Shriram Ownership Trust, CHENNAI V. DCIT, CHENNAI

ITA 406/CHNY/2017

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4094 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-07-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 19-06-2017
• Assessment Year: 2013-2014
• Appeal Filed On: 17-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHAJI P JACOB IRS
• Assessee Lawyers: R SIVARAMAN
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Gift; Recovery proceedings; Charitable institution; Fair market value
• Section: 50C; 54F; 56(2); 14A; 12AA; 56; 12; 11

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : CHENNAI . . . , ! . '#'$ , % !& ' [BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER ] ./I.T.A. NOS. 406 & 407/MDS/2017 / ASSESSMENT YEARS : 2013-2014 & 2014-2015. SHRIRAM OWNERSHIP TRUST, NO.4, SHRIRAM HOUSE, I FLOOR, BURKIT ROAD, T. NAGAR, CHENNAI 600 017. VS. THE DEPUTY COMMISSIONER OF INCOME TAX, NON CORPORATE CIRCLE 2, CHENNAI 600 034. [PAN AAGTS 2243H] ( () / APPELLANT) ( *+() /RESPONDENT) / APPELLANT BY : SHRI. R. SIVARAMAN, ADVOCATE /RESPONDENT BY : SHRI. SHAJI P. JACOB, IRS, ADDL. CIT. /DATE OF HEARING : 22-06-2017 ! /DATE OF PRONOUNCEMENT : 05-07-2017 / O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER THESE ARE APPEALS FILED BY THE ASSESSEE DIRECTED AGAINST ORDER DATED 06.02.2017 OF LD. COMMISSIONER OF INCOM E-TAX (APPEALS)- 2, CHENNAI FOR THE IMPUGNED ASSESSMENT YEARS. ITA NOS.406 & 407/MDS/2017 :- 2 -: 2. APPEAL FOR ASSESSMENT YEAR 2014-15 IS TAKEN UP FIRS T FOR DISPOSAL. EFFECTIVE ISSUES RAISED BY THE ASSESSEE THROUGH ITS GROUNDS 1 TO 16 ARE ON AN ADDITION OF ?25,00,000/- MADE UNDE R SECTION 56(2) (VII) OF THE INCOME TAX ACT, 1961 (IN SHORT THE A CT) AND DISALLOWANCE U/S. 14A OF THE ACT R.W.R. 8D OF THE INCOME TAX RU LES, 1962 (IN SHORT THE RULES). LATTER ISSUE APPEARS IN ASSESSEES APPEAL FOR ASSESSMENT YEAR 2013-2014 ALSO. 3. FACTS APROPOS ARE THAT ASSESSEE A PRIVATE DISCRETIO NARY TRUST HAD FILED ITS RETURN OF INCOME FOR THE IMPUGNED ASS ESSMENT YEAR DISCLOSING INCOME OF ?107,72,76,893/-. IT SEEMS TH AT THE RETURN WAS INITIALLY TAKEN UP FOR COMPLETE SCRUTINY WHICH WAS LATER MODIFIED TO A LIMITED PURPOSE SCRUTINY, FOR EXAMINING THE DIFFE RENCE BETWEEN TURNOVER SHOWN IN THE INCOME TAX RETURN AND TURNOVE R SHOWN IN SERVICE TAX RETURN. HOWEVER, ON 06.09.2016, THE P ROCEEDINGS WERE AGAIN CONVERTED INTO A COMPLETE SCRUTINY BASED O N AN APPROVAL RECEIVED FROM THE PRINCIPAL COMMISSIONER OF INCOME TAX, CHENNAI. MEANWHILE, THE JCIT, NON CORPORATE RANGE 2, CHENN AI PASSED AN ORDER U/S. 144A OF THE ACT, ON 24.08.2016, GIVING DIRECTIONS TO THE LD. ASSESSING OFFICER TO TREAT A CORPUS DONATION OF ?25 ,00,000/- RECEIVED BY THE ASSESSEE TRUST DURING THE RELEVANT PREVIOUS YEAR, AS INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES. LD. JCIT WAS OF THE ITA NOS.406 & 407/MDS/2017 :- 3 -: OPINION THAT ASSESSEE BEING A PRIVATE DISCRETIONARY TRUST, HAD TO BE CONSIDERED AS REPRESENTING ITS BENEFICIARIARIES WHO WERE ALL INDIVIDUALS AND THUS GOVERNED BY SEC. 160(1) (IV) OF THE ACT. AS PER THE LD. JCIT BY VIRTUE OF SECTION 161(1) OF THE ACT, IN ITS CAPACITY AS A REPRESENTATIVE ASSESSEE, LIABILITY WAS CAST ON IT IN A LIKE MANNER TO THE SAME EXTENT AS IT APPLIED TO ITS BENEFICIARIARIES. THUS ACCORDING TO HIM, THE SUM OF ?25,00,00,000/- CREDITED AS CORPUS FUND DURING THE RELEVANT PREVIOUS YEAR HAD TO BE TAXED U/S. 56(2)(V II) OF THE ACT CONSIDERING THE STATUS OF THE ASSESSEE AS AN INDI VIDUAL. FOR CONCLUDING SO, LD. JCIT ALSO RELIED ON AN OPINIO N RECEIVED FROM SENIOR STANDING COUNSEL SHRI. T. RAVIKUMAR WHO ST ATED AS UNDER:- THE ASSESSEE TRUST IS A REPRESENTATIVE ASSESSEE AND THE INCOME OF THE ASSESSEE IS ASSESSED IN ITS REPRESENTATIVE CAPA CITY. THE ASSESSEE TRUST REPRESENTS THE BENEFICIARIES WHO ARE INDIVIDUALS AND HENCE THE ASSESSEE TRUST IS TO BE ASSESSED IN T HE STATUS OF 'INDIVIDUAL' ONLY. THE CONTRIBUTION OFRS.25 CRORES IS TO BE ASSESSED A S INCOME U/S.56(1) S.56(2)(V)/(VI)/(VII)/(VIIA) ONLY DETAIL ABOUT THE ADDITIONAL CIRCUMSTANCES UNDER WHICH INCOME IS TO BE CHARGED T O TAX UNDER (HE HEADING' INCOME FROM OTHER SOURCES'. THE WORDING OR S.56(2) STARTS WITH 'IN PARTICULAR, AND WITHOUT PREJUDICE TO THE GENERALITY OF THE PROVISIONS OF SU B-SECTION (1), THE FOLLOWING INCOMES, SHALL BE CHARGEABLE TO INCOME-TA X UNDER THE HEAD 'INCOME FROM OTHER SOURCES', WHICH SIGNIFIES T HAT THE RECEIPT OF THE ASSESSEE CANNOT BE EXCLUDED FROM TOTAL INCOM E U/S.56(L). ITA NOS.406 & 407/MDS/2017 :- 4 -: THE CONTRIBUTION OF RS.25 CRORES IS TO BE ASSESSED AS INCOME OF THE ASSESSEE TRUST IN ITS CAPACITY AS REPRESENTATIVE AS SESSEE AND IS TO BE ASSESSED IN THE STATUS OF 'INDIVIDUAL' ONLY. 4. LD. JCIT PUT THE ASSESSEE ON NOTICE, HIS INTENTION TO TREAT THE SUM RECEIVED BY IT AS CORPUS DONATION AS INCOME U /S. 56(2)(VII) OF THE ACT. ASSESSEE THEREUPON SUBMITTED THAT IT HAD TO BE CONSIDERED ONLY AS AN ASSOCIATION OF PERSONS (IN SHORT AOP) A ND NOT AS AN INDIVIDUAL. ACCORDING TO THE ASSESSEE BY VIRTU E OF THE EXPLANATION ADDED TO SEC. 2(31) BY FINANCE ACT, 2002 W.E.F. 01 .04.2002, THE APEX COURT JUDGMENT IN THE CASE OF CIT VS. INDIRA BALKRISHNA 39 ITR 546 WHICH GAVE AN EXPOSITION OF WHAT CONSTITUTED AN A OP, WAS NO MORE APPLICABLE. FURTHER, CONTENTION OF THE ASSESSEE WAS THAT CORPUS CONTRIBUTION RECEIVED BY A PRIVATE TRUST WAS NOT TA XABLE. CONTENTION OF THE ASSESSEE WAS THAT IT COULD BE CONSIDERED, ON LY AS AN ASSOCIATION OF PERSONS UNDER THE DEFINITION OF PERSON GIVEN IN 2(31) OF THE ACT, AND NOT AS AN INDIVIDUAL. AS PER THE ASSESSEE SEC TION 56(2)(VII) OF THE ACT COULD BE APPLIED ONLY TO AN INDIVIDUAL FALLING WITHIN THE MEANING OF THE SAID TERM IN THAT SECTION. 5. HOWEVER, LD. JCIT WAS NOT IMPRESSED BY ANY OF THE ABOVE ARGUMENTS TAKEN BY THE ASSESSEE. ACCORDING TO HIM, EXPLANATION TO SEC. 2(31) OF THE ACT, INTRODUCED BY FINANCE ACT, 2 002, WAS ONLY TO BRING WITHIN THE AMBIT OF TAXATION, RELIGIOUS AND / OR CHARITABLE TRUSTS ITA NOS.406 & 407/MDS/2017 :- 5 -: WHICH LOST EXEMPTION U/S. 11 & 12 OF THE ACT. FURT HER, AS PER LD. JCIT NONE OF THE TRUSTEES OF THE ASSESSEE TRUST NOR IT S BENEFICIARIES HAD COME TOGETHER WITH A COMMON PURPOSE OF EARNING IN COME AND THEREFORE IT COULD NOT BE TREATED AS AN AOP. ACCO RDING TO THE LD. JCIT, DEFINITION OF PERSON U/S. 2(31) OF THE ACT DID NOT SPECIFY ANY SPECIFIC CATEGORY FOR TRUSTS. FURTHER, ACCORDING TO HIM, BY VIRTUE OF JUDGMENT OF GUJARAT HIGH COURT IN THE CASE OF CIT VS. DEEPA K FAMILY TRUST NO.1 AND OTHERS 211 ITR 575, THAT OF BOMBAY HIGH COURT IN THE CASE OF CIT VS. MARSONS BENEFICIARY TRUST 188 ITR 224, THAT OF GUJARAT HIGH COURT IN THE CASE OF NITI TRUST AND OTHERS VS. CIT 221 ITR 435, THAT OF DELHI HIGH COURT IN THE CASE OF CIT VS. SA E HEAD OFFICE MONTHLY PAID EMPLOYEES 271 ITR 159, THAT OF CALCUTT A HIGH COURT IN THE CASE OF CIT VS. SHRI. KRISHNA BANDAR TRUST 201 ITR 989 AND THAT OF APEX COURT IN THE CASE OF C.R. NAGAPPA VS. CIT 73 ITR 626 , ASSESSEE TRUST HAD TO BE TREATED AS A REPRESENTATIVE ASSESSE E HAVING THE STATUS OF AN INDIVIDUAL, SINCE ALL ITS BENEFICIARIES WERE INDIVIDUALS. FURTHER, AS PER LD. JCIT, IF SEC. 56(2) (VII) OF THE ACT WAS T O BE CONFINED ONLY TO INDIVIDUALS AND HUFS THEN GIFTS RECEIVED BY INDIVI DUALS AND HUFS THROUGH THE MEDIUM OF A PRIVATE DISCRETIONARY TRU ST WOULD BE LEFT OUT OF SCOPE OF TAXATION. ACCORDING TO THE LD. JCIT, D EFINITION OF A RELATIVE GIVEN IN EXPLANATION TO SEC.56(2)(VII) OF THE ACT C OULD NOT TAKE OUT THE APPLICABILITY OF SAID SECTION TO A PRIVATE DISCRETI ONARY TRUST. IN ANY CASE ITA NOS.406 & 407/MDS/2017 :- 6 -: AS PER LD. JCIT, BENEFIT RECEIVED BY THE ASSESSEE T RUST THROUGH THE CORPUS DONATION WOULD ALSO GET COVERED U/S. 2(24)( IVA) OF THE ACT. IN OTHER WORDS, ACCORDING TO HIM, BENEFITS WHICH WERE CONVERTIBLE TO MONEY OBTAINED BY A REPRESENTATIVE ASSESSEE WAS A T AXABLE INCOME. BASED ON THE ABOVE REASONINGS, LD. JCIT DIRECTED T HE LD. ASSESSING OFFICER TO TREAT THE CORPUS DONATION RECEIVED AS IN COME FROM OTHER SOURCES. 6. ADHERING TO THE DIRECTIONS OF THE LD. JCIT, LD. ASS ESSING OFFICER COMPLETED THE ASSESSMENT ADDING A SUM OF ?2 5,00,00,000/- TO THE RETURNED INCOME. 7. AGGRIEVED, ASSESSEE MOVED IN APPEAL BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS). ARGUMENTS TAK EN BY THE ASSESSEE BEFORE LD. COMMISSIONER OF INCOME TAX (APP EALS) ARE SUMMARIZED HEREUNDER:- (A) THE ADDITION OF 25 CRORES AS INCOME MADE BY THE ASSESSING OFFICER IN THE ASSESSMENT MADE ON 27.09.2016 IS CONTRARY TO FACTS OF THE CASE AND THE RELEVANT PROVISIONS OF LAW. (B) THE ASSESSING OFFICER ERRED IN IMPLICITLY GIVING EFFECT TO THE ORDER OF THE JOINT COMMISSIONER WHICH WAS NOT GUIDANCE AS ENVISAGED U/S 144A IGNORING THE DETAILED SUBMISSION CONTAINED IN THE APPELLANT LETTE R DATED 09.09.2016 FILED BEFORE THE ASSESSING OFFICER ON 15.09.2016. (C ) THE ASSESSING OFFICER ERRED IN BYPASSING THE DECISIONS OF THE AP HIGH COURT IN CIT VS. SRMT STAFF ITA NOS.406 & 407/MDS/2017 :- 7 -: ASSOCIATION 221 ITR 234 A.P, ITAT DELHI BENCH C IN ESCORTS EMPLOYEES WELFARE TRUST VS. ITO (1983) 5 ITO 226 AND THE ORDER DT 08.07. 2008 OF THE CHENNAI BEN CH IN PENTAFOUR SOFTWARE EMPLOYEES WELFARE FOUNDATION VS. ACIT IN ITA NOS.751 AND 752 / MOS / 2007 AND BRINGING TO TAX THE CORPUS DONATION RECEIVED BY APPELLANT AS INCOME. (D) THE ASSESSING OFFICER ERRED IN APPLYING SECTION 56(2)(VII) TO BRING TO TAX AS INCOME CORPUS DONATION S RECEIVED BY THE APPELLANT TRUST OVERLOOKING THE FACT THAT SECTION 56(2)(VII) APPLIES ONLY TO INDIVIDUALS AND HUFS AND IGNORING THE RATIO DECIDED IN CL'T VS SMT. SODRA DEVI(1957) 32 ITR 615 ON THE CONTEXTUAL INTERPRETATION OF THE TERM INDIVIDUAL AND THE DECISI ON OF THE DELHI DALMIA PARIVAR TRUST VS. A.O (2016) 158 ITD 521 (E) THE ASSESSING OFFICER ERRED IN OVERLOOKING THE FACT THAT SECTION 56(2)(VII) APPLIES ONLY TO WHAT IS ACT UALLY RECEIVED BY INDIVIDUALS AND HUFS. (F) THE ASSESSING OFFICER ERRED IN APPLYING SECTION 2(24) (IVA) TO BRING TO TAX VOLUNTARY CORPUS DONATIO NS OF SUMS OF MONEY RECEIVED BY THE APPELLANT TRUST IGNORING THE INTERPRETATION OF THE EXPRESSION VALUE OF ANY BENEFIT OR PERQUISITE, WHETHER CONVERTIBLE INTO MONEY OR NOT, LAID DOWN BY THE JURISDICTIONAL HIGH COURT IN THE CASES OF CIT VS. G. VENKATARAMAN (1978) 111 ITR 444 AND CIT VS. A.R. ADAIKAPPA CHETTIAR (1973) 91 ITR 90. ASSESSEE ALSO PLACED RELIANCE ON THE FOLLOWING DECI SIONS:- (I) CIT VS. SRMT STAFF ASSOCIATION 221 ITR 234 (AP HIGH COURT) (II) PENTAFOUR SOFTWARE EMPLOYEES WELFARE FOUNDATION VS. ACIT ORDER DATED 8.7.2008 OF CHENNAI BENCH IN ITA NOS.751 & 752/MDS/2007 . 8. LD. COMMISSIONER OF INCOME TAX (APPEALS) AFTER CONSIDERING THE ABOVE ARGUMENTS OF THE ASSESSEE HEL D THAT LD. JCIT HAD OFFERED ENOUGH AND SUFFICIENT OPPORTUNITY TO TH E ASSESSEE AND HE ITA NOS.406 & 407/MDS/2017 :- 8 -: HAD ALSO COMPLIED WITH THE PROCEDURE LAID DOWN U/S . 144A OF THE ACT. AS PER LD. COMMISSIONER OF INCOME TAX (APPEALS), DI RECTIONS ISSUED BY THE LD. JCIT U/S. 144A OF THE ACT WERE BINDING ON T HE LD. ASSESSING OFFICER AND THEREFORE ARGUMENT OF THE ASSESSEE THAT LD. ASSESSING OFFICER HAD NOT APPLIED HIS MIND TO THE ISSUE COULD NOT BE ACCEPTED. FURTHER, AS PER THE LD. COMMISSIONER OF INCOME TAX (APPEALS), RELIANCE PLACED BY THE ASSESSEE ON THE JUDGMENTS O F JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. SHRI. G. VENKATARAMAN 111 ITR 444 AND CIT VS. A.R. ADAIKAPPA CHETTIAR 91 ITR 90 , FOR CANVASSING ITS ARGUMENT THAT VOLUNTARY CONTRIBUTION COULD NOT BE BROUGHT TO TAX, WERE IRRELEVANT, SINCE LD. ASSESSING OFFICER HAD B ROUGHT THE SUM TO TAX U/S. 56(2)(VII) OF THE ACT READ WITH MEANING 2(24) (XV) OF THE ACT AND NOT AS A CORPUS DONATION SIMPLICITER. FURTHER, AC CORDING TO HIM, ASSESSEE WAS RIGHTLY CONSIDERED IN THE STATUS OF IN DIVIDUAL SINCE IT WAS NOT AN AOP WITHIN THE MEANING OF THAT TERM AS EXPO UNDED BY HONBLE APEX COURT IN THE CASE OF INDIRA BALKRISHNA(SUPRA ). 9. LD. COMMISSIONER OF INCOME TAX (APPEALS) IN HIS OR DER, DISTINGUISHED THE JUDGMENT OF HONBLE ANDHRA PRADES H HIGH COURT IN THE CASE OF SRMT STAFF ASSOCIATION (SUPRA) RELIED O N BY THE ASSESSEE, NOTING THAT THE SAID CASE WAS IN RELATION TO APPLIC ABILITY OF SEC. 2(24)(IIA) OF THE ACT, WHICH WAS RELEVANT TO CHARI TABLE INSTITUTIONS AND NOT PRIVATE DISCRETIONARY TRUSTS. SIMILARLY ACCORD ING TO THE LD. ITA NOS.406 & 407/MDS/2017 :- 9 -: COMMISSIONER OF INCOME TAX (APPEALS) THE DECISION O F DELHI BENCH OF THE TRIBUNAL IN THE CASE OF ESCORTS EMPLOYEES WELFA RE TRUST (SUPRA) WAS ALSO IN RELATION TO A CHARITABLE TRUST. VIZ-A- VIZ DECISION OF CO- ORDINATE BENCH IN THE CASE OF PENTOFOUR SOFTWARE EMPLOYEES WELFARE FOUNDATION (SUPRA), LD. COMMISSIONER OF INCOME TAX (APPEALS) OBSERVED THAT THE ASSESSEE THERE WAS FORMED AS A CO MPANY UNDER SECTION 25 OF THE COMPANIES ACT, 1956 AND NOT COMP ARABLE TO A PRIVATE DISCRETIONARY TRUST. NEVERTHELESS, HE AGRE ED WITH THE CONTENTION OF THE ASSESSEE THAT CORPUS DONATION REC EIVED BY THE ASSESSEE WOULD NOT COME WITHIN THE AMBIT OF SEC. 2( 24) (IVA) OF THE ACT, SINCE IT WAS NOT ANY BENEFIT OR PERQUISITE. HOWEVER, ACCORDING TO HIM SEC. 56(2)(VII) OF THE ACT R.W.S. 2(24)(XV) SQ UARELY APPLIED TO ANY DONATION WHETHER CORPUS OR NOT RECEIVED BY THE ASS ESSEE. ACCORDING TO HIM, THE LD. JCIT HAD TAKEN A CORRECT VIEW IN H OLDING THAT INCOME RECEIVED ON BEHALF OF INDIVIDUAL BENEFICIARIES BY A REPRESENTATIVE ASSESSEE WAS TO BE TREATED, FOR ALL PURPOSES OF THE ACT, AS INCOME RECEIVED BY AN INDIVIDUAL. LD. COMMISSIONER OF INCOME TAX (APPEALS), ALSO CONSIDERED THE EFFECT OF CLAUSE (X ) INTRODUCED IN SEC. 56(2) BY FINANCE ACT, 2017 W.E.F. 01.04.2017. ACCO RDING TO HIM, INSERTION OF THE SAID CLAUSE WAS PROSPECTIVE IN NA TURE AND COULD NOT COME TO THE AID OF THE ASSESSEE IN ANY MANNER. H E THUS, HELD THAT THE CORPUS DONATION OF ?25,00,00,000/- RECEIVED BY THE ASSESSEE WAS ITA NOS.406 & 407/MDS/2017 :- 10 -: RIGHTLY CONSIDERED AS INCOME U/S. 56(2)(VII) OF TH E ACT R.W.S. 2(24(XV) OF THE ACT. NEVERTHELESS HE DIRECTED THE LD. ASSES SING OFFICER TO GRANT BASIC EXEMPTION OF ?50,000/- AVAILABLE U/S. 56(2) ( VII) OF THE ACT. 10. NOW BEFORE US, LD. AUTHORISED REPRESENTATIVE STRONG LY ASSAILING THE ORDERS OF THE LOWER AUTHORITIES SUBMI TTED THAT ASSESSEE HAD FILED ITS RETURN IN THE STATUS OF A TRUST. A S PER THE LD. AUTHORISED REPRESENTATIVE EVEN IN THE ASSESSMENT ORDER THE LD. ASSESSING OFFICER HAD MENTIONED THE STATUS OF THE ASSESSEE AS TRUST . LD. AUTHORISED REPRESENTATIVE POINTED OUT THAT RETURN FOR THE ASSE SSEE WAS FILED IN FORM ITR V PRESCRIBED FOR TRUSTS AND THIS WAS DIFFE RENT FROM THE RETURN FORM PRESCRIBED FOR INDIVIDUALS. 11. CONTINUING HIS SUBMISSIONS, LD. AUTHORISED REPRES ENTATIVE SUBMITTED THAT LD. JCIT HAD INVOKED SEC. 144A OF T HE ACT, EVEN WHEN AN ASSESSMENT WAS NOT PENDING. ACCORDING TO HIM, W HEN THE PROCEEDINGS UNDER SECTION 144A OF THE ACT WERE INIT IATED BY THE LD. JCIT, THERE WAS ONLY A LIMITED PURPOSE SCRUTINY U NDER WAY AND NOT A COMPLETE SCRUTINY. RELYING ON CIRCULAR NO.5/2016 D ATED 14.07.2016 OF CENTRAL BOARD OF DIRECT TAXES, LD. AUTHORISED REPRE SENTATIVE SUBMITTED THAT A LIMITED SCRUTINY WAS NOT EQUIVALENT OR COMP ARABLE TO A REGULAR ASSESSMENT PROCEEDINGS. ACCORDING TO HIM, A LIMITED PURPOSE SCRUTINY ITA NOS.406 & 407/MDS/2017 :- 11 -: HAD ONLY A LIMITED SCOPE. FURTHER, ACCORDING TO TH E LD. AUTHORISED REPRESENTATIVE, THE LIMITED SCRUTINY WAS INTENDED AND CONFINED TO EXAMINATION OF DIFFERENCE BETWEEN TURNOVER AS PER INCOME TAX RETURN AND TURNOVER AS PER SERVICE TAX RETURN. LD . AUTHORISED REPRESENTATIVE POINTED OUT THAT THE DECISION FOR TA KING UP THE CASE FOR A COMPLETE SCRUTINY WAS MADE ONLY ON 06.09.2016, BY WHICH TIME THE LD. JCIT PASSED HIS ORDER U/S.144A OF THE ACT. TH US, ACCORDING TO HIM, LD. JCIT HAD PASSED THE ORDER EVEN WHEN NO ASSESSM ENT PROCEEDINGS WERE PENDING THEREBY RENDERING HIS DIRECTION VOI D. 12. CONTINUING HIS ATTACK ON THE ORDER PASSED U/S.144A OF THE ACT, LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT L D. JCIT COULD HAVE ISSUED ONLY DIRECTION AS A GUIDELINE TO THE LD. ASS ESSING OFFICER. ACCORDING TO HIM, LD. ASSESSING OFFICER HAD SIMPLY FOLLOWED THE DIRECTIONS OF LD. JCIT DIRECTION AND MADE THE ADDIT ION, WITHOUT APPLYING HIS MIND INDEPENDENTLY ON THE MERITS OF THE ADDITI ON. AS PER LD. AUTHORISED REPRESENTATIVE THE DIRECTIONS OF THE LD. JCIT WERE BINDING ON THE LD. ASSESSING OFFICER BUT SUCH DIRECTIONS W ERE BINDING ONLY AS A GUIDANCE TO THE LD. ASSESSING OFFICER AND NOT AS A DIRECTION TO MAKE AN ADDITION. 13. ON THE MERITS OF THE ADDITION, LD. AUTHORISED REPR ESENTATIVE SUBMITTED THAT VOLUNTARY CONTRIBUTION RECEIVED TOWA RDS CORPUS ITA NOS.406 & 407/MDS/2017 :- 12 -: DONATION WAS NOT TAXABLE IN THE HANDS OF A PRIVATE DISCRETIONARY TRUST. ACCORDING TO HIM, ASSESSEE WHICH WAS A PRIVATE D ISCRETIONARY TRUST HAD RETURNED ITS INCOME IN THE STATUS OF A TRUST AND WAS ASSESSED IN THE STATUS OF A TRUST. ACCORDING TO HIM, IT COULD NOT BE CONSIDERED AS AN INDIVIDUAL ONLY FOR MAKING AN ADDITION. REL YING ONCE AGAIN CO- ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF PENTAFOUR SOFTWARE EMPLOYEES WELFARE FOUNDATION (SUPRA) LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT VOLUNTARY CONTRIBUTION TOWARDS COR PUS OF A TRUST COULD NOT BE CONSIDERED AS INCOME. FURTHER, AS PER THE LD. AUTHORISED REPRESENTATIVE, A PRIVATE DISCRETIONARY TRUST COUL D NOT BE EQUATED WITH AN INDIVIDUAL. FOR THIS LD. AUTHORISED REPRESENTAT IVE RELIED ON DECISION OF CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE O F GOPAL SRINIVASAN TRUST VS. ADIT 46 ITD 157 . ACCORDING TO HIM, CORPUS CONTRIBUTION RECEIVED COULD NOT BE ROPED IN AS INCOME EVEN U/ S. 2(24) (IVA) OF THE ACT, SINCE ASSESSEE HAD NOT OBTAINED THE CONTRIBUTI ON BY WAY OF A LEGAL RIGHT OR CLAIM BUT IT WAS ONLY A GRATUITOUS PAYME NT RECEIVED BY IT. RELIANCE WAS PLACED ON THE JUDGMENT OF HONBLE JUR ISDICTIONAL HIGH COURT IN THE CASE OF A.R. ADAIKAPA CHETTIAR (SUPRA). ACCORDING TO LD. AUTHORISED REPRESENTATIVE THE QUESTION AS TO HOW A GIFT RECEIVED BY A PRIVATE DISCRETIONARY TRUST HAD TO BE TREATED HAD COME UP BEFORE THE DELHI BENCH OF THIS TRIBUNAL IN THE CASE OF MRIDU HARI DALMIA PARIVAR TRUST VS. ACIT 158 ITD 521. ACCORDING TO HIM, IN THE SAID CASE THE ITA NOS.406 & 407/MDS/2017 :- 13 -: TRIBUNAL HAD CLEARLY HELD THAT A GIFT RECEIVED BY A PRIVATE DISCRETIONARY TRUST COULD NOT BE CONSIDERED INCOME U/S. 56(2)(VI ) OF THE ACT. 14. PER CONTRA, LD. DEPARTMENTAL REPRESENTATIVE, REBUT TING THE ARGUMENTS OF THE LD. AUTHORISED REPRESENTATIVE SUBM ITTED THAT THE DIRECTIONS GIVEN BY THE LD. JCIT U/S. 144A OF THE A CT WAS AFTER GIVING DUE OPPORTUNITY TO THE ASSESSEE FOR REPRESENTING IT S CASE AND AFTER TAKING INTO ACCOUNT ALL THE AVERMENTS MADE BY THE A SSESSEE, INCLUDING THE CASE LAWS RELIED ON BY THE ASSESSEE. CONTENTIO N OF THE LD. DEPARTMENTAL REPRESENTATIVE WAS THAT LD. ASSESSING OFFICER WAS BOUND UNDER LAW TO FOLLOW THE DIRECTIONS OF THE LD . JCIT U/S. 144A OF THE ACT. ACCORDING TO HIM, WHETHER THE DIRECTIONS WERE FOR THE GUIDANCE OF THE LD. ASSESSING OFFICER, MATTERED LIT TLE. 15. REPULSING THE ARGUMENT OF THE LD. AUTHORISED REPRE SENTATIVE THAT THERE WAS NO ASSESSMENT PROCEEDINGS PENDING BE FORE LD. ASSESSING OFFICER WHEN THE LD. JCIT INVOKED THE POW ERS VESTED ON HIM U/S. 144A OF THE ACT, LD. DEPARTMENTAL REPRESENTA TIVE SUBMITTED THAT THE ASSESSMENT WAS ORIGINALLY TAKEN UP FOR SCRUTINY THROUGH A NOTICE U/S. 143(2) OF THE ACT ISSUED ON 01.06.2016. ACC ORDING TO HIM, WHETHER IT WAS A LIMITED SCRUTINY OR COMPLETE SCRUT INY, HARDLY MATTERED WHEN ADMITTEDLY, THE ASSESSMENT PROCEEDINGS WERE PE NDING BEFORE LD. ASSESSING OFFICER. ITA NOS.406 & 407/MDS/2017 :- 14 -: 16. SUPPORTING THE MERITS OF THE ADDITION MADE BY THE L D. ASSESSING OFFICER, LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT UNDISPUTEDLY THE AMOUNT RECEIVED BY ASSESSEE WAS A CAPITAL INFLOW. AS PER THE LD. DEPARTMENTAL REPRESENTATIVE THE ADDITI ON WAS NOT MADE CONSIDERING THE SUM AS VALUE OF A BENEFIT OR PERQUI SITE U/S. 2(24) (IVA) OF THE ACT NOR WAS IT CONSIDERED AS INCOME U/S. 2( 24)(IIA) OF THE ACT. AS PER LD. DEPARTMENTAL REPRESENTATIVE THE SUM WAS CONSIDERED AS INCOME FALLING WITHIN SEC. 2(24) (XV) OF THE ACT W HICH CLEARLY BROUGHT WITHIN ITS AMBIT ALL SUMS OF MONEY REFERRED IN SEC. 56(2)(VII) OF THE ACT. ACCORDING TO HIM, THE RETURN FORM IN WHICH AS SESSEE FILED ITS INCOME AND STATUS SHOWN BY THE ASSESSEE IN SUCH RE TURN WERE IRRELEVANT, SINCE RULES PRESCRIBING THE FORMS COULD NEVER WHITTLE DOWN THE PROVISIONS OF ACT. FURTHER, ACCORDING TO HIM, R ULES COULD NOT TAKE AWAY WHAT WAS CONFERRED BY THE ACT OR WATER DOWN IT S EFFECT. ARGUMENT OF THE LD. DR WAS THAT ASSESSEE BEING A P RIVATE DISCRETIONARY TRUST WITH INDIVIDUALS AS ITS BENEFI CIARIES, HAD TO BE CONSIDERED IN THE STATUS OF AN INDIVIDUAL ONLY. 17. DRAWING A PARALLEL WITH SEC. 50L, SEC.54F AND SEC. 194A OF THE ACT, WHERE ALSO THE TERM INDIVIDUAL OR HUF WAS MENTIONED, LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT HONBL E JURISDICTIONAL HIGH COURT AND CO-ORDINATE BENCHES OF THIS TRIBUNAL HAD IN VARIOUS ITA NOS.406 & 407/MDS/2017 :- 15 -: JUDGMENTS HELD THAT SAID TERMS INCLUDED IN IT, A PR IVATE DISCRETIONARY TRUST ALSO, WHOSE MEMBERS WERE INDIVIDUALS. RELYIN G ON THE DECISION OF MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF BALGOPAL TRUST VS. ACTI (IN ITA NO.5661/MUM/2016, DATED 03.05.2017), LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT BENEFIT U/S. 54F OF THE ACT WHICH WAS AVAILABLE ONLY TO AN INDIVIDUAL AND H UF WAS GIVEN BY THE TRIBUNAL TO A PRIVATE NON DISCRETIONARY TRUST. AS PER LD.DR, THE MUMBAI BENCH IN THIS DECISION HAD CLEARLY HELD THA T A REPRESENTATIVE ASSESSEE HAD THE SAME DUTIES, RESPONSIBILITIES AND LIABILITIES AS IF INCOME WAS RECEIVED BY HIM BENEFICIALLY FOR AN INDI VIDUAL BENEFICIARY. RELYING ON THE JURISDICTIONAL HIGH COURT IN THE CAS E OF CIT VS. VENU SURESH SHEELA TRUST AND OTHERS 233 ITR 99, LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT RELIEF U/S. 80L OF T HE ACT WHICH ALSO WAS AVAILABLE ONLY TO AN INDIVIDUAL AND HUF, WAS G IVEN TO A PRIVATE DISCRETIONARY TRUST TREATING IT AS AN INDIVIDUAL, I N A REPRESENTATIVE CAPACITY. RELYING ON THE JUDGMENT OF JURISDICTIONA L HIGH COURT IN THE CASE OF CIT VS. ARIHANT TRUST AND ORS. 214 ITR 306 , LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT AN ARTI FICIAL JURIDICAL PERSON WAS TREATED AS AN INDIVIDUAL FOR THE PUR POSE OF APPLICATION OF SEC. 194A OF THE ACT. ACCORDING TO HIM, JUDGMENT O F HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. T.S.K. ENTERPRISES 274 ITR 41 CLEARLY REBUTTED THE ARGUMENT OF THE ASSESSEE THAT A ITA NOS.406 & 407/MDS/2017 :- 16 -: DISCRETIONARY TRUST COULD BE ASSESSED ONLY AS AN A OP AND NOT IN THE STATUS OF AN INDIVIDUAL. FINALLY LD. DEPARTMENTAL REPRESENTATIVE RELYING ON A JUDGMENT OF HONBLE APEX COURT IN THE CASE OF CIT VS. KAMALINI KHATAU 209 ITR 101, STATED THAT A PRIVATE DISCRETIONARY TRUST COULD BE DEEMED AS AN AOP ONLY FOR THE PURPOSE OF C HARGING TAX. 18. AS FOR THE AMENDMENT MADE BY FINANCE ACT, 2017, WHE REBY SUB CLAUSE (X) TO SECTION 56(2) OF THE ACT WAS INT RODUCED, ACCORDING TO THE LD. DEPARTMENTAL REPRESENTATIVE, THIS HAD NO RE LEVANCE, SINCE IT WAS BROUGHT IN, ONLY TO BRING WITHIN THE FOLD OF TAXATION, MONEY RECEIVED BY FIRMS AND COMPANIES WITHOUT CONSIDERAT ION. COMING TO THE DECISION OF DELHI BENCH OF THE TRIBUNAL IN THE CASE MRIDU HARI DALMIA PARIVAR TRUST (SUPRA ) RELIED ON BY THE LD. AUTHORISED REPRESENTATIVE, LD. DEPARTMENTAL REPRESENTATIVE SU BMITTED THAT DELHI BENCH HAD NOT CONSIDERED THE JUDGMENTS OF THE MADR AS HIGH COURT, WITH RESPECT TO THE STATUS OF PRIVATE DISCRETIONARY TRUSTS AND THEREFORE WAS NOT BINDING. ACCORDING TO HIM, ON THE FACE OF A CATENA OF JUDGMENTS OF JURISDICTIONAL HIGH COURT, WHICH WAS ALL IN SUPPORT OF THE REVENUE, DECISION OF DELHI BENCH OF THIS TRIBUN AL PALED INTO INSIGNIFICANCE. 19. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE ORDERS OF THE AUTHORITIES BELOW. FIRST WE WILL DEA L WITH THE ISSUE ITA NOS.406 & 407/MDS/2017 :- 17 -: WHETHER LD. JCIT INVOKED THE POWERS VESTED ON HIM U /S. 144A OF THE ACT IN ACCORDANCE WITH SAID PROVISION. CONTENTION OF THE LD. AUTHORISED REPRESENTATIVE IS THAT THERE WAS NO ASSE SSMENT PROCEEDINGS PENDING AS ON DATE WHEN LD. JCIT ISSUED ORDER ON 24.08.2016. HOWEVER, THE ASSESSMENT ORDER CLEARLY STATES THAT NOTICE U/S. 143(2) OF THE ACT WAS ISSUED TO THE ASS ESSEE ON 01.06.2016. THUS, CLEARLY WHEN THE LD. JCIT PASSED HIS ORDER UNDER SEC. 144A OF THE ACT, ASSESSMENT PROCEEDINGS WERE P ENDING. WE ARE IN AGREEMENT WITH THE CONTENTION OF THE LD. DEPART MENTAL REPRESENTATIVE THAT IT MATTERED LITTLE WHETHER SU CH ASSESSMENT PROCEEDINGS WAS FOR A LIMITED SCRUTINY OR COMPLETE SCRUTINY ASSESSMENT. AT THIS JUNCTURE, IT WOULD BE APPOSIT E TO HAVE A LOOK AT SECTION 144A OF THE ACT WHICH READS AS UNDER:- A JOINT COMMISSIONER MAY, ON HIS OWN MOTION OR ON A REFERENCE BEING MADE TO HIM BY THE (ASSESSING) OFFI CER OR ON THE APPLICATION OF AN ASSESSEE, CALL FOR AND EXAMIN E THE RECORD OF ANY PROCEEDING IN WHICH AN ASSESSMENT IS PENDING AND, IF HE CONSIDERS THAT, HAVING REGARD TO THE NAT URE OF THE CASE OR THE AMOUNT INVOLVED OR FOR ANY OTHER REASON , IT IS NECESSARY OR EXPEDIENT SO TO DO, HE MAY ISSUE SUCH DIRECTIONS AS HE THINKS FIT FOR THE GUIDANCE OF THE (ASSESSING) OFFICER TO ENABLE HIM TO COMPLETE THE ASSESSMENT AN D SUCH DIRECTIONS SHALL BE BINDING ON THE (ASSESSING) OFFI CER . SECTION SIMPLY STATES THAT AN ASSESSMENT HAS TO BE PENDING AND NOTHING MORE. WE CANNOT READ INTO THE SECTION, WOR DS WHICH ARE NOT ITA NOS.406 & 407/MDS/2017 :- 18 -: THERE AND GIVE AN INTERPRETATION AS CANVASSED BY T HE LD. AUTHORISED REPRESENTATIVE. 20. SECOND ISSUE THAT WE HAVE TO CONSIDER IS REGARDING THE NATURE OF DIRECTIONS ISSUED BY THE LD. JCIT. CONTE NTION OF THE LD. AUTHORISED REPRESENTATIVE IS THAT LD. JCIT COULD IS SUE ONLY GUIDANCE TO THE LD. ASSESSING OFFICER WHICH ENABLE HIM TO COMPLETE THE ASSESSMENT. HOWEVER, THE SECTION ITSELF SAYS THAT THE DIRECTIONS UNDER SECTION 144A OF THE ACT ARE BINDING ON THE L D. ASSESSING OFFICER. THUS, IN OUR OPINION, THE DISTINCTION SOUGHT TO BE DRAWN BETWEEN GUIDANCE AND DIRECTIONS HARDLY MATTERED. IT MIGHT BE TRUE THAT LD. ASSESSING OFFICER HAD SIMPLY FOLLOWED THE DIRECTION S OF THE LD. JCIT WITHOUT APPLYING HIS MIND. HOWEVER LD. ASSESSING O FFICER BEING DUTY BOUND UNDER LAW TO FOLLOW THE DIRECTIONS OF LD. JCI T, THE QUESTION WHETHER HE HAD APPLIED HIS MIND OVER THAT ISSUE, IN OUR OPINION BECAME IRRELEVANT. THUS WE ARE OF THE OPINION THA T THE DIRECTIONS ISSUED BY THE LD. JCIT WERE WITHIN THE PARAMETERS O F SEC. 144A OF THE ACT AND VALID 21. NOW COMING TO THE MERITS OF THE CASE, ONE OF THE CO NTENTIONS RAISED BY THE LD. AUTHORISED REPRESENTATIVE IS THAT THE SUM OF ?25,00,00,000/- RECEIVED BY THE ASSESSEE AS CORPUS DONATION COULD ITA NOS.406 & 407/MDS/2017 :- 19 -: NOT BE ROPED IN AS INCOME U/S. 2(24)(IVA) OF THE AC T. THERE CAN BE ABSOLUTELY NO DOUBT ON THIS ASPECT. IN FACT LD.CI T(A) HAD CLEARLY HELD THAT AMOUNT RECEIVED COULD NOT BE CONSIDERED A S BENEFIT OR PERQUISITE AND SEC.2(24)(IVA) OF THE ACT. THERE CA N ALSO BE NO DOUBT THAT THE AMOUNT DID NOT FALL WITHIN THE SEC.2(24)(I IA) OF THE ACT SINCE ASSESSEE WAS NOT A TRUST CREATED FOR A RELIGIOUS O R CHARITABLE PURPOSE. 22. WHAT WE FIND IS THAT LD. COMMISSIONER OF INCOME TA X (APPEALS) HAD CONFIRMED THE ADDITION U/S. 2(24)(XV) OF THE ACT R.W.S. 56(2)(VII) OF THE ACT. BOTH THESE SECTIONS ARE REP RODUCED HEREUNDER:- SEC. 2(24) INCOME INCLUDES--- (I)................ (II).......................... (XV) ANY SUM OF MONEY OR VALUE OF PROPERTY REFERRE D TO IN CLAUSE (VII) [FOR CLAUSE (VIIA)] OF SUB-SECTION (2) OF SECTION 56;] SECTION 56(2) 2) IN PARTICULAR, AND WITHOUT PREJUDICE TO THE GENE RALITY OF THE PROVISIONS OF SUB- SECTION (1), THE FOLLOWING INCOMES, SHALL BE CHARGE ABLE TO INCOME-TAX UNDER THE HEAD 'INCOME FROM OTHER SOURCES', NAMELY : ( I ) .; ( IA ) .; IB ) .;; ( IC ) ; ITA NOS.406 & 407/MDS/2017 :- 20 -: ( ID ) '; ( II ) .. '; ( III ) '; ( VII ) WHERE AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY R ECEIVES, IN ANY PREVIOUS YEAR, FROM ANY PERSON OR PERSONS ON OR AFTER THE 1ST DAY OF OCTOBER, 2009 84 [ BUT BEFORE THE 1ST DAY OF APRIL, 2017 ] , ( A ) ANY SUM OF MONEY, WITHOUT CONSIDERATION, THE AGG REGATE VALUE OF WHICH EXCEEDS FIFTY THOUSAND RUPEES, THE WHOLE OF THE AGG REGATE VALUE OF SUCH SUM; ( B ) ANY IMMOVABLE PROPERTY, ( I ) WITHOUT CONSIDERATION, THE STAMP DUTY VALUE OF WHIC H EXCEEDS FIFTY THOUSAND RUPEES, THE STAMP DUTY VALUE OF SUCH PROPERTY; ( II ) FOR A CONSIDERATION WHICH IS LESS THAN THE STAMP DUTY VALUE OF THE PROPERTY BY AN AMOUNT EXCEEDING FIFTY THOUSAND RUPE ES, THE STAMP DUTY VALUE OF SUCH PROPERTY AS EXCEEDS SUCH CONSIDE RATION: PROVIDED THAT WHERE THE DATE OF THE AGREEMENT FIXING THE AM OUNT OF CONSIDERATION FOR THE TRANSFER OF IMMOVABLE PROPERT Y AND THE DATE OF REGISTRATION ARE NOT THE SAME, THE STAMP DUTY VALUE ON THE DATE OF THE AGREEMENT MAY BE TAKEN FOR THE PURPOSES OF THIS SUB -CLAUSE: PROVIDED FURTHER THAT THE SAID PROVISO SHALL APPLY ONLY IN A CASE W HERE THE AMOUNT OF CONSIDERATION REFERRED TO THEREIN, OR A PART THEREOF, HAS BEEN PAID BY ANY MODE OTHER THAN CASH ON OR BEFORE THE DATE OF THE AGREEMENT FOR THE TRANSFER OF SUCH IMMOVABLE PROPER TY; ( C ) ANY PROPERTY, OTHER THAN IMMOVABLE PROPERTY, ( I ) WITHOUT CONSIDERATION, THE AGGREGATE FAIR MARKET VALUE OF WHICH EXCEEDS FIFTY THOUSAND RUPEES, THE WHOLE OF THE AGG REGATE FAIR MARKET VALUE OF SUCH PROPERTY; ( II ) FOR A CONSIDERATION WHICH IS LESS THAN THE AGGRE GATE FAIR MARKET VALUE OF THE PROPERTY BY AN AMOUNT EXCEEDING FIFTY THOUSAND RUPEES, THE AGGREGATE FAIR MARKET VALUE OF SUCH PRO PERTY AS EXCEEDS SUCH CONSIDERATION : PROVIDED THAT WHERE THE STAMP DUTY VALUE OF IMMOVABLE PROPER TY AS REFERRED TO IN SUB-CLAUSE ( B ) IS DISPUTED BY THE ASSESSEE ON GROUNDS MENTIONED IN SUB- SECTION (2) OF SECTION 50C, THE ASSESSING OFFICER M AY REFER THE VALUATION OF SUCH PROPERTY TO A VALUATION OFFICER, AND THE PROVI SIONS OF SECTION 50C AND SUB-SECTION (15) OF SECTION 155 SHALL, AS FAR AS MA Y BE, APPLY IN RELATION TO THE STAMP DUTY VALUE OF SUCH PROPERTY FOR THE PURPOSE O F SUB-CLAUSE ( B ) AS THEY APPLY FOR VALUATION OF CAPITAL ASSET UNDER THOSE SE CTIONS : PROVIDED FURTHER THAT THIS CLAUSE SHALL NOT APPLY TO ANY SUM OF MONE Y OR ANY PROPERTY RECEIVED ( A ) FROM ANY RELATIVE; OR ( B ) ON THE OCCASION OF THE MARRIAGE OF THE INDIVIDUA L; OR ( C ) UNDER A WILL OR BY WAY OF INHERITANCE; OR ITA NOS.406 & 407/MDS/2017 :- 21 -: ( D ) IN CONTEMPLATION OF DEATH OF THE PAYER OR DONOR, AS THE CASE MAY BE; OR ( E ) FROM ANY LOCAL AUTHORITY AS DEFINED IN THE EXPLANATION TO CLAUSE ( 20 ) OF SECTION 10; OR ( F ) FROM ANY FUND OR FOUNDATION OR UNIVERSITY OR OTH ER EDUCATIONAL INSTITUTION OR HOSPITAL OR OTHER MEDICAL INSTITUTIO N OR ANY TRUST OR INSTITUTION REFERRED TO IN CLAUSE ( 23C ) OF SECTION 10 OR ( G ) FROM ANY TRUST OR INSTITUTION REGISTERED UNDER S ECTION 12AA [ OR ] 85 [ ( H ) BY WAY OF TRANSACTION NOT REGARDED AS TRANSFER UN DER CLAUSE ( VICB ) OR CLAUSE ( VID ) OR CLAUSE ( VII ) OF SECTION 47 ] EXPLANATION. FOR THE PURPOSES OF THIS CLAUSE, ( A ) 'ASSESSABLE' SHALL HAVE THE MEANING ASSIGNED TO IT IN THE EXPLANATION 2 TO SUB-SECTION (2) OF SECTION 50C ( B ) 'FAIR MARKET VALUE' OF A PROPERTY, OTHER THAN AN IMMOVABLE PROPERTY, MEANS THE VALUE DETERMINED IN ACCORDANCE WITH THE M ETHOD AS MAY BE PRESCRIBED; ( C ) 'JEWELLERY' SHALL HAVE THE MEANING ASSIGNED TO I T IN THE EXPLANATION TO SUB-CLAUSE ( II ) OF CLAUSE ( 14 ) OF SECTION 2; ( D ) 'PROPERTY' MEANS THE FOLLOWING CAPITAL ASSET OF THE ASSESSEE, NAMELY: ( I ) IMMOVABLE PROPERTY BEING LAND OR BUILDING OR BOT H; ( II ) SHARES AND SECURITIES; ( III ) JEWELLERY; ( IV ) ARCHAEOLOGICAL COLLECTIONS; ( V ) DRAWINGS; ( VI ) PAINTINGS; ( VII ) SCULPTURES; ( VIII ) ANY WORK OF ART; OR ( IX ) BULLION; ( E ) 'RELATIVE' MEANS, ( I ) IN CASE OF AN INDIVIDUAL ( A ) SPOUSE OF THE INDIVIDUAL; ( B ) BROTHER OR SISTER OF THE INDIVIDUAL; ( C ) BROTHER OR SISTER OF THE SPOUSE OF THE INDIVIDUA L; ( D ) BROTHER OR SISTER OF EITHER OF THE PARENTS OF THE INDIVIDUAL; ( E ) ANY LINEAL ASCENDANT OR DESCENDANT OF THE INDIVID UAL; ( F ) ANY LINEAL ASCENDANT OR DESCENDANT OF THE SPOUSE OF THE INDIVIDUAL; ( G ) SPOUSE OF THE PERSON REFERRED TO IN ITEMS ( B ) TO ( F ); AND ( II ) IN CASE OF A HINDU UNDIVIDED FAMILY, ANY MEMBER THEREOF; ( F ) 'STAMP DUTY VALUE' MEANS THE VALUE ADOPTED OR AS SESSED OR ASSESSABLE BY ANY AUTHORITY OF THE CENTRAL GOVERNMENT OR A STATE GOVERNMENT FOR THE PURPOSE OF PAYMENT OF STAMP DUTY IN RESPECT OF AN I MMOVABLE PROPERTY; ITA NOS.406 & 407/MDS/2017 :- 22 -: MAIN CONTENTION TAKEN BY THE LD. AUTHORISED REPRESE NTATIVE IS THAT ASSESSEE COULD NOT BE CONSIDERED AS AN INDIVIDUAL OR HUF WITHIN THE MEANING OF SEC. 56(2)(VII) OF THE ACT, SINCE ASSESS EE HAD FILED ITS RETURN IN THE STATUS OF A TRUST. IT MAY BE TRUE TH AT ASSESSEE HAD USED THE RETURN FORM PRESCRIBED FOR TRUST/AOP WHILE FILI NG ITS RETURN AND NOT THE RETURN FORM PRESCRIBED FOR INDIVIDUALS. HOWEV ER, IN OUR OPINION STATUS OF AN ASSESSEE FOR THE PURPOSE OF ASSESSMENT CANNOT BE DETERMINED BY THE FORM IN WHICH A RETURN OF INCOME WAS FILED. DEFINITION OF A PERSON U/S. 2(31) OF THE ACT DOES N OT GIVE A SPECIFIC CLASSIFICATION FOR A TRUST, WHETHER IT IS FOR PRIV ATE PURPOSE OR FOR PUBLIC CHARITY. HOWEVER, THE DEFINITION IS AN INCLUSIVE ONE AND THIS BY ITSELF MEAN THAT ALL POSSIBLE STATUS IN WHICH A PERSON C AN BE ASSESSED ARE NOT EXHAUSTIVELY DETAILED IN IT. OR IN OTHER WORDS HOW THE ASSESSEE DESCRIBED ITSELF IN ITS RETURN MAY NOT BE DETERMINA TIVE OF ITS STATUS. STATUS UNDER INCOME TAX IS A MATTER OF LAW AND NOT OF CHOICE. 23. NOW COMING TO THE APPLICATION OF SEC.56(2)(VII) O F THE ACT LOWER AUTHORITIES HAD TREATED THE ASSESSEE ON PAR W ITH AN INDIVIDUAL, TAKING A VIEW THAT AN INDIVIDUAL DID NOT ALWAYS ME AN A NATURAL PERSON ALONE. AT THIS JUNCTURE, IT WILL BE NECESSARY TO HAVE A LOOK AT THE JUDGMENT OF HONBLE APEX COURT IN THE CASE OF CIT VS. SMT. KAMALINI KHATAU 209 ITR 101. THERE THE QUESTION BEFORE HONBLE APEX COURT WAS THE LIABILITY IN THE CASE OF A DISCRETIONARY TR UST AND THE POWERS OF ITA NOS.406 & 407/MDS/2017 :- 23 -: THE LD. ASSESSING OFFICER TO ASSESS AND RECOVER TAX FROM A TRUSTEE OR THE BENEFICIARY. WHAT WAS HELD BY THE APEX COURT A T PARA 12 OF ITS JUDGMENT IS REPRODUCED HEREUNDER:- TO BEGIN WITH, THE TRUSTEE EVEN OF A DISCRETIONAR Y TRUST IS, BY REASON OF THE TERMS OF SECTION 160, A REPRESENTA TIVE ASSESSEE. SECTION 161(1) SETS OUT THE LIABILITY OF A REPRESENTATIVE ASSESSEE. ITS FIRST PART MAKES HIM S UBJECT, AS REGARDS THE INCOME IN RESPECT OF WHICH HE IS A REPRESENTATIVE ASSESSEE, TO THE SAME DUTIES, RESPONSIBILITIES AND LIABILITIES AS IF THE INCOME W ERE INCOME RECEIVED BY OR ACCRUING TO OR IN FAVOUR OF HIM BENE FICIALLY, AND HE IS MADE LIABLE TO ASSESSMENT IN HIS OWN NAME IN RESPECT THEREOF. THE SECOND PART AFFORDS PROTECTION TO THE REPRESENTATIVE ASSESSEE ; IT STATES THAT SUCH ASSES SMENT SHALL BE DEEMED TO BE MADE UPON HIM ONLY IN HIS REPRESENTATIVE CAPACITY AND ALSO THAT TAX MAY BE LE VIED UPON AND RECOVERED FROM HIM ONLY IN LIKE MANNER AND TO THE SAME EXTENT AS IT WOULD BE LEVIABLE UPON AND RECOVERABLE FROM THE PERSON REPRESENTED BY HIM. SEC TION 161(2) GIVES THE REPRESENTATIVE ASSESSEE A FURTHER MEASURE OF PROTECTION BY MAKING IT EXPLICIT THAT 'H E SHALL NOT, IN RESPECT OF THAT INCOME, BE ASSESSED UNDER A NY OTHER PROVISIONS OF THIS ACT'. THIS IS OF SIGNIFICA NCE FOR 'ANY OTHER PROVISIONS OF THIS ACT' MUST PLAINLY MEAN ANY PROVISION OF THE ACT OTHER THAN SECTION 161. SECTION 164 STATES THAT WHERE ANY INCOME IN RESPECT OF WHICH A TRUSTEE IS LIABLE AS REPRESENTATIVE ASSESSE E IS NOT SPECIFICALLY RECEIVABLE ON BEHALF OR FOR THE BENEFI T OF ANY ONE PERSON OR WHERE THE INDIVIDUAL SHARES OF THE PE RSONS ON WHOSE BEHALF OR FOR WHOSE BENEFIT SUCH INCOME OR PART THEREOF IS RECEIVABLE ARE INDETERMINATE OR UNKNOWN, TAX SHALL BE CHARGED AS IF SUCH INCOME WERE THE TOTAL I NCOME OF AN ASSOCIATION OF PERSONS OR SUCH COURSE BENEFITS T HE REVENUE. PUT DIFFERENTLY, SECTION 164 STATES THAT T AX SHALL BE LEVIED UPON THE INCOME OF A DISCRETIONARY TRUST AS IF IT WERE THE TOTAL INCOME OF AN ASSOCIATION OF PERSONS, EXCEPT THAT IF IT OR PART OF IT IS ACTUALLY RECEIVED BY A BENEFICIARY IT OR THAT PART OF IT BECOMES CHARGEABLE TO TAX AT THE RATE APPLICABLE TO THE TOTAL INCOME OF THE BENEFICIARY I F THAT COURSE IS BENEFICIAL TO THE REVENUE. SECTION 164 DO ES NOT CREATE A CHARGE ON THE INCOME OF A DISCRETIONARY TR UST. THE WORD 'CHARGED' IN THE CONTEXT IN WHICH IT IS USED I N SECTION ITA NOS.406 & 407/MDS/2017 :- 24 -: 164 MEANS ONLY 'LEVIED'. SECTION 164 DOES NOT MAKE THE TRUSTEE OF A DISCRETIONARY TRUST LIABLE TO ASSESSME NT OR THE RECOVERY OF TAX ON THE INCOME OF THE TRUST. SECTION 164 HARKS BACK TO SECTION 161 WHEN IT REFERS TO 'PERSON S . . . . LIABLE AS REPRESENTATIVE ASSESSEES'. IT IS SECTION 161, THEREFORE, WHICH HAS TO BE READ TO MAKE THE TRUSTEE EVEN OF A DISCRETIONARY TRUST LIABLE TO ASSESSMENT AND R ECOVERY OF TAX ON INCOME RECEIVED BY HIM AS A TRUSTEE. FURT HER, SECTION 161, AS POINTED OUT ABOVE, PROTECTS THE REPRESENTATIVE ASSESSEE BY STATING THAT ASSESSMENT UPON HIM SHALL BE DEEMED TO BE ONLY IN HIS REPRESENTATIV E CAPACITY, BY MANDATING THAT TAX CAN BE LEVIED UPON AND RECOVERED FROM HIM ONLY IN LIKE MANNER AND TO THE S AME EXTENT AS IT WOULD BE LEVIABLE UPON AND RECOVERABLE FROM THE PERSON REPRESENTED BY HIM AND BY STATING THAT H E MAY NOT BE ASSESSED UNDER ANY OTHER PROVISIONS OF THE A CT. SECTION 164 DOES NOT GIVE ANY OF THESE PROTECTIONS, AS, CLEARLY, THEY MUST BE GIVEN TO ALL REPRESENTATIVE A SSESSEES. THE LIABILITY OF A TRUSTEE OF A DISCRETIONARY TRUST TO BE ASSESSED TO TAX IN RESPECT OF ITS INCOME AND TO REC OVERY THEREOF IS CREATED BY SECTION 161 AND IT ALSO STATE S THAT HE IS NOT LIABLE TO SUCH ASSESSMENT UNDER ANY OTHER PR OVISIONS OF THE ACT. SECTION 164 SETS OUT ONLY HOW SUCH TAX SHALL BE CHARGED WHEN THE INCOME IS NOT DISTRIBUTED AND WHEN THE INCOME IS DISTRIBUTED. IT DOES APPEAR, THEREFORE, THAT SECTION 164 CANNOT BE READ AS BEING A CODE IN ITSELF APPLICABLE TO THE TAXATIO N OF THE INCOME OF A DISCRETIONARY TRUST. CONSEQUENTLY, IT C ANNOT BE HELD THAT THE BENEFICIARY OF A DISCRETIONARY TRUST, EVEN IF HE HAS RECEIVED ITS INCOME IN THE ACCOUNTING YEAR, CAN NOT BE TAXED THEREON BECAUSE SECTION 164 DOES NOT PROVIDE FOR SUCH CONTINGENCY. THE PRINCIPAL CONTENTION RAISED B Y MR. SALVE ON BEHALF OF THE ASSESSEE MUST, ACCORDINGLY, BE REJECTED. WHY, THEN, SHOULD THE BENEFICIARY OF A DISCRETIONAR Y TRUST STAND ON A FOOTING DIFFERENT FROM THAT OF THE BENEF ICIARY OF A SPECIFIC TRUST ? IT IS TRUE THAT THE LANGUAGE OF SECTION 166 DOES NOT AVAIL THE REVENUE BECAUSE IT STATES THAT S ECTIONS 160 TO 165 DO NOT PREVENT 'EITHER THE DIRECT ASSESS MENT OF THE PERSON ON WHOSE BEHALF OR FOR WHOSE BENEFIT INC OME THEREIN REFERRED TO IS RECEIVABLE OR THE RECOVERY F ROM SUCH PERSON OF THE TAX PAYABLE IN RESPECT OF SUCH INCOME '. THE SECTION IS CLEARLY CLARIFICATORY. IT DOES NOT EMPOW ER ANY ASSESSMENT OR RECOVERY BY ITSELF. IT ONLY MAKES IT CLEAR THAT ITA NOS.406 & 407/MDS/2017 :- 25 -: SECTIONS 160 TO 165 DO NOT BAR THE DIRECT ASSESSMEN T OF THE PERSON ON WHOSE BEHALF OR FOR WHOSE BENEFIT THE INCOME IS RECEIVABLE OR THE RECOVERY FROM SUCH PERS ON OF THE TAX PAYABLE THEREON, PROVIDED THAT IS PERMISSIB LE UNDER ANY OTHER PROVISIONS OF THE ACT. EVEN SO, SINCE THE WORD USED IN SECTION 166 IS 'RECEIVABLE', IT CANNOT APPL Y TO A DISCRETIONARY TRUST FOR IT CANNOT BE SAID THAT THE INCOME THEREON IS 'RECEIVABLE' FOR ONE OR MORE BENEFICIARI ES, IT BEING LEFT TO THE DISCRETION OF THE TRUSTEES WHETHE R OR NOT THE INCOME SHOULD BE DISTRIBUTED TO ONE OR MORE OF THE BENEFICIARIES OR NOT AT ALL. BUT THAT IS NOT TO SAY THAT THE BENEFICIARY OF A DISCRETIONARY TRUST, BECAUSE HE DO ES NOT FALL WITHIN THE AMBIT OF SECTION 166, MAY NOT BE AS SESSED UPON INCOME RECEIVED BY HIM AND TAX RECOVERED FROM HIM THEREON IF THAT IS PERMISSIBLE UNDER ANY OTHER PROV ISIONS OF THE ACT FOR, AS AFORESTATED, SECTION 166 IS MERELY CLARIFICATORY. SECTION 5 OF THE ACT DEFINES THE TOT AL INCOME OF ANY PERSON TO INCLUDE INCOME RECEIVED BY HIM OR RECEIVED ON HIS BEHALF OR WHICH ACCRUES OR ARISES T O HIM. A PERSON MAY BE DIRECTLY ASSESSED IN RESPECT OF SUCH INCOME. THE INCOME OF A DISCRETIONARY TRUST WHICH IS WITHIN THE ACCOUNTING YEAR DISTRIBUTED TO AND RECEIVED BY THE BENEFICIARY WOULD, THEREFORE, BE SUBJECT TO ASSESSM ENT IN HIS HANDS AND TAX THEREON WOULD BE RECOVERABLE FROM HIM. SUCH INCOME WOULD SQUARELY FALL WITHIN THE BROAD SW EEP OF TOTAL INCOME UNDER SECTION 5 AND THE BENEFICIARY WO ULD BE LIABLE TO ASSESSMENT AND RECOVERY OF TAX THEREON UN DER SECTION 4. WHAT HAS BEEN OBSERVED BY THE APEX COURT IS THAT TA X IS TO LEVIED ON THE INCOME OF THE DISCRETIONARY TRUST AS IF IT WAS TOTAL INCOME OF AN AOP, EXCEPT FOR THAT PART WHAT WAS ACTUALLY RECEIVE D BY THE BENEFICIARY. BY NECESSARY IMPLICATION THIS MEAN TH AT PRIVATE DISCRETIONARY TRUST CANNOT BE TREATED AS AN INDIVID UAL FOR ALL PURPOSE OF ACT, ESPECIALLY WHEN THE TERM INDIVIDUAL AS SUCH AS IS NOT DEFINED THEREIN. ITA NOS.406 & 407/MDS/2017 :- 26 -: 24. NO DOUBT A GROUP OF INDIVIDUALS MAY AS WELL COME IN FOR TREATMENT IN THE STATUS OF AN INDIVIDUAL IF THE CONTEXT, SO REQUIRES AS HELD BY THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. SHRI KRISHNA BANDAR TRUST, 201 ITR 0989 . THEIR LORDSHIP WHILE TAKING THIS VIEW HAD CONSIDERED THE JUDGMENTS OF APEX COURT IN THE CASE OF INDIRA BALAKRISHNA (SUPRA) AND OF JOGENDRA NATH NA SKAR VS. CIT AS WELL AS THAT OF ANDHRA PRADESH STATE ROAD TRANSPORT CORPORATION VS. ITO (52 ITR 524 ). WHAT WE DISCERN FROM THIS DECISION IS THAT A CONTEXTUAL MEANING HAS GIVEN TO THE TERM INDIVID UAL. THUS JUST BECAUSE A PRIVATE DISCRETIONARY TRUST BEEN TREATED AS INDIVIDUAL FOR THE PURPOSE OF TAXATION U/S. 80L OR U/S. 194A OR SEC. 5 4F OF THE ACT WOULD NOT BE A REASON TO TREAT IT SO U/S. 56(2)(VII) OF T HE ACT ALSO. WE ARE ALIVE TO THE JUDGMENT OF HONBLE JURISDICTIONAL HI GH COURT IN THE CASE OF VENU SURESH SHEELA TRUST & ORS 233 ITR 0099 WHEREIN IT WAS HELD THAT FOR APPLICATION OF SEC. 80L, A PRIVATE DISCRE TIONARY TRUST SHOULD BE CONSIDERED AS AN INDIVIDUAL. IT WAS SIMILARLY HELD BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF ARIHANT TRUST & ORS (SUPRA ) WHERE THE QUESTION WAS EXEMPTION FROM APPLICATION U/S. 194A OF THE ACT. THERE IS ALSO A DECISION OF THE BOMBAY BENCH OF THIS TRI BUNAL IN THE CASE OF BALAGOPAL TRUST (SUPRA ) WHERE THE BENEFIT OF SEC. 54F OF THE ACT TO A PRIVATE TRUST TREATING IT AS EQUIVALENT TO INDIVID UAL. HOWEVER, THE COMMON STRAIN RUNNING THROUGH ALL THESE DECISIONS IS THAT, THE ITA NOS.406 & 407/MDS/2017 :- 27 -: INTERPRETATIONS WERE IN RELATION TO A RELIEF GIVI NG PROVISION BENEFITING THE ASSESSEE, AND NOT A PROVISION CHARGING TAX ON AN ASSESSEE. IT IS TRITE LAW THAT RELIEF GIVING PROVISIONS ARE TO BE INTERPRETED LIBERALLY WHEREAS CHARGING PROVISIONS ARE TO BE APPLIED STRIC TLY. SECTION 56(2) OF THE ACT IS NOT AKIN TO A RELIEF GIVING PROVISION LIKE SECTION 80L, 54F OF THE ACT. IT IS A CHARGING SECTION WHEREIN CERTAIN TYPE OF RECEIPTS, THAT MAY NOT OTHERWISE BE CONSIDERED AS INCOME IS ROPED IN FOR TAXATION. 25. THAT APART, THE DEFINITION OF RELATIVE GIVEN IN EXPLANATION (E) TO SAID SECTION LEAVES NO ROOM FOR DOUBT, THAT THE TERM INDIVIDUAL USED IMPLIED ONLY A NATURAL PERSON. THUS IRRESPECT IVE OF THE STATUS IN WHICH ASSESSEE WAS CONSIDERED FOR ASSESSMENT, IN OU R OPINION IT COULD NOT BE CONSIDERED AS AN INDIVIDUAL FOR APPLICATION OF SEC. 56(2)(VII) OF THE ACT. THE TERM INDIVIDUAL AS USED IN THE SAID S ECTION, BY NECESSARY IMPLICATION ONLY CAN BRING IN NATURAL PERSONS. TH US, WE ARE UNABLE TO ACCEPT THE ARGUMENT OF THE LD. DEPARTMENTAL REPRESE NTATIVE THAT THE TERM INDIVIDUAL HAVING BEEN DEFINED TO INCLUDE AN ARTIFICIAL JURIDICAL PERSON AS ALSO A PRIVATE DISCRETIONARY TRUST U/S. 8 0L, 54F AND 194A OF THE ACT, IT SHOULD BE SO CONSIDERED FOR APPLICATION OF SEC. 56(2)(VII) AS WELL. AS HELD BY APEX COURT IN THE CASE OF CIT VS. SUN ENGINEERING WORKS P. LTD 198 ITR 297, IT IS NEITHER DESIRABLE NOR PERMISSIBLE TO PICK OUT A WORD OR SENTENCE DIVORCED FROM THE CONTE XT OF A QUESTION RAISED BEFORE THE COURT AND TREAT IT AS COMPLETE LA W. ANY JUDGMENT ITA NOS.406 & 407/MDS/2017 :- 28 -: HAS TO BE READ AS A WHOLE AND THE OBSERVATIONS FROM THE JUDGMENT HAD TO BE CONSIDERED IN THE LIGHT OF THE QUESTIONS RAISED ABOVE. THUS, IN OUR OPINION THE JUDGMENTS OF JURISDICTIONAL HIGH COURT RELIED BY THE LD. DEPARTMENTAL REPRESENTATIVE WHICH WERE ALL REN DERED IN DIFFERENT CONTEXT, DEALING WITH RELIEF GIVING PROVISIONS OF T HE ACT WOULD HAVE NO APPLICABILITY FOR INTERPRETING A CHARGING SECT ION. 26. IN OUR OPINION, THE DECISION OF DELHI BENCH OF TH E TRIBUNAL IN THE CASE OF DECISION IN THE CASE OF MRIDU HARI DALMIA PARIVAR TRUST (SUPR A) RELIED ON BY THE LD. AR WHEN SEEN IN THE LIGHT OF THE ABOVE DISCUSSION, BRINGS OUT HOW CORRECTLY THE BENCH UNDERSTOOD THE APPLICABILITY OF SEC. 56(2)(VII) ON PRIVATE TRUSTS. THE QUESTION THERE ALSO WAS TREATMENT OF A GIFT RECEIVED BY A PRIVAT E DISCRETIONARY TRUST, CONSIDERED BY THE ASSESSING OFFICER AS INCOME U/S. 56(2) (VI) OF THE ACT. WHAT WAS HELD BY THE DELHI BENCH AT PARA 3 TO 5 ARE REPRODUCED HEREUNDER:- 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE RELEVANT MATERIAL ON RECORD. THE AO INVOKED THE PROVISIONS OF SECTION 56(2)(VI) FOR COMING TO THE CONCLUSION THAT THE AMOUNT OF GIFT RECEIVED BY THE ASSESSEE FROM MRS. ABHA DALMIA WAS NOT EXEMPT UNDER THIS PROVISION AND HENCE CHARGEABLE TO TAX. H E SATISFIED HIMSELF AS REGARDS THE FULFILLMENT OF THR EE CONDITIONS AS NOTED BY HIM. AT THE OUTSET, WE FIND THAT THE VIEW POINT OF THE AO IN CONSTRUING SECTION 56(2 ) AS AN EXEMPTION PROVISION IS NOT CORRECT AS IT WILL BE SEEN INFRA THAT IT IS RATHER A CHARGING PROVISION. REVER TING TO THE POINT IN DISPUTE, THE PRIMARY QUESTION WHICH FA LLS FOR OUR CONSIDERATION IS WHETHER OR NOT THE AMOUNT OF ITA NOS.406 & 407/MDS/2017 :- 29 -: RS.1.60 CRORE IS CHARGEABLE TO TAX AS PER THE PROVISIONS OF SECTION 56(2)(VI). 4. SECTION 56 FALLS UNDER CHAPTER IV-F OF THE ACT W ITH THE CAPTION 'INCOME FROM OTHER SOURCES.' SUB-SECTIO N (1) OF THIS SECTION PROVIDES THAT INCOME OF EVERY K IND WHICH IS NOT TO BE EXCLUDED FROM THE TOTAL INCOME UNDER THIS ACT SHALL BE CHARGEABLE TO INCOME-TAX UN DER THE HEAD 'INCOME FROM OTHER SOURCES', IF IT IS NOT CHARGEABLE TO INCOME-TAX UNDER ANY OF THE HEADS SPECIFIED IN SECTION 14, ITEMS A TO E. THEN COMES S UB- SECTION (2) OF SECTION 56 WHICH PROVIDES IN PARTICU LAR AND WITHOUT PREJUDICE TO THE GENERALITY OF THE PROVISIONS OF SUB-SECTION (1) THAT THE INCOMES DISCUSSED UNDER VARIOUS CLAUSES OF THIS SUB-SECTION SHALL BE CHARGEABLE TO INCOME-TAX UNDER THE HEAD 'INCOME FROM OTHER SOURCES.' CLAUSE (VI), WHICH IS RELEVANT FOR OUR PURPOSE, READS AS UNDER : '(VI) WHERE ANY SUM OF MONEY, THE AGGREGATE VALUE O F WHICH EXCEEDS FIFTY THOUSAND RUPEES, IS RECEIVED WITHOUT CONSIDERATION, BY AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY, IN AN Y PREVIOUS YEAR FROM ANY PERSON OR PERSONS ON OR AFTER THE 1ST DAY OF APRIL, 2006 BUT BEFORE THE 1ST DAY OF OCTOBER, 2009, THE WHOLE OF THE AGGREGATE VALUE OF SUCH SUM: PROVIDED THAT THIS CLAUSE SHALL NOT APPLY TO ANY SU M OF MONEY RECEIVED (A) FROM ANY RELATIVE; OR (B) ON THE OCCASION OF THE MARRIAGE OF THE INDIVIDUAL; OR (C) UNDER A WILL OR BY WAY OF INHERITANCE; OR (D) IN CONTEMPLATION OF DEATH OF THE PAYER; OR (E) FROM ANY LOCAL AUTHORITY AS DEFINED IN THE EXPLANAT ION TO CLAUSE (20) OF SECTION 10; OR ITA NOS.406 & 407/MDS/2017 :- 30 -: (F) FROM ANY FUND OR FOUNDATION OR UNIVERSITY OR OTHER EDUCATIONAL INSTITUTION OR HOSPITAL OR OTHER MEDICAL INSTITUTIO N OR ANY TRUST OR INSTITUTION REFERRED TO IN CLAUSE (23C) OF SECTION 10; OR (G) FROM ANY TRUST OR INSTITUTION REGISTERED UNDER SECT ION 12AA. EXPLANATION. FOR THE PURPOSES OF THIS CLAUSE, 'RELA TIVE' MEANS (I) SPOUSE OF THE INDIVIDUAL; (II) BROTHER OR SISTER OF THE INDIVIDUAL; (III) BROTHER OR SISTER OF THE SPOUSE OF THE INDIVIDUAL; (IV) BROTHER OR SISTER OF EITHER OF THE PARENTS OF THE I NDIVIDUAL; (V) ANY LINEAL ASCENDANT OR DESCENDANT OF THE INDIVIDUA L; (VI) ANY LINEAL ASCENDANT OR DESCENDANT OF THE SPOUSE OF THE INDIVIDUAL; (VII) SPOUSE OF THE PERSON REFERRED TO IN CLAUSES (II) TO (VI);' 5. A BARE PERUSAL OF THE ABOVE PROVISION INDICATES THAT WHERE ANY SUM OF MONEY EXCEEDING RS.50,000/- IS RECEIVED WITH OUT CONSIDERATION BY ANY INDIVIDUAL OR HUF, IN ANY PREV IOUS YEAR FROM ANY PERSON OR PERSONS, THE WHOLE OF THE AGGREGATE V ALUE OF SUCH SUM SHALL BE CHARGEABLE TO INCOME-TAX UNDER THE HEA D 'INCOME FROM OTHER SOURCES'. A CURSORY GLANCE AT THE OPENIN G LINE OF SUB- SECTION (2) OF SECTION 56 DIVULGES THAT IT IS A CHA RGING PROVISION, WHICH CHARGES THE RECEIPT OF AN OTHERWISE GENUINE A MOUNT OF GIFT ETC. TO TAX, SUBJECT TO THE FULFILLMENT OF CERTAIN STIPULATED CONDITIONS. IT FOLLOWS THAT IN ORDER TO ATTRACT THE APPLICABILITY OF CLAUSE (VI) OF SECTION 56(2), THE FOLLOWING CONDITI ONS SHOULD BE FULFILLED: ITA NOS.406 & 407/MDS/2017 :- 31 -: (I) AN AMOUNT EXCEEDING RS.50,000/- IN AGGREGATE SHOULD BE RECEIVED IN A YEAR; (II) SUCH RECEIPT SHOULD BE WITHOUT CONSIDERATION; (III) SUCH RECEIPT SHOULD BE BY AN INDIVIDUAL OR HUF; AND (IV) SUCH RECEIPT BY INDIVIDUAL OR HUF SHOULD BE FROM AN Y PERSON OR PERSONS WITHIN THE DESIGNATED PERIOD. 6. IT IS ON THE CUMULATIVE SATISFACTION OF THE ABOV E CONDITIONS THAT THE AMOUNT RECEIVED BECOMES CHARGEABLE TO TAX U/S 5 6(2)(VI). THEN, THERE IS A PROVISO TO THIS PROVISION WHICH FO RBIDS THE APPLICABILITY OF THE CHARGING PROVISION UNDER CERTA IN CIRCUMSTANCES ENSHRINED IN CLAUSES (A) TO (G). EXPLANATION TO THI S PROVISO GIVES MEANING TO THE TERM 'RELATIVE', WHICH HAS BEEN USED IN CLAUSE (A) OF THE PROVISO TO SECTION 56(2)(VI). EFFECT OF THE PROVISO ALONG WITH EXPLANATION TO SECTION 56(2)(VI), TO THE EXTENT OF THE ISSUE UNDER CONSIDERATION, IS THAT WHERE ANY SUM OF MONEY EXCEE DING THE SPECIFIED LIMIT IS RECEIVED AS GIFT FROM ANY RELATI VE AS DEFINED IN THE EXPLANATION, THAT SHALL NOT BE CHARGEABLE TO TAX U/ S 56(2)(VI). COMING BACK TO THE AFORENOTED FOUR CONDITIONS BRING ING RECEIPT WITHIN THE CHARGING PROVISION, WE FIND THAT THE FIR ST CONDITION, NAMELY, RECEIPT OF MONEY IN EXCESS OF RS.50,000/- I S SATISFIED. THE SECOND CONDITION IS THAT SUCH AMOUNT SHOULD BE RECE IVED WITHOUT CONSIDERATION. THIS CONDITION IS ALSO SATISFIED BEC AUSE THE ASSESSEE TRUST RECEIVED A SUM OF RS.1.60 CRORE FROM SMT. ABH A DALMIA AS GIFT, WHICH IS OBVIOUSLY WITHOUT ANY CONSIDERATION. THE FOURTH CONDITION ABOUT THE RECEIPT OF SUCH AMOUNT FROM ANY PERSON OR PERSONS BEFORE THE DESIGNATED DATE IS ALSO SATISFIE D. NOW WE ESPOUSE THE THIRD CONDITION AS PER WHICH THE RECEIP T OF SUCH SUM SHOULD BE BY AN INDIVIDUAL OR HUF. THIS CONDITION I S OBVIOUSLY WANTING BECAUSE AS PER THE AO'S OWN VERSION THE STA TUS OF THE ASSESSEE IS ASSOCIATION OF PERSONS, WHICH IS OTHER THAN AN INDIVIDUAL OR HUF. SECTION 2(31) DEFINES 'PERSON' A S INCLUDING (I) AN INDIVIDUAL, (II) A HINDU UNDIVIDED FAMILY, (III) A COMPANY, (IV) A FIRM, (V) AN ASSOCIATION OF PERSONS OR A BODY OF IN DIVIDUALS, WHETHER INCORPORATED OR NOT,(VI) A LOCAL AUTHORITY, AND (VII) EVERY ARTIFICIAL JURIDICAL PERSON, NOT FALLING WITHIN ANY OF THE PRECEDING SUB-CLAUSES. IT IS PALPABLE FROM THE DEFINITION OF 'PERSON' AS GIVEN IN SECTION 2(31) OF THE ACT THAT AOP IS A PERSON DI FFERENT FROM AN INDIVIDUAL OR A HUF. EVEN IF AN AOP CONSISTS OF SOM E INDIVIDUALS, THE STATUS OF SUCH A GROUP OF INDIVIDUALS REMAINS A S THAT OF 'AOP', ITA NOS.406 & 407/MDS/2017 :- 32 -: IN THE SAME WAY IN WHICH WHEN SOME INDIVIDUALS ENTE R INTO PARTNERSHIP, THE BODY WHICH COMES INTO EXISTENCE IS CALLED A 'FIRM'. THE AO HAS RIGHTLY ADMITTED THE STATUS OF THE ASSES SEE AS AN AOP AND NOT AN INDIVIDUAL OR HUF. IT IS AXIOMATIC FROM A PLAIN READING OF THE PROVISION THAT ANY SUM EXCEEDING RS.50,000/- CA N FALL WITHIN THE AMBIT OF SECTION 56(2)(VI) OF THE ACT ONLY IF I T IS RECEIVED BY AN INDIVIDUAL OR HUF. SINCE THE ASSESSEE IN QUESTION I S AN AOP AND NOT ANY INDIVIDUAL OR HUF, WHO RECEIVED A SUM OF RS.1.6 0 CRORE WITHOUT CONSIDERATION, SUCH A RECEIPT IN OUR CONSIDERED OPI NION CANNOT BE INCLUDED IN ITS TOTAL INCOME WITHIN THE FRAMEWORK O F SECTION 56(2)(VI). WE, THEREFORE, SET ASIDE THE IMPUGNED OR DER ON THIS SCORE AND ORDER FOR THE DELETION OF THIS ADDITION. SECTION 56(2)(VI) OF THE ACT WAS THE PRECURSOR TO S EC. 56(2)(VII) OF THE ACT, AND THEREFORE THE ABOVE DECISION IN OUR OPINIO N SQUARELY COVERS THE ISSUE IN HAND, BEFORE US ALSO. 27. IN ANY CASE, WE FIND THAT SEC. 56(2) OF THE ACT HAS BEEN AMENDED BY FINANCE ACT, 2017 INSERTING CLAUSE (X). APPLICABILITY OF SEC. 56(2)(VII) OF THE ACT IS ONLY UPTO 1 ST APRIL, 2017 AND AFTER THAT DATE, IN ITS PLACE, SEC. 56(2)(X) COMES INTO PLAY. LATTER SECTION HAS BROADENED THE SCOPE OF TAXING GIFTS RECEIVED WITHOU T CONSIDERATION TO PERSONS OTHER THAN INDIVIDUALS AND HUF ALSO. EXPLAN ATORY NOTE TO FINANCE BILL 2017 GIVES THE REASON FOR ADDING CLAUS E (X) TO SEC. 56(2) AS UNDER:- UNDER THE EXISTING PROVISIONS OF SECTION 56(2)(VI I), ANY SUM OF MONEY OR ANY PROPERTY WHICH IS RECEIVED WITHOUT CON SIDERATION OR FOR INADEQUATE CONSIDERATION (IN EXCESS OF THE SPEC IFIED LIMIT OF RS. 50,000) BY AN INDIVIDUAL OR HINDU UNDIVIDED FAM ILY IS CHARGEABLE TO INCOME-TAX IN THE HANDS OF THE RESIDE NT UNDER THE HEAD 'INCOME FROM OTHER SOURCES' SUBJECT TO CERTAIN EXCEPTIONS. FURTHER, RECEIPT OF CERTAIN SHARES BY A FIRM OR A C OMPANY IN WHICH ITA NOS.406 & 407/MDS/2017 :- 33 -: THE PUBLIC ARE NOT SUBSTANTIALLY INTERESTED IS ALSO CHARGEABLE TO INCOME-TAX IN CASE SUCH RECEIPT IS IN EXCESS OF RS. 50,000 AND IS RECEIVED WITHOUT CONSIDERATION OR FOR INADEQUATE CO NSIDERATION. THE EXISTING DEFINITION OF PROPERTY FOR THE PURPOSE OF THIS SECTION INCLUDES IMMOVABLE PROPERTY, JEWELLERY, SHARES, PAI NTINGS, ETC. THESE ANTI-ABUSE PROVISIONS ARE CURRENTLY APPLICABL E ONLY IN CASE OF INDIVIDUAL OR HUF AND FIRM OR COMPANY IN CERTAIN CASES. THEREFORE, RECEIPT OF SUM OF MONEY OR PROPERTY WITH OUT CONSIDERATION OR FOR INADEQUATE CONSIDERATION DOES NOT ATTRACT THESE ANTI-ABUSE PROVISIONS IN CASES OF OTHER ASSES SEES. IN ORDER TO PREVENT THE PRACTICE OF RECEIVING THE SUM OF MONEY OR THE PROPERTY WITHOUT CONSIDERATION OR FOR INADEQUAT E CONSIDERATION, IT IS PROPOSED TO INSERT A NEW CLAUS E (X) IN SUB- SECTION (2) OF SECTION 56 SO AS TO PROVIDE THAT REC EIPT OF THE SUM OF MONEY OR THE PROPERTY BY ANY PERSON WITHOUT CONS IDERATION OR FOR INADEQUATE CONSIDERATION IN EXCESS OF RS. 50,00 0 SHALL BE CHARGEABLE TO TAX IN THE HANDS OF THE RECIPIENT UND ER THE HEAD 'INCOME FROM OTHER SOURCES'. IT IS ALSO PROPOSED TO WIDEN THE SCOPE OF EXISTING EXCEPTIONS BY INCLUDING THE RECEI PT BY CERTAIN TRUSTS OR INSTITUTIONS AND RECEIPT BY WAY OF CERTAI N TRANSFERS NOT REGARDED AS TRANSFER UNDER SECTION 47. A READING OF THE ABOVE EXPLANATORY NOTE CLEARLY IND ICATE THAT THE PROVISIONS AS IT STOOD PRIOR TO INTRODUCTION OF CLA USE (X) COVERED ONLY INDIVIDUALS AND HUF AND THE LEGISLATURE WANTED TO INCLUDE IN ITS FOLD OTHER ENTITIES ALSO, WHICH WERE RECEIVING GRATUIT OUS PAYMENTS. APPLICABILITY OF THIS PROVISION IS ONLY FROM 01.04. 2017 28. BASED ON OUR DISCUSSION ABOVE, WE ARE OF THE OPINIO N THAT THE SUM OF ?25,00,00,000/- RECEIVED BY THE ASSESSEE COULD NOT HAVE BEEN CONSIDERED AS INCOME FROM OTHER SOURCE U/S. 56 (2)(VII) OF THE ACT R.W.S 2(24)(XV) OF THE ACT. THE SAID ADDITION STAND S DELETED. ITA NOS.406 & 407/MDS/2017 :- 34 -: 29. THE ONLY OTHER ISSUE RAISED BY THE ASSESSEE WHICH I S COMMON FOR BOTH THE YEARS IS ON DISALLOWANCE U/S. 14A OF THE ACT. 30. LIMITED ARGUMENTS OF THE LD. AUTHORISED REPRESENT ATIVE WAS THAT WHILE COMPUTING SUCH DISALLOWANCE, ONLY TH OSE INVESTMENTS WHICH YIELDED EXEMPT DIVIDEND WAS TO BE CONSIDERE D AND NOT OTHER INVESTMENTS WHICH DID NOT YIELD ANY DIVIDEND. ACCO RDING TO HIM, BY VIRTUE OF DECISION OF DELHI BENCH OF THE TRIBUNAL I N THE CASE OF INTERGLOBE ENTERPRISES LTD VS. DCIT ( IN ITA NOS.13 62, 1032 & 1580/DEL/2013, DATED 04.04.2014) AND THAT OF KOLKATA BENCH OF THE TRIBUNAL IN THE CASE OF REI AGRO LTD VS. DCIT 144 ITD 141 , ONLY INVESTMENTS GIVING RISE TO DIVIDEND INCOME CLAIMED AS EXEMPT COULD BE CONSIDERED FOR CALCULATION U/S. 14A OF THE ACT. RELIANCE WAS ALSO PLACED ON THE DECISION OF CO-ORDINATE BENCH IN THE CASE OF COMPUTER AGE MANAGEMENT SERVICES (P) LTD VS. ACIT (ITA NO.12 59 TO 1261/MDS/2014). 31. PER CONTRA, LD. DEPARTMENTAL REPRESENTATIVE SUBMIT TED THAT IMPORT GIVEN TO SEC. 14A OF THE ACT BY LD. AUTHORIS ED REPRESENTATIVE COULD NOT BE ACCEPTED, SINCE THE WORDINGS ON THE S AID SECTION DID NOT GIVE ROOM FOR ANY SUCH INTERPRETATION. FURTHER, A S PER LD. DEPARTMENTAL REPRESENTATIVE THE ASSESSEE TRUST ITS ELF WAS FORMED FOR MAKING INVESTMENTS IN SHARES AND DISTRIBUTING THE DIVIDEND AMONG ITS ITA NOS.406 & 407/MDS/2017 :- 35 -: BENEFICIARIES. THEREFORE, ACCORDING TO HIM, SEC. 14 A OF THE ACT SHOULD BE APPLIED STRICTLY. RELIANCE WAS ALSO PLACED ON TH E JUDGMENT OF APEX COURT IN THE CASE OF CIT VS. RAJENDRA PRASAD MOODY 115 ITR 519 . 32. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE ORDERS OF THE AUTHORITIES BELOW. CONTENTION OF THE ASSESSEE IS THAT DIVIDEND ON WHICH EXEMPTION WAS CLAIMED BY IT, WAS ONLY ON FEW INVESTMENTS, WHEREAS MAJORITY OF ITS INVESTMENTS DI D NOT YIELD ANY INCOME AT ALL. DETAILS OF INVESTMENTS HELD BY THE ASSESSEE, AS AT THE END OF THE RELEVANT PREVIOUS YEAR IS REPRODUCED HE REUNDER:- DETAILS OF INVESTMENTS AS ON 31.3.14 AS ON 31.3.13 DIVIDEND INVESTMENT IN PREFERENCE SHARES 2,24,67,248 2,24,67,248 2,29,794 INVESTMENT IN EQUITY SHARES -- - SHRIRAM AUTO MALL LAND HOLDINGS PVT. LTD. 55,89,940 30,89,940 --- SHRIRAM FINANCIAL VENTURES PVT. LTD 1,34,37,25,300 1,34,37,25,300 --- SHRIRAM INVESTMENT HOLDINGS P. LD. 2,25,010 2,25,010 --- SHRIRAM RETAIL AND FRANCHISEES PVT LTD. --- 99,990 --- S HRIRAM CHITS HYDERABAD P. LTD 8,52,05,000 8,52,05,000 --- SHRIRAM CHITS KARNATAKA PVT LTD 3,99,99,000 3,99,99,000 --- SHRIRAM CHITS TAMILNADU PVT LTD 11,99,99,800 11,99,99,800 --- SHRIRAM CAPITAL LTD ---- 1 4,30,863 SHRIRAM VALUE SERVICES P. LTD 1,49,8 0,600 1,49,80,600 --- TVS SHRIRAM GROWTH 3,29,60,621 3,42,89,158 12,179 ITA NOS.406 & 407/MDS/2017 :- 36 -: FUND IB TVS SHRIRAM GROWTH FUND IA 39,18,91,446 39,74,94,530 2,45,217 UTI LIQUID PLAN 5,75,94,331 10,69,783 SHRILAKHA FINANCIAL SERVICES FIRM 7,49,701 ---- --- UTI MONEY MARKET MF ---- ---- 53,48,579 TOTAL 2,05,77,93,666 2,11,99,19,608 73,36,415 IN THE DECISIONS OF I NTERGLOBE ENTERPRISES LTD (SUPRA) DECIDED BY DELHI BENCH AND REI AGRO LTD (SUPRA ) DECIDED BY KOLKATA BENCH, IT HAS BEEN HELD THAT INVESTMENTS ON WHICH NO INCOME WAS RECEI VED BY AN ASSESSEE, SHOULD NOT BE CONSIDERED WHILE CALCULAT ING THE DISALLOWANCE U/S. 14A OF THE ACT. THEREFORE THIS A SPECT IN OUR OPINION, REQUIRES A REVISIT BY THE LD. ASSESSING OFFICER. WE SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES AND REMIT THE ISSUE REGAR DING DISALLOWANCE U/S. 14A OF THE ACT BACK TO THE FILE OF THE LD. ASS ESSING OFFICER FOR COMPUTATION OF SUCH DISALLOWANCE, AFTER EXCLUDING T HOSE INVESTMENTS, WHICH YIELDED NO INCOME DURING THE RELEVANT PREVIOU S YEAR. ORDERED ACCORDINGLY. 33. WE ALSO FIND THAT ASSESSEE HAS RAISED GROUNDS IN I TS APPEAL FOR ASSESSMENT YEAR 2013-2014 WHERE IT SAYS THAT CR EDIT FOR TDS OF ?1,22,329/- WAS NOT GIVEN TO IT. IN OUR OPINION, THIS CAN BE VERIFIED ITA NOS.406 & 407/MDS/2017 :- 37 -: BY THE LD. ASSESSING OFFICER AND IF SUCH CREDIT IS AVAILABLE TO THE ASSESSEE UNDER LAW IT HAS TO BE GIVEN. ORDERED ACC ORDINGLY. 34. IN THE RESULT, THE APPEALS OF THE ASSESSEE FOR BO TH ASSESSMENT YEARS ARE ALLOWED PRO TANTO. ORDER PRONOUNCED ON WEDNESDAY, THE FIFTH DAY OF JUL Y, 2017, AT CHENNAI. SD/- SD/- ( . . . ) (N.R.S. GANESAN) / JUDICIAL MEMBER ( ! . '#'$ ) (ABRAHAM P. GEORGE) % / ACCOUNTANT MEMBER '# / CHENNAI $% / DATED:5 TH JULY, 2017 KV %& '()( / COPY TO: 1 . / APPELLANT 3. *+, / CIT(A) 5. (-. / / DR 2. / RESPONDENT 4. * / CIT 6. .01 / GF