ITO, New Delhi V. Shri Ashok Dhadwal, New Delhi

ITA 2931/DEL/2011

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3389 (ITAT-DELHI)
• Duration Of Justice: 6 year(s) 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 03-05-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 03-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAVI KANT GUPTA SENIOR
• Assessee Lawyers: VIDUR PURI
• Keywords: Salary income; Maximum Marginal Rate

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH A : NEW DELHI) BEFORE HONBLE PRESIDENT, SHRI G.D. AGRAWAL AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.2919/DEL./2011 (ASSESSMENT YEAR : 2008-09) ACIT, CIRCLE 47 (1), VS. SHRI ANAAM MISHRA, NEW DELHI. S 226, 1 ST FLOOR, G.K. PART II, NEW DELHI. (PAN : AHOPM5098F) ITA NO.2931/DEL./2011 (ASSESSMENT YEAR : 2008-09) ITO,WARD 47 (1), VS. SHRI ASHOK DHADWAL, NEW DELHI. B 701, RAJASVA CGHS, DEFENCE APARTMENT, PLOT NO.33, SECTOR 4, DWARKA, NEW DELHI - 110 075. (PAN : AAJPD8079P) ITA NO.2932/DEL./2011 (ASSESSMENT YEAR : 2008-09) ITO, WARD 47 (1), VS. SHRI DEBAPRIYA DAM, NEW DELHI. 72, POCKET C, SECTOR A, VASANT KUNJ, NEW DELHI - 110 057. (PAN : AAJPD8079P) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI VIDUR PURI, CA REVENUE BY : SHRI RAVI KANT GUPTA, SENIOR DR DATE OF HEARING : 07.02.2018 DATE OF ORDER : 19.02.2018 O R D E R ITA NO.892 & 893/DEL./2016 2 PER KULDIP SINGH, JUDICIAL MEMBER : SINCE COMMON QUESTIONS OF FACTS AND LAW HAVE BEEN R AISED IN ALL THE AFORESAID APPEALS, THE SAME ARE BEING DI SPOSED OF BY WAY OF CONSOLIDATED ORDER TO AVOID REPETITION OF DISCUS SION. 2. THE APPELLANT, ACIT, CIRCLE 47 (1), NEW DELHI (H EREINAFTER REFERRED TO AS THE REVENUE) BY FILING THE PRESENT APPEAL BEARING ITA NO.2919/DEL/2011 AND THE APPELLANT, ITO, WARD 4 7 (1), NEW DELHI (HEREINAFTER REFERRED TO AS THE REVENUE) BY FILING THE PRESENT APPEALS BEARING ITA NOS.2931/DEL/2011 & 293 2/DEL/2011, SOUGHT TO SET ASIDE THE IMPUGNED ORDERS ALL DATED 2 9.03.2011 PASSED BY LD. CIT (APPEALS)-XXX, NEW DELHI ON THE S IMILAR GROUNDS, EXCEPT THE DIFFERENCE IN THE ADDITION, INT ER ALIA THAT :- ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) HAS ERRED IN : (I) DELETING THE ADDITIONS (RS.62,61,745/-, RS.40,36,071/- & RS.65,46,327/- IN ITA NOS.2919/DEL/2011, 2931/DEL/2011 & 2932/DEL/2011 RESPECTIVELY) RIGHTLY MADE BY THE A.O ON ACCOUNT O F 'INCOME FROM OTHER SOURCES U/S 56(2)(VI) OF THE IT ACT, AS THE SUM WAS RECEIVED BY THE ASSESSEE WITHOUT ANY CONSIDERATION FROM 12 TRUSTS AND THE INCOME TAX ACT,1961 NO WHERE PROVIDES EXEMPTION FOR THE SAID RECEIPTS, MORE SO, SECTION 56(2)(VI) SPECIFICALLY B RINGS SUCH RECEIPTS WITHIN THE AMBIT OF TAXATION; (II) HOLDING THAT THE TRUST IS A DISCRETIONARY TRUS T WITHOUT CONSIDERING THE FACT THAT THE TRUSTS WERE F ORMED FOR THE WELFARE OF THE EMPLOYEES OF THE M/S LINTAS INDIA ITA NO.892 & 893/DEL./2016 3 PVT. LTD. ONLY AND THE SHARE OF THE ASSESSEE WAS WE LL KNOWN WHICH WAS TO BE DETERMINED ON THE BASIS OF HI S LENGTH OF SERVICE WITH THE EMPLOYER AND CURRENT SAL ARY. THE TRUST DEED NO WHERE MENTIONED THAT THE INCOME O F THE TRUST WAS TO BE DISTRIBUTED ON THE COMPLETE DIS CRETION OF THE TRUST; (III) HOLDING THAT THE ASSESSEE'S CASE IS COVERED U NDER SECTION 86 OF THE IT ACT AND THAT SECTION 56(2)(VI) DOES NOT OVER RIDE THE PROVISIONS OF SECTION 86, NOT CONSIDER4ING THE FACT THAT SECTION 86 READ WITH SEC TION 67 A, DEALS IN SHARE OF INCOME RECEIVED BY A MEMBER OF ASSOCIATION OF PERSONS/ BODY OF INDIVIDUALS AND THE ASSESSMENT OF THE TRUST STANDS ON A DIFFERENT FOOTI NG FROM THAT OF AN AOP. MOREOVER, NO PROOF IS THERE ON RECORD THAT THE TRUST HAD PAID TAXES AT THE MAXIMUM MARGINAL RATE OR ANY HIGHER RATE ON ITS WHOLE INCOM E. HENCE, THE PROVISIONS OF THE SECTION 86 OF THE ACT DO NOT APPLY IN THE PRESENT CASE. (IV) NOT CONSIDERING THE FACT THAT INCOME RECEIVED BY THE ASSESSEE FROM THE TRUSTS ALSO COMES UNDER INCOM E IN THE NATURE OF 'PROFIT IN LIEU OF SALARY' U/S 17(3)( II) OF THE I.T. ACT, 1961; AS THE TRUST WAS ESTABLISHED BY THE SETTLER/EMPLOYER COMPANY FOR THE WELFARE OF THE EMPLOYEES ONLY AND THE CONNECTION OF THE ASSESSEE W ITH THE TRUST WAS ONLY ON ACCOUNT OF HIS CONNECTION WIT H THE EMPLOYER COMPANY. 3. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICA TION OF THE CONTROVERSY AT HAND ARE : ASSESSEES, SHRI ANAAM MIS HRA, SHRI ASHOK DHADWAL AND SHRI DEBAPRIYA DAM, IN ALL THE AFORESA ID APPEALS BEING EMPLOYEES OF M/S. LINTAS INDIA PVT. LTD. RECEIVED A N AMOUNT OF RS.62,61,745/-, RS.40,36,071/- AND RS.65,46,327/- R ESPECTIVELY FROM EMPLOYERS VARIOUS EMPLOYEES WELFARE TRUSTS. AO M ADE THE ADDITION ITA NO.892 & 893/DEL./2016 4 OF THE AFORESAID AMOUNTS RECEIVED BY THE ASSESSEE B Y INVOKING THE PROVISIONS CONTAINED U/S 56(2)(VI) OF THE INCOME-TA X ACT, 1961 (FOR SHORT THE ACT) AS THE SAME HAS BEEN RECEIVED WITH OUT CONSIDERING THE FACT THAT ALL 12 TRUSTS COVERED U/S 56(2)(VI) OF TH E ACT. 4. ASSESSEE CARRIED THE MATTER BY WAY OF FILING APP EALS BEFORE THE LD. CIT (A) WHO HAD DELETED THE ADDITIONS BY AL LOWING ALL THE AFORESAID APPEALS. FEELING AGGRIEVED, THE REVENUE HAS COME UP BEFORE THE TRIBUNAL BY WAY OF FILING THE PRESENT AP PEALS. 5. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. 6. UNDISPUTEDLY, THE EMPLOYER OF THE ASSESSEES, NAM ELY, M/S. LINTAS INDIA PVT. LTD., A PUBLIC LIMITED COMPANY HA VE FORMED 12 TRUSTS FOR THE BENEFIT AND WELFARE OF THE EMPLOYEES AS PER TRUST DEEDS AVAILABLE AT PAGES 71 TO 214 OF THE PAPER BOO K - 2. IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE HAS RECEIVED AFORE SAID AMOUNTS FROM 12 EMPLOYEES WELFARE TRUSTS. IT IS ALSO NOT I N DISPUTE THAT THE 12 TRUSTS HAVE EARNED THE INCOME AND PAID THE TAX T HEREON TO THE FOLLOWING EFFECT :- ITA NO.892 & 893/DEL./2016 5 NAME OF TRUST INCOME RETURNED (RS.) INCOME TAX PAID (RS.) LINTAS EMPLOYEES EDUCATION TRUST 26,20,29,350 5,93,77,487 LINTAS EMPLOYEES HEALTH ASSISTANCE TRUST 26,20,15,070 5,93,72,709 LINTAS EMPLOYEES SPORTS TRUST 16,96,7 3 ,250 3,84,26,959 LINTAS EMPLOYEES CULTURAL ACTIVITIES TRUST 16,96,77,910 3,84,27,762 LINTAS EMPLOYEES PROFESSIONAL DEVELOPMENT TRUST 16,96,73,120 3,84,26,652 LINTAS EMPLOYEES FINANCIAL ASSISTANCE TRUST 18,31,23,570 4,14,78,898 LINTAS EMPLOYEES RESEARCH ASSISTANCE TRUST 18,31,18,560 4,14,77,245 LINTAS EMPLOYEES TECHNOLOGICAL DEVELOPMENT TRUST 18,31,08,260 4,14,74,516 LINTAS EMPLOYEES FAMILY PLANNING ASSISTANCE TRUST 16,96,86,180 3,84,30,436 LINTAS EMPLOYEES HOBBIES AND CRAFTS TRUST 16,96,79,630 3,84,29,191 LINTAS EMPLOYEES HOLIDAY ASSISTANCE TRUST 16,96,85,060 3,84,31,260 LINTAS EMPLOYEES RECREATION TRUST 26,20,24,170 5,93,75,726 7. IT IS ALSO NOT IN DISPUTE THAT ASSESSEES, SHRI A NAAM MISHRA, SHRI ASHOK DHADWAL AND SHRI DEBAPRIYA DAM HAS RECE IVED AN AMOUNT OF RS.62,61,745/-, RS.40,36,071/- AND RS.65, 46,327/- RESPECTIVELY OUT OF THE REMAINING INCOME LEFT WITH THE TRUSTS AFTER PAYMENT OF THE TAX. IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEES ARE BENEFICIARIES OF THE 12 DISCRETIONARY TRUSTS WHO HA VE ALREADY PAID THE INCOME-TAX ON ITS INCOME AND THEN DISTRIBUTED T HE BALANCE AMOUNT AMONGST ITS BENEFICIARIES OUT OF CAPITAL GAI NS OUT OF SALE OF SHARES AFTER RETAINING SOME AMOUNT IN ITS CORPUS FO R ITS EXPENDITURE. ITA NO.892 & 893/DEL./2016 6 8. THE LD. DR FOR THE REVENUE CHALLENGING THE IMPUG NED ORDERS CONTENDED THAT THE AMOUNT RECEIVED BY THE ASSESSEE FROM THE DISCRETIONARY TRUSTS IS TAXABLE U/S 56(2)(VI) AND S ECTION 86 OF THE ACT IS NOT APPLICABLE AND THAT SINCE CREATION OF A TRUST IS A WELFARE PROGRAMME OF A TRUST FOR ITS EMPLOYEES, ANY BENEFIT EARNED BY THE EMPLOYEES ARE CHARGEABLE TO TAX AS SALARY INCOME; T HAT IN THIS CASE, THE TRUST HAS NOT PAID TAX AT THE MAXIMUM MARGINAL RATE. 9. HOWEVER, ON THE OTHER HAND, THE LD. AR FOR THE A SSESSEES CONTENDED THAT THE CASE OF THE ASSESSEES IS COVERED U/S 161, 164 & 167 OF THE ACT AND THE TAX IS TO BE PAID BY ONE ENT ITY ONLY AND BY RELYING UPON CIRCULAR NO.157 (F.NO.228/8/73-IT (A-I I) DATED 26.12.1974 MAKING CLARIFICATION FOR SECTION 164/166 OF THE ACT CONTENDED THAT ALL THE INCOME ARE TO BE CHARGED TO TAX ONLY ONCE AND IT IS NOT OPEN TO THE INCOME-TAX OFFICER TO ASS ESS THE SAME INCOME FOR THAT ASSESSMENT YEAR IN THE HANDS OF OTH ER PERSONS I.E. BENEFICIARY OF THE TRUST. FOR READY PERUSAL, OPERA TIVE PART OF THE CIRCULAR NO.157 (F.NO.228/8/73-IT (A-II) DATED 26.1 2.1974 IS REPRODUCED AS UNDER :- 1. ATTENTION IS INVITED TO BOARD'S INSTRUCTION NO . 45/78/66/ITJ(5), DATED 24-2-1967 [PRINTED HERE AS CLARIFICATION 2] ON THE SUBJECT OF ASSESSMENT MADE UNDER SECTION 41 (2) OF THE 1922 ACT/SECTION 166 OF THE 1961 ACT. IN SPITE OF THE CLEAR INSTRUCTIONS TO THE EFFECT THAT NEITHER SECTION 41 WHICH GIVE AN OPTION TO THE DEPARTMENT TO TAX EITHER THE REPRESENTATIVE ASSESSE E OR ITA NO.892 & 893/DEL./2016 7 THE BENEFICIAL OWNER OF THE INCOME NOR THE PARALLEL PROVISIONS OF THE 1961 ACT CONTEMPLATED ASSESSMENT OF THE SAME INCOME BOTH IN THE HANDS OF THE TRUSTEES A ND THE BENEFICIARIES, INSTANCES HAVE COME TO THE NOTIC E OF THE BOARD OF SUCH DOUBLE ASSESSMENT 2. ACCORDING TO THE SCHEME OF THE 1961 ACT, EVEN A S IT WAS UNDER THE 1922 ACT, THE GENERAL PRINCIPLE IS TO CHARGE ALL INCOME ONLY ONCE. THE BOARD DESIRE TO REITERATE THE EARLIER INSTRUCTIONS IN THIS REGARD. IN ORDER THAT THERE IS NO LOSS OF REVENUE, THE INCOME-TAX OF FICER SHOULD KEEP THIS POINT IN VIEW AT THE TIME OF RAISI NG THE INITIAL ASSESSMENT EITHER OF THE TRUST OR THE BENEF ICIARIES AND ADOPT A COURSE BENEFICIAL TO THE REVENUE. HAVIN G EXERCISED HIS OPTION ONCE, IT WILL NOT BE OPEN TO T HE INCOME-TAX OFFICER TO ASSESS THE SAME INCOME FOR TH AT ASSESSMENT YEAR IN THE HANDS OF THE OTHER PERSON (I .E., THE BENEFICIARY OR THE TRUSTEE). 10. IDENTICAL ISSUE WAS ALSO DETERMINED BY THE HON BLE SUPREME COURT IN CASE CITED AS ITO VS. ATCHAIAH - 218 ITR 239 WHEREIN THE HONBLE SUPREME COURT HAS HELD THAT IN CASE WRONG P ERSON HAS BEEN TAXED BY THE AO, HE IS NOT PRECLUDED FROM TAXI NG THE RIGHT PERSON WITH RESPECT TO THE RIGHT INCOME. SO, AO IS TO ADOPT THE RIGHT COURSE WHICH IS BENEFICIAL TO THE REVENUE. 11. COORDINATE BENCH OF THE TRIBUNAL IN CASE CITED AS ACIT VS. NIRANJAN NAROTTAM (2003) 128 TAXMAN 25 (AHD.)(MAG .) ALSO DECIDED THE IDENTICAL ISSUE IN FAVOUR OF THE ASSESS EE. 12. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE, WE AR E OF THE CONSIDERED VIEW THAT LD. CIT (A) HAS THRASHED THE C ONTROVERSY AT HAND AT LENGTH BY CONSIDERING THE AFORESAID CBDT CI RCULAR AND ITA NO.892 & 893/DEL./2016 8 JUDGMENT RENDERED BY HONBLE SUPREME COURT IN ITO VS. ATCHAIAH (SUPRA) AND WHEN THE INCOME OF ALL THE AFORESAID 12 DISCRETIONARY TRUSTS HAVE BEEN CHARGED TO TAX, THE SAME INCOME CA NNOT BE TAXED TWICE WHEN FELL INTO THE HANDS OF THE ASSESSEE. SO , WHEN THE AO HAS EXERCISED HIS OPTION ONCE BY TAXING ALL THE 12 TRUSTS DULY DESCRIBED IN PRECEDING PARA NO.6, IT IS NOT OPEN TO THE ASSESSING AUTHORITY TO ASSESS THE SAME INCOME FOR THAT ASSESS MENT YEAR IN THE HANDS OF THE OTHER PERSON I.E. THE BENEFICIARY OF T HE TRUSTS. SO, FINDING NO ILLEGALITY OR PERVERSITY IN THE IMPUGNED ORDERS PASSED BY THE LD. CIT (A), AFORESAID APPEALS BEARING ITA NOS. 2919/DEL/2011, 2931/DEL/2011 AND 2932/DEL/2011 FILED BY THE REVENU E ARE HEREBY DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THIS 19 TH DAY OF FEBRUARY, 2018. SD/- SD/- (G.D. AGRAWAL) (KULDIP SINGH) PRESIDENT JUDICIAL MEMBER DATED THE 19 TH DAY OF FEBRUARY, 2018 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-XI, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.