distributed amongst the beneficiaries comprised of exempt dividend
income of Rs.20.84 crores. This income would be wholly exempt u/s
10(34) in the hands of beneficiaries also. Even if the fantastic
interpretation of AO is considered in any event the deduction u/s
10(34) in respect of exempt dividend income cannot be denied.

(ix)   The various decisions referred to by the learned A.O. were
mostly rendered before the amendment of section 164(1) by the
Finance Act, 1980 which provided that instead of tax being charged in
the slab rate applicable to Association of Persons, the rate chargeable
was prescribed as maximum marginal rate which was most beneficial
                                   7                           ITA 2670/Del/2013
                                                             Smt. Alpana Kirloskar



to the revenue. The issue, therefore, has to be read and understood in
the light of the amendment.

(x)    In all the past years income of the Fair Value Trust has been
consistently assessed directly in the hands of trustees and the share of
income as and when received by the beneficiaries including the
appellant has not been assessed as exempt in their hands since the
setting up of the Trust.

(xi)   During the assessment proceedings for assessment year 2006-
07, this very issue was raised by the learned A.O. and after
considering the assessee explanation about the share being exempt in
view of above submissions the assessment was completed u/s 143(3}
by treating the beneficial share income from dividends earned by
trust amounting to Rs.4 crores received on distribution by assessee as
exempt. This order is placed on record. Thus apart from the merits
assesses case is covered by principles of `rule of consistency'
enshrined by the courts which has been violated by the learned A.O.
despite there being absolutely no difference in facts and circumstances
of the case. On this score also the observations/findings of the learned
A.O. are liable to be set-aside.
(xii) The learned A.O. has illegally assessed this amount under the
head "Other Sources" under section 56(2)(vi} holding that the
beneficial receipt from trust as a gift. By any stretch of imagination
the beneficial share cannot be treated as a gift by the trust to the
appellant. This amount was received by the appellant by virtue of her
legal right as a beneficiary named in the Trust Deed. It is this very
income which has been assessed to tax in the hands of the trustees as
representative assessee at maximum marginal rate of tax. There is not
                                  8                              ITA 2670/Del/2013
                                                               Smt. Alpana Kirloskar



a single case law or an authority to support the view that the income
received by beneficiary from a trust constituted a Gift.
(xiii) Without prejudice, even if the stand of the learned A.O. is
accepted that the beneficiaries could be directly assessed is accepted,
the dispute still remains only of academic interest. As perusal of
statement of accounts of the Fair Value Trust would show the trust
had derived only dividend income which was exempt from tax u/s
10(34) which has been distributed among beneficiaries. Even for the
sake of argument if this income is again directly sought to be assessed
in the hands of the beneficiaries, the same is still covered by
exemption u/s 10(34). The income whether assessed in the hands of
the trust or beneficiaries, retain the same character as assessable in the
hands of the trust. While directly assessing the beneficiaries in respect
of the income received by them on distribution, the amount of
dividend included therein is eligible for deduction/exemption in the
same manner as would have been done had the trustees been assessed
in respect of such amount. In this connection, reliance is placed upon
the decision of Hon'ble Gujrat High Court in CIT vs. (1) Dr. Anand
Sarabhai, (2) Executors and trustees of Dr. Vikram Sarabhai reported
in (1998) 231 ITR 529 which is on all the fours with the case of the
appellant. Therefore, even if the income is to be taxed in the hands of
the appellant, the same would be Nil in view of the exemption u/s
10(34) of dividend income. The appellant's claim is that even if the
inclusion of Rs. l crore in the hands of the appellant for any reason is
upheld, the exemption of Rs. l crores representing the exemption of
dividend income may kindly be allowed leaving the taxable amount of
Rs. l crore at Nil.
(xiv) It is well settled that there cannot be double assessment of the
same income. Income having been taxed and tax having been paid in
                                          9                              ITA 2670/Del/2013
                                                                       Smt. Alpana Kirloskar



         the hands of the trust at maximum marginal rate the same income
         could not again be brought to tax in the hands of the appellant. Double
         assessment is barred by law. Circular No.157 dated 26.12.1974
         reproduced in (1975) 98 ITR Statute 41, was relied on.
3.4.     Besides, above submissions before ld. CIT(A), assessee filed
additional evidence which was duly admitted by him and a remand report
was called from AO. The assessing officer submitted remand report dated
5-10-2012 reiterating her stand. Assessee made following submissions
before ld. CIT(A).
3.5.     After considering the material available on record, ld. CIT(A) did not
agree with treating the beneficial income as gift but confirmed the addition
by holding:
   (1)      Law created a fiction that if the income of the trust is not
            distributed then it can be taxed in the hands of the beneficiaries.
            There was no impediment in taxing the beneficiary of a
            discretionary trust in this situation when the income is received by
            beneficiary.
   (2)      The law provided a protection to revenue by creating a fiction that
            the tax would be levied upon and recovered from right person in
            right manner and to the same extent as it would be leviable upon
            and recoverable from the person represented by trustees.
   (3)      Relying on the judgments in the cases of CIT Vs. Kamalini Khatau
            (1994) 209 ITR 101 (SC); and CIT Vs. Dr. Anand Sarabhai Trust
            (1998) 231 ITR 524 (SC), it was held that these judgments
            supported the above interpretation.
   (4)      It was a settled law that revenue had a clear option to assess and
            recover tax either from trustees or from the beneficiaries of a
            discretionary trust in respect of income which has been distributed
            and received by the beneficiaries. AO's order was thus upheld by
                                               10                          ITA 2670/Del/2013
                                                                         Smt. Alpana Kirloskar



                 holding that assessing officer had invoked right sections while
                 taxing the beneficial shares in assessee's hands.
     (5)         Thus, AO's application of sec. 56(2) was held to be inadvertent and
                 not tenable. AO's order was upheld qua the applicability of sec.
                 164 as interpreted by him and the reference to sec. 56(2) was held
                 to be inapplicable.
3.6.       Aggrieved, assessee is before us.

4.         Ld. Counsel for the assessee vehemently argues that it has not been
disputed by department that the FVT has been assessed to tax at Pune prior
to the assessment of the assessee. This clearly indicates that the department
has already exercised the option u/s 164 of assessing the trust income in the
hands of the trust/ trustees at the maximum marginal rate as provided u/s
164. Once that option is exercised by revenue then in the case of all the
beneficiaries its consequence will apply as a natural corollary. There is
absolutely no substance in the stand of the lower authorities that even though
the entire income of the trust has been assessed in the hands of the trustees
at maximum marginal rate still the option of sec. 164 remains open with the
department to again assess the beneficial share at the will and desire of the
AO in case of each beneficiary respectively. The stand is self contradictory,
illegal and against the circulated stand of the CBDT.
4.1.       Thus, FVT having already been assessed at the maximum marginal
rate and the consequent assessment in the hands of Shri Atul Kirloskar
treating the beneficial share from same trust as exempt, the statutory option
of taxing u/s 164 stands foreclosed qua the assessee. To demonstrate his
point, our attention was invited to P.B. from the assessment orders are
passed as under:
           (i)      Fair Value Trust u/s 143(1) by ACIT Pune dated 23-3-2011.
                                        11                             ITA 2670/Del/2013
                                                                     Smt. Alpana Kirloskar



       (ii)    Another beneficiary Shri Atul Kirloskar, assessed by ACIT
       Circle 9, Pune u/s 143(3) vide order dated 1-12-2011 for the same
       year. By this order the beneficial share of Rs. 4 crores received from
       FVT has been accepted to be exempt.
       (iii)   Assessment in assessee's on 29-12-2011.
4.2.   Ld. Counsel for the assessee contends that if the department's
assessments action is holistically taken it demonstrates a totally absurd and
harsh approach adopted in the case of the assessee. In the FVT trust case, the
entire trust income is assessed as per law i.e. u/s 164. The option provided
by sec. 164 is thus clearly exercised by department in this manner. Section
164 does not provide that option once exercised, can be reviewed or reopted
by any officer assessing respective beneficiaries. Besides, the option cannot
be changed from one beneficiary to other beneficiary. On this account itself
the action of the department deserves to be quashed.
4.3.   Ld. Counsel further submitted         that the action is contrary to the
Board's Circulars and settled case law on the subject. Reliance is placed on
the ratio of decision in the case of CIT vs. Gargiben Trust (1981( 130 ITR
479 (Bom) for the proposition that mode of assessment provided u/s 161 to
166 of the I.T. Act, 1961 is alternative to each other and once the ITO brings
to tax an income in the hands of the either trustees or the beneficiaries, the
same cannot be brought to tax in the hands of other person.
4.4.   It is pleaded that AO and CIT(A) both have wrongly applied the
decision of Hon'ble Supreme Court in the case of Kamalini Khatau (supra),
it rather helps the assessee `s case in as much as it also lays down that such
income can be either assessed in the hands of trust or beneficiary, it does not
authorize tax from both. It is clear from following observation:
       "We hold accordingly that the revenue had the option to assess
       and recover tax from either of the trustees or the beneficiaries
       of a discretionary trust in respect of such income thereof as has
       been distributed and received by the beneficiaries".
                                            12                            ITA 2670/Del/2013
                                                                        Smt. Alpana Kirloskar




4.5.     Further reliance is placed on:
         (i)      Jyotindera Sinhji vs. S.L. Tripathi & others (1993) 201 ITR 611
                  (SC), holding that revenue has option to tax income in the
                  hands of either the beneficiaries or trustees. Double taxation of
                  income in the hands of trust and beneficiary is not permissible.
         (ii)     Nagappa (CR) Vs. CIT (1969) 73 ITR 626, holding that there
                  cannot be assessment of the same income once in the hands of
                  the representative assessee and again in the hands of
                  beneficiary.
4.6.     It is alternatively submitted that assuming for the sake of argument
that the assessment was made u/s 166, the income received on distribution
by the trust included dividend income exempt u/s 10(34) of the I.T. Act. The
beneficial income to assessee being part of dividend income only same was
entitled to the exemption u/s 10(34) which has not been allowed by lower
authorities despite express provisions.
4.7.     Section 4 of the Income-tax Act is chargeable section and provides
that income tax shall be charged for any assessment year at the prescribed
rates in respect of total income of the previous year of every person. Section
5 defines the scope of total income and how the income has to be arrived at
in the case of the residents and non residents etc. Section 10 of the Act
provides that in computing the total income of the previous year of any
person, any income falling within clauses laid down therein shall not be
included. Dividend income is exempt u/s 10(34). Thus what is chargeable to
tax is the total income which excludes exempt income. In support, reliance
has been placed on following judgments for respective propositions:-
   (i)          Jyotindera Sinhji Vs. S.L. Tripathi & others (1993) 201 ITR 611
                (SC):
                                      13                            ITA 2670/Del/2013
                                                                  Smt. Alpana Kirloskar



        The ITO may, therefore, assess the person represented in respect of
        the income of the trust property and the appropriate provisions of
        Income-tax Act relating to computation of total income and the
        manner in which the income is to be computed will apply to that
        assessment.
        Apart from the rate of tax, the quantum of it can only be the same
        as in the case of beneficiary. Thus in the assessment of the trustees
        should be given all exemptions, abatements, deductions and relief
        that the beneficiary would have been entitled to had he been
        directly assessed.
(ii)    CIT vs. Saurin S. Jhaveri (2002) 257 ITR 160.
        Special deduction u/s 80C is available while computing the
        beneficiary share of income from the trust.
(iii)   CIT Vs. Bharti Devi Sarabhai (1998) 231 ITR 531 (Guj)
        The amount of dividend income received by the trustee which was
        allowable for deduction u/s 80K, when passed on to the beneficiary
        would nonetheless be eligible to the same deduction.
(iv)    CIT vs. Dr. Anand Sarabhai (1998) 231 ITR 529 (Guj)
        The deductibility u/s 80K of the amount of dividend or its part
        which is attributable to the profits and gains which the company is
        entitled to deduction u/s 80J would remain the same when
        computed either in the hands of the trustees or in the hands of the
        beneficiary. Such dividend income passed on by the trustees to the
        beneficiaries will still remain a dividend income in the hands of the
        beneficiaries if the department opts to directly assess the
        beneficiaries. Provisions of section 165 indicate that when part
        only of the income of the trust is chargeable under the Act, the
        beneficiary's share of income should be taken to be derived
                                          14                             ITA 2670/Del/2013
                                                                       Smt. Alpana Kirloskar






             proportionately from the chargeable and non chargeable portions
             of the trust income and should be assessed accordingly.
5.     Ld. DR, on the other hand, relied on the order of CIT(A) and further
relied upon the ratio of decisions in the cases of Moti Trust Vs. CIT 236 ITR
37(SC); and CIT Vs. Dr. Anand Sarabhai Trust 231 ITR 524 (SC).
6.     We have heard rival contentions and perused the material available
on record. The fact that the FVT was already assessed by the department at
Pune at the maximum marginal rate has not been denied by the ld. DR.
Similarly, the assessment in the case of another beneficiary of the same trust
Shri Atul Kirloskar having been finalized u/s 143(3) on 1-12-2011 i.e. prior
to the assessee's assessment dated 29-12-2011 also has not been disputed. In
his case, the beneficial share from the same trust has been allowed to be
exempt being already assessed in the hands of the trust.
6.1.   In these circumstances, in our considered view it clearly emerges that
the department has already exercised the option to tax the trust income
directly in the hands of trustees in terms of sections 161 to 166. The fact
that in the case of another beneficiary of the same trust for the same year
i.e. Shri Atul Kirloskar his beneficial income from trust has been held to be
exempt as not includible having been taxed in the hands of trust. Both these
assessments stand testimony to the fact that option has not only been
exercised by the department but it has been also implemented in the case of
other beneficiary. In view of these undisputed facts on record we see no
justification in assessing the amount of beneficial share from trust at Rs.
99,50,000/- in the hands of the assessee again for following reasons:
       (i)      The assessee's stand is correct that as per the scheme of
       assessment of private discretionary trust department has to opt
       whether to assesses the income in the hands of trust or beneficiaries.
       The option is clearly exercised first in the hands of trust as
       demonstrated by its assessment order. This is reconfirmed by the
                                         15                            ITA 2670/Del/2013
                                                                     Smt. Alpana Kirloskar



       assessment of Shri Atul Kirloskar. Thereafter department cannot take
       a course to review, reopt or rewrite what has been statutorily exercised
       and change its stand from beneficiary to beneficiary.
       (ii)    In any case it has not been disputed that entire trust income is
       from dividends exempt u/s 10(34) and what comes in the hands as
       beneficial share retains the same colour and is also exempt u/s 10(34).
       Our view is fortified by Hon'ble Supreme court judgment in the case
       of Jyotindera Sinhji and other case laws cited by assessee (supra).
       Therefore, alternatively also, the beneficial share being part of exempt
       dividend income, same is exempt from tax and is to be excluded while
       computing the assessee.
       (iii)   The action taken by the department is contrary to the settled
       scheme and interpretation of sections 161 to 164 and CBDT Circular.
       the Hon'ble Supreme Court judgment in the case of Kamalini Khatau
       (supra) does not support the proposition as applied by the revenue
       authorities. In our considered view these undisputed facts support the
       case of the assessee.
       (iv)    The rule of consistency favors the assessee, facts, circumstances
       and legal position remaining same and department having already
       accepted this position in assesses own case for AY 2006-07 u/s143(3),
       we see no reason to break the rule of consistency in this case. Our
       views are supported by Hon'ble Supreme court in the case of
       Radhsoami Satsang


6.2.   In view of the foregoing, on merits and on alternate submissions
assessee deserves to succeed. We, therefore, hold that the department having
already exercised the option to tax the income directly in the hands of the
trust, there is no provision to review the option taken in the case of trust and
                                        16                              ITA 2670/Del/2013
                                                                      Smt. Alpana Kirloskar



again to change the option from one beneficiary to another, the impugned
income is therefore held to be exempt in the hands of the assessee.


7.    In the result, assessee's appeal is allowed.
Order pronounced in open court on 28-04-2014.



       Sd/-                                                 Sd/-
( J.S. REDDY )                                       ( R.P. TOLANI )
ACCOUNTANT MEMBER                                    JUDICIAL MEMBER
Dated: 28-04-2014.
MP
Copy to :
   1. Assessee
   2. AO
   3. CIT
   4. CIT(A)
   5. DR
17     ITA 2670/Del/2013
     Smt. Alpana Kirloskar

 
 
Home | About Us | Terms and Conditions | Contact Us
Copyright 2016 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Software Outsourcing Company Offshore Software Outsourcing Software Outsourcing Company India Offshore Outsourcing Company India Software BPO Software Business Process Outsourcing Software Outsourcing India Offsho

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions