ACIT, New Delhi V. Shri Sanjay Sethi, New Delhi

ITA 1652/DEL/2011

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 3130 (ITAT-DELHI)
• Duration Of Justice: 6 year(s) 8 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-12-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 28-06-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 05-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KAUSHLENDRA TIWARI
• Keywords: Salary income; Capital receipt

Judgement Text

PAGE | 1 INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G : NEW DELHI BEFORE SHRI H.S.SIDHU , JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 1652/DEL/2011 (ASSESSMENT YEAR: 2007 - 08 ) ACIT , CIRCLE - 46(1), ROOM NO. 425A, 4 TH FLOOR, MAYUR BHAWAN, NEW DELHI VS. SANJAY SETHI, B - 80, SARVODAYA ENCLAVE, NEW DELHI PAN:ANRPS4525N (APPELLANT) (RESPONDENT) REVENUE BY : SHRI KAUSHLENDRA TIWARI, SR. DR ASSESSEE BY: SHRI PRAMOD JAIN, CA DATE OF HEARING 25 /09/2017 DATE OF PRONOUNCEMENT 1 3 / 1 2 /2017 O R D E R PER PRASHANT MAHARISHI , A. M. 1. THIS APPEAL IS PREFERRED BY ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 46 (1), NEW DELHI (HEREINAFTER REFERRED TO AS THE L D ASSESSING OFFICER ) AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - XXX, NEW DELHI DATED 25/01/2011 FOR ASSESSMENT YEAR 2007 - 08 IN CASE OF THE ASSESSEE WHERE THE ADDITION OF RS. 888383 1 / - WAS DELETED. THE LD. ASSESSING OFFICER HAS RAISED FOLLOWING GROUND S OF APPEAL BEFORE US: - (I) DELETING THE ADDITION OF RS '88,83,831/ - RIGHTLY MADE BY THE AO ON ACCOUNT OF PROFIT IN LIEU OF SALARY U/S 17(3)(II) OF THE IT ACT, 1961; NOT CONSIDERING THE FACT THAT (A) THE TRUST WAS ESTABLISHED BY THE SETTLER/EMPLOYER CO MPANY FOR THE WELFARE OF THE EMPLOYEES ONLY, (B) THE OBJECTIVES OF THE TRUST MAKE IT AMPLY CLEAR THAT THE SUM RECEIVED BY THE ASSESSEE IS NOTHING BUT A REWARD FOR EMPLOYMENT WITH THE EMPLOYER/SETTLER COMPANY AND (C) THAT THE CONNECTION OF THE ASSESSEE WITH THE TRUST WAS ONLY ON ACCOUNT OF HIS CONNECTION WITH THE EMPLOYER COMPANY; (II) HOLDING THAT THE TRUST IS A DISCRETIONARY TRUST WITHOUT CONSIDERING THE DISCUSSION MADE BY THE AO IN THE ASSESSMENT ORDER IN POINT NO. I OF SUB PARA 3.1 WHICH MAKES IT CLEAR T HAT THE TRUST IS A SPECIFIC OR DETERMINATE TRUST AND NOT A DISCRETIONARY TRUST SINCE ALL THE BENEFICIARIES OF THE TRUST ARE SPECIALLY KNOWN AND DETERMINATE AND THE TRUST DEED NO WHERE MENTIONED THAT THE INCOME OF THE TRUST WAS TO BE DISTRIBUTED ON THE COMP LETE DISCRETION OF THE TRUSTEES; (III) NOT CONSIDERING THE FACT THAT THE AMOUNT OF RS. 88,83,8317 - IS TAXABLE IN THE HANDS OF THE ASSESSEE AS (A) IN THE RELEVANT COMPUTATION OF INCOME, THE TRUST HAS DECLARED INCOME IN THE INCOME & EXPENDITURE ACCOUNT POST DISTRIBUTION TO THE BENEFICIARIES AND HENCE THIS IS NOT A CASE OF DOUBLE TAXATION OR DOUBLE ASSESSMENT, (B) THE ASSESSEE ACIT VS SANJAY SETHI, ITA NO. 1652/DEL/2011 (ASSESSMENT YEAR: 2007 - 08) PAGE | 2 IS THE RIGHT PERSON TO BE TAXED FOR THE SAID AMOUNT SINCE HIS SHARE IS DETERMINATE & (C) THE SAID INCOME OF THE ASSESSEE FALLS WITHIN T HE SCOPE OF SECTION 5 OF THE ACT AND CHARGEABLE TO TAX U/S 4 OF THE IT ACT, 1961. 2. THE BRIEF FACTS OF THE CASE SHOWS THAT ASSESSEE IS AN INDIVIDUAL EARNING SALARY INCOME. FOR THE YEAR , HE FILED HIS RETURN OF INCOME ON 31/7/2007 DECLARING TOTAL INCOME OF RS. 4 925510/ - . DURING THE COURSE OF ASSESSMENT PROCEEDINGS ON VERIFICATION OF THE BANK ACCOUNT OF THE ASSESSEE, LD. ASSESSING OFFICER FOUND THAT RS. 8883831/ - HAD BEEN DEPOSITED IN THE HDFC BANK ACCOUNT OF THE ASSESSEE ON 16/01/2007. THE ASSESSEE WAS ASKED TO EXPLAIN THE DETAIL OF THE ABOVE AMOUNT WHICH WAS TREATED BY ASSESSEE AS A CAPITAL RECEIPT. BEFORE THE LD. ASSESSING OFFICER THE ASSESSEE EXPLAINED THAT ASSESSEE IS A BENEFICIARY OF A DISCRETI ONARY TRUST OF THE EMPLOYEES WELFARE TRUST OF THE EMPLOYER. DURING THE YEAR , THE TRUSTEES OF THE TRUST HAVE DISTRIBUTED THE AMOUNT TO THE ASSESSEE AS A BENEFICIARY. THE TRUST HAS ALREADY DISCHARGED ITS OBLIGATION UNDER THE INCOME TAX ACT BY PAYING THE TAX AT THE APPROPRIATE RATE ON THE INCOME EARNED BY THE TRUST. THE ASSESSEE STATED THAT AS A BENEFICIARY HE HAS RECEIVED THE ABOVE SUM BEING PART OF THE DISTRIBUTION MADE BY THE TRUSTEES TO THE BENEFICIARIES OF THE TRUST AND THEREFORE SAME IS A CAPITAL RECEIPT AND NOT CHARGEABLE TO TAX . 3. THE LD . ASSESSING OFFICER REJECTED THE CONTENTION OF THE ASSESSEE AND HELD THAT ABOVE SUM RECEIVED IS CHARGEABLE TO TAX WITHIN THE SCOPE OF PROVISIONS OF SECTION 17 (3) (II) OF THE ACT AND THUS OF THE NATURE OF PROFITS IN LIEU OF SALARY . ACCORDING TO HIM THE SAID SUM OF RS. RS. 8883831/ - IS CHARGEABLE TO TAX. THEREFORE, THE TOTAL INCOME OF THE ASSESSEE WAS ASSESSED THAT RS. 13809341/ - AGAINST THE R ETURNED INCOME OF RS. 4 925510/ - WHEREIN THE ADDITION OF RS. 8883831/ - HAS BEEN M ADE VIDE ASSESSMENT ORDER DATED 30/12/2009 PASSED UNDER SECTION 143 (3) OF THE INCOME TAX ACT , 1961. 4. AGGRIEVED, WITH THE ORDER OF THE LD. AO THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. FIRST APPELLATE AUTHORITY VIDE ORDER DATED 25/01/2011 , THE ABOVE ADDITION WAS DELETED THEREFORE , REVENUE IS IN APPEAL BEFORE US. 5. THE LD. DEPARTMENTAL REPRESENTATIVE RELIED UPON THE ORDER LD. AO 6. THE LD. AUTHORISED REPRESENTATIVE FILED A PAPER BOOK CONTAINING 68 PAGES AND VEHEMENTLY RELIED UPON THE ORDER OF THE LD. CIT (A). HE FURTHER STATED THAT ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE COORDINATE BENCH IN CASE OF ITA NO. 1651/ DEL /2011 , WHEREIN THE ADDITION HAS BEEN DELETED FOLLOWING THE DECISION OF THE HONBLE SUPREME COURT IN THE C ASE OF CIT V S. KAMALINI KHATAU 209 ITR 101. 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTION AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES. THE IDENTICAL ISSUE AROSE IN CASE OF MR MANU KHOCHAR IN ITA NO. 1651/ DEL /2011 ACIT VS SANJAY SETHI, ITA NO. 1652/DEL/2011 (ASSESSMENT YEAR: 2007 - 08) PAGE | 3 FOR ASSESSMENT YEAR 2007 - 08 WHEREI N V IDE ORDER DATED 27/04/2017 , COORDINATE BENCH HAS DELETED THE ADDITION IN THE HANDS OF THAT ASSESSEE ON THE IDENTICAL FACTS AND CIRCUMSTANCES OF THE CASE. THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF THE COORDINATE BENCH, WE FIND NO INFIRMITY IN THE ORDER OF THE LD . CIT (A) IN DELETING THE IMPUGNED ADDITION. IN THE RESULT ALL THE THREE GROUNDS RAISED BY THE LD . ASSESSING OFFICER , WITH RESPECT TO THE TAXATION OF RS. 8883831/ - OF THE DISTRIBUTION FROM THE BENEFICIARY TRUST TAXED BY THE LD. ASSESSING OF FICER UNDER SECTION 17(3)(II) OF THE ACT . 8. IN THE RESULT APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 1 3 / 1 2 /2017. - S D / - - S D / - ( H.S.SIDHU ) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 1 3 / 12 /2017 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI