GUPTA FAMILY TRUST, MUMBAI V. ITO 21(3)(2), MUMBAI

ITA 4503/MUM/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3766 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-05-2016
• Appeal Filed By: Assessee
• Bench Allotted: J
• Next Hearing Date: 09-02-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 30-06-2014
• Court: TRIBUNAL
• Department Lawyers: SHABANA PARVEEN
• Keywords: Business income; Maximum Marginal Rate

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL J , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI SANJAY GARG , JM ./ ITA NO. 4503 / MUM/20 1 4 ( / ASSESSMENT YEAR : 200 6 - 0 7 ) GUPTA FAMI LY TRUST, SRUTI CHAMBERS, 2 ND DHOBHI TALAO LANE, 18, MUMBAI - 400002 VS. ITO - 21(3)(2), MUMBAI ./ ./ PAN/GIR NO. : A AA TG 2939 G ( / APPELLANT ) .. ( / RESPONDENT ) /ASSESSEE BY : SHRI NISHIT GANDH I /REVENUE BY : MISS SHABANA PARVEEN / DATE OF HEARING : 0 3 /05/2016 / DATE OF PRONOUNCEMENT 11/05 /201 6 / O R D E R PER R.C.SHARMA (A.M) : THIS IS AN APPEAL FILED BY THE ASSESSEE AG AINST THE ORDER OF CIT(A) - MUMBAI, FOR THE ASSESSMENT YEAR 200 6 - 07 . 2. ONLY GRIEVANCE OF THE ASSESSEE RELATES TO TAXING RENTAL INCOME IN THE HANDS OF ASSESSEE TRUST IN SPITE OF THE FACT THAT SHARES OF EACH BENEFICIARY IS DETERMINED AND EACH BENEFICIARY HAS INCLUDED THEIR SHARE OF INCOME SO RECEIVED FROM THE TRUST IN THEIR INDIVIDUAL RETURN OF INCOME . 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PRIVATE TRUST HAVING INCOME MAINLY IN THE FORM OF RENT AL INCOME. THE RENTAL INCOME DERIVED BY THE TRUST IS ALLOCATED TO THE BENEFICIARIES IN RESPECT OF THE RATIO OF SHARES GIVEN IN THE TRUST DEED. DURING THE YEAR, THE ASSESSEE TRUST HAS DERIVED GROSS RENT OF ITA NO. 4503 /1 4 2 RS.25,91,803/ - AND AFTER CLAIMING DEDUCTION OF MUNI CIPAL TAXES OF RS.5,90,438/ - , BANK CHARGES OF RS.2,278/ - AND DEDUCTION @ 30% U/S. 24(A), THE INCOME FROM HOUSE PROPERTY HAS BEEN COMPUTED AT RS.13, 99,360/ - AND AFTER ALLOCATING THE WHOLE INCOME TO THE BENEFICIARIES, THE TRUST HAS FILED RETUR N OF INCOME SHOW ING NIL INCOME. HOWEVER, THE AO HAS TAXED THE INCOME IN THE HANDS OF THE TRUST. 4. BY THE IMPUGNED ORDER THE CIT(A) CONFIRMED THE ACTION OF THE AO. 5. IT WAS ARGUED BY LD. AR THAT BENEFICIARIES HAVE ALREADY INCLUDED THEIR SHARE IN THEIR RESPECTIVE RETURNS AND ALSO PAID TAX THEREON, THEREFORE, THE AO WAS NOT JUSTIFIED IN AGAIN TAXING THE TRUST WITH RESPECT TO THE SAME INCOME. FURTHER LD. AR PLACE D RELIANCE ON THE ORDER OF JURISDICTIONAL HIGH COURT IN THE CASE OF MARSONS BENEFICIARY TRUST, 188 ITR 224, WHERE IN IT WAS HELD AS UNDER : - IN THE APPLICATIONS WHICH ARE BEFORE US, THE SHARES OF THE BENEFICIARIES IN THE TRUST INCOME ARE KNOWN AND DETERMINATE. THERE CAN, THEREFORE, BE NO QUESTION OF SECTION 164 BEING ATTRACTED. LOOKING TO SECTION 161(1) AND THE DECIS IONS OF OUR HIGH COURT AND THE SUPREME COURT, THE INCOME OF THE TRUST, WHETHER IT IS BUSINESS INCOME OR ANY OTHER INCOME, WILL THEREFORE, HAVE TO BE TREATED AS IF IT WERE DISTRIBUTED TO THE BENEFICIARIES. TAX ON THE SHARE OF EACH BENEFICIARY WILL HAVE TO B E SEPARATELY CALCULATED AS IF IT FORMED A PART OF THE BENEFICIARY'S INCOME. TAX PAYABLE BY THE TRUSTEES WILL BE THE SUM TOTAL OF THE TAX SO CALCULATED ON THE SHARE OF EACH BENEFICIARY. IN FACT, UNDER SECTION 166, THE REVENUE HAS THE OPTION TO ASSESS THE BE NEFICIARY DIRECTLY . THIS DOES NOT MAKE ANY DIFFERENCE TO THE QUANTUM OF TAX WHICH IS LIABLE TO BE PAID. BUT THE INCOME CANNOT BE TAXED IN THE HANDS OF THE TRUSTEES AS ONE UNIT UNDER SECTION 161 (1). 6. ON THE OTHER HAND, LD. DR RELIED ON THE ORDER OF LOW ER AUTHORITIES. 7. WE HAVE CONSIDERED RIVAL CONTENTIONS, CAREFULLY GONE THROUGH THE ORDER OF HONBLE BOMBAY HIGH COURT AS RELIED BY LD. AR. WE FOUND THAT SHARE OF BENEFICIARIES ARE DETERMINED, THEREFORE, PROVISIONS OF SECTION ITA NO. 4503 /1 4 3 164(1) SHALL NOT BE APPLICABLE FOR TAXING THE ASSESSEE AT MAXIMUM MARGINAL RATE. HOWEVER, AT THE VERY SAME TIME, UNDER PROVISIONS OF SECTION 161(1) , THE ASSESSEE BEING A REPRESENTATIVE ASSESSEE IS LIABLE TO TAX IN RESPECT OF INCOME OF THE TRUST IN THE SAME MANNER AS IF INCOME ACCRUING TO THE BENEFICIARY AND SHALL BE TAXED SUBJECT TO OTHER PROVISIONS. SECTION 161(1) SPECIFICALLY REQUIRES INCOME RECEIVED BY THE REPRESENTATIVE ASSESSEE TO BE ASSESSED IN THE HANDS OF REPRESENTATIVE OF ASSESSEE AND RECOVER Y OF TAX FROM SUCH REPRESENTATIVE A SSESSEE. PROVISIONS OF SECTION 166 GIVES A DISCRETION TO THE AO TO MAKE ASSESSMENT TO THE INCOME RECEIVED BY THE REPRESENTATIVE ASSESSEE ON BEHALF OF THE BENEFICIARIES. 8. A PLAIN READING OF PROVISIONS OF SECTION 160 TO 165 SUGGESTS THAT THE TRUST, EVEN IF SHARE IS DETERMINED, IS STILL LIABLE TO ASSESS U/S.161(1) READ WITH SECTION 160(1)(IV) OF THE ACT. THE ONLY EXCEPTION TO THIS IS WHEN THE AO ASSESSES THE BENEFICIARY U/S.166 THEN SAME INCOME CANNOT BE ASSESSEE IN THE HANDS OF REPRESENTATIVE ASSESSEE U/S.1 61(1). AS THE FACTS ARE NOT CLEAR AS TO WHETHER THE AO HAS ASSESSED BENEFICIARY U/S.166 OF I.T.ACT , WE RESTORE THE MATTER BACK TO THE FILE OF AO TO FIND OUT IF THE BENEFICIARIES HAVE BEEN ASSESSED U/S.166 AND FOR DECIDING AFRESH AS PER LAW. 9 . NEXT GRIEVAN CE OF THE ASSESSEE RELATES TO DISALLOWANCE OF ADDITION OF RS. 90,726/ - BEING MADE OF MUNICIPAL TAX ON THE PLEA THAT ASSESSEE HAS NOT FILED PROOF OF PAYMENT OF MUNICIPAL TAX TO TH E EXTENT OF RS.90,726/ - DURING THE COURSE OF HEARING LD. AR DREW OUR ATTENTION TO A LETTER DATED 28 - 9 - 2008 ADDRESSED TO THE MANAGER SYNDICATE BANK, VILE PARLE, MUMBAI ITA NO. 4503 /1 4 4 FOR ISSUE OF A CERTIFICATE OF PAYMENT MADE FROM THEIR ACCOUNT, OUT OF WHICH PAY ORDER WAS ISSUED IN FAVOUR OF THANE MUNICIPAL CORPORATION. AS PER THE BANK STATEMENT PLA CED ON RECORD AT PAGE 51 OF THE PAPER BOOK, WE FOUND THAT PAY ORDER OF RS.90,865/ - WAS ISSUED. IN THE INTEREST OF JUSTICE, WE RESTORE THIS MATTER ALSO BACK TO THE FILE OF AO FOR VERIFYING THE ACTUAL PAYMENT AS PER THE BANK STATEMENT AND TO DECIDE THE ISSU E AFRESH AS PER LAW. 10 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED IN PART. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 11/05 / 201 6 . SD/ - ( SANJAY GARG ) SD/ - ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 11/05 /201 6 . . /PKM , . / PS / COPY OF THE ORDER FORWARDED TO : / BY ORD ER, / ( ASSTT. REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE R ESPONDENT. 3. ( ) / THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. //TRUE COPY//