Dhairya Beneficiary Trust, Kanpur V. Dy. Commissioner of Income Tax-I, Kanpur

ITA 456/LKW/2014

• Counselvise Citation: 45623714 RSA 2014
• Duration Of Justice: 3 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-09-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 21-08-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 26-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R K RAM
• Assessee Lawyers: P K KAPOOR
• Keywords: Principle of natural justice; Maximum Marginal Rate
• Section: 154; 2; 11

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO.456/LKW/2014 ASSESSMENT YEAR:2007 - 08 DHARIYA BENEFICIARY TRUST, 111/39, ASHOK NAGAR, KANPUR. PAN:AAATD5787F VS. DY.C.I.T. - I, KANPUR. (APPELLANT) (RESPONDENT) APPELLANT BY SHRI P. K. KAPOOR, C.A. RESPONDENT BY SHRI R. K. RAM, D. R. DATE OF HEARING 22/08/2014 DATE OF PRONOUNCEMENT 1 8 /09/2014 O R D E R PER A. K. GARODIA, A.M. THIS IS AN ASSESSEES APPEAL DIRECTED AGAINST THE ORDER PASSED BY LEARNED CIT(A) - I, DEHRADUN HOLDING CONCURRENT CHARGE OF CIT(A) - II, KANPUR CAMP AT KANPUR DATED 18/02/2014 FOR THE ASSESSMENT YEAR 2007 - 2008. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER: 1. THE LEARNED CIT(A) I, DEHRADUN HOLDING (CONCURRENT CHARGE OF CIT(A) - II, KANPUR CAMP AT KANPUR) WAS WRONG IN LAW & ON FACTS IN NOT ACCEPTING THE CONTENTION OF THE APPELLANT ABOUT THE NON APPLICABILITY OF THE PROVISION OF SECTION 154 OF THE ACT. 2. THE LEARNED CIT(APPEAL) HAS FAILED TO APPRECIATE THE FOLLOWING SUBMISSION IN RELATION TO THE, NON APPLICABILITY OF PROVISIONS OF SECTION 154 OF THE IT ACT: - ( I ) THAT THE ORDER OF THE LEARNED AO PASSED U/S. 154 WAS NOT A VALID ORDER BECAUSE THERE WAS NO APPARENT MISTAKE OF RECORD & THE PROVISIONS 2 OF SECTION 154 WERE NOT AT ALL APPLICABLE TO THE FACTS OF THE CASE. ( II ) THAT THE BENEFICIARY TRUST WAS NOT ENGAGED IN THE BUSINESS & THERE WAS NO ADVENTURE IN THE NATURE OF TRADE. ( III ) THAT THE PROVISIONS OF SECTION 161 READ WITH SECTION 164(1) WERE NOT ALL APPLICABLE TO THE FACTS OF THE CASE AS THERE WAS ONLY ONE BENEFICIARY IN THE TRUST. 3. THAT THE LEARNED CIT(A) HAS ALSO FAILED TO APPRECIATE & CONSIDER THE VARIOUS DECISIONS CITED BEFORE HIM. 4. THAT THE ORDER OF THE LEARNED CIT(A) IS AGAINST LAW, FACTS & PRINCIPLES OF NATURAL JUSTICE. 3. IT WAS SUBMITTED BY LEARNED A.R. OF THE ASSESSEE THAT THE BASIS OF THE ORDER PASSED BY THE ASSESSING OFFICER U/S 154 IS THAT THE SHARE OF BENEFICIARY OF ASSESSEE TRUST IS UNKNOWN . HE SUBMITTED THAT IN THE PRESENT CASE, THE SHARE IS NOT UNKNOWN BECAUSE AS PER THE TRUST DEED, AVAILABLE ON PAGE NO. 3 TO 9 OF THE PAPER BOOK, IT CAN BE SEEN THAT THERE IS ONLY ONE BENEFICIARY MASTER DHARIYA THAKKAR MINOR SON OF SHRI DHA RMENDRA KUMAR THAKKAR AND HIS SHARE IS 100% AND THEREFORE, THE ORDER PASSED BY THE ASSESSING OFFICER U/S 154 IS NOT JUSTIFIED. IN THIS REGARD , HE ALSO SUBMITTED THAT ON PAGE NO. 29 TO 35 IS AN ORDER OF CIT(A) - II, AGRA DATED 17/02/2014 IN THE CASE OF M/S V IDIT BENEFICIARY TRUST, KANPUR FOR ASSESSMENT YEAR 2007 - 08 AND IN THIS ORDER , IT IS HELD BY CIT(A) THAT IN THE CASE OF SOLE BENEFICIARY, THE SHARE IS 100% AND THEREFORE, THE ASSESSING OFFICER CANNOT APPLY MAXIMUM RATE. HE ALSO SUBMITTED THAT THIS ORDER OF CIT(A) WAS NOT APPEALED BEFORE THE TRIBUNAL. 4. LEARNED D.R. OF THE REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. FIRST OF ALL WE FIND THAT THE BASIS OF THE ORDER PASSED BY THE ASSESSING OFFICER U/S 154 IS NOT ON THE 3 BASIS THAT A SHARE OF BENEFICIARY IS UNKNOWN. THE BASIS OF THE ORDER PASSED BY THE ASSESSING OFFICER U/S 154 IS THAT MAXIMUM MARGINAL RATE OF TAX IS CHARGEABLE AS PER SECTION 161 READ WITH SECTION 164(1) OF THE ACT. THE BASIS OF THE AS SESSING OFFICER IS THAT SINCE THE INCOME OF THE ASSESSEE OF RS.1,65,030/ - INCLUDES RS.1,50,128/ - ON ACCOUNT OF PROFIT FROM DEALING IN COMMODITY EXCHANGE, WHICH IS INCOME FROM BUSINESS, THE ASSESSEE IS LIABLE TO PAY MAXIMUM MARGINAL RATE OF TAX IN TERMS OF SECTION 161 READ WITH SECTION 164(1) OF THE ACT. NOW WE REPRODUCE THE PROVISIONS OF SECTION 164(1), IT READS AS UNDER: 164. CHARGE OF TAX WHERE SHARE OF BENEFICIARIES UNKNOWN. (1) SUBJECT TO THE PROVISIONS OF SUB - SECTIONS (2) AND (3), WHERE ANY INCOME IN RESPECT OF WHICH THE PERSONS MENTIONED IN CLAUSES (III) AND (IV) OF SUB - SECTION (1) OF SECTION 160 ARE LIABLE AS REPRESENTATIVE ASSESSEES OR ANY PART THEREOF IS NOT SPECIFICALLY RECEIVABLE ON BEHALF OR FOR THE BENEFIT OF ANY ONE PERSON OR WHERE THE IND IVIDUAL SHARES OF THE PERSONS ON WHOSE BEHALF OR FOR WHOSE BENEFIT SUCH INCOME OR SUCH PART THEREOF IS RECEIVABLE ARE INDETERMINATE OR UNKNOWN (SUCH INCOME, SUCH PART OF THE INCOME AND SUCH PERSONS BEING HEREAFTER IN THIS SECTION REFERRED TO AS 'RELEVANT I NCOME', 'PART OF RELEVANT INCOME' AND 'BENEFICIARIES', RESPECTIVELY), TAX SHALL BE CHARGED ON THE RELEVANT INCOME OR PART OF RELEVANT INCOME AT THE MAXIMUM MARGINAL RATE: PROVIDED THAT IN A CASE WHERE -- (I) NONE OF THE BENEFICIARIES HAS ANY OTHER INCOME CHARGEABLE UNDER THIS ACT EXCEEDING THE MAXIMUM AMOUNT NOT CHARGEABLE TO TAX IN THE CASE OF AN ASSOCIATION OF PERSONS OR IS A BENEFICIARY UNDER ANY OTHER TRUST ; OR (II) THE RELEVANT INCOME OR PART OF RELEVANT INCOME IS RECEIVABLE UNDER A TRUST DECLARED B Y ANY PERSON BY WILL AND SUCH TRUST IS THE ONLY TRUST SO DECLARED BY HIM ; OR (III) THE RELEVANT INCOME OR PART OF RELEVANT INCOME IS RECEIVABLE UNDER A TRUST CREATED BEFORE THE 1ST DAY OF MARCH, 1970, BY A NON - TESTAMENTARY INSTRUMENT AND THE ASSESSING 4 OF FICER IS SATISFIED, HAVING REGARD TO ALL THE CIRCUMSTANCES EXISTING AT THE RELEVANT TIME, THAT THE TRUST WAS CREATED BONA FIDE EXCLUSIVELY FOR THE BENEFIT OF THE RELATIVES OF THE SETTLOR, OR WHERE THE SETTLOR IS A HINDU UNDIVIDED FAMILY, EXCLUSIVELY FOR TH E BENEFIT OF THE MEMBERS OF SUCH FAMILY, IN CIRCUMSTANCES WHERE SUCH RELATIVES OR MEMBERS WERE MAINLY DEPENDENT ON THE SETTLOR FOR THEIR SUPPORT AND MAINTENANCE; OR (IV) THE RELEVANT INCOME IS RECEIVABLE BY THE TRUSTEES ON BEHALF OF A PROVIDENT FUND, SUPE RANNUATION FUND, GRATUITY FUND, PENSION FUND OR ANY OTHER FUND CREATED BONA FIDE BY A PERSON CARRYING ON A BUSINESS OR PROFESSION EXCLUSIVELY FOR THE BENEFIT OF PERSONS EMPLOYED IN SUCH BUSINESS OR PROFESSION, TAX SHALL BE CHARGED ON THE RELEVANT INCOME OR PART OF RELEVANT INCOME AS IF IT WERE THE TOTAL INCOME OF AN ASSOCIATION OF PERSONS: PROVIDED FURTHER THAT WHERE ANY INCOME IN RESPECT OF WHICH THE PERSON MENTIONED IN CLAUSE (IV) OF SUB - SECTION (1) OF SECTION 160 IS LIABLE AS REPRESENTATIVE ASSESSEE CON SISTS OF, OR INCLUDES, PROFITS AND GAINS OF BUSINESS, THE PRECEDING PROVISO SHALL APPLY ONLY IF SUCH PROFITS AND GAINS ARE RECEIVABLE UNDER A TRUST DECLARED BY ANY PERSON BY WILL EXCLUSIVELY FOR THE BENEFIT OF ANY RELATIVE DEPENDENT ON HIM FOR SUPPORT AND MAINTENANCE AND SUCH TRUST IS THE ONLY TRUST SO DECLARED BY HIM. (2) IN THE CASE OF RELEVANT INCOME WHICH IS DERIVED FROM PROPERTY HELD UNDER TRUST WHOLLY FOR CHARITABLE OR RELIGIOUS PURPOSES, OR WHICH IS OF THE NATURE REFERRED TO IN SUB - CLAUSE (IIA) OF C LAUSE (24) OF SECTION 2, OR WHICH IS OF THE NATURE REFERRED TO IN SUB - SECTION (4A) OF SECTION 11, TAX SHALL BE CHARGED ON SO MUCH OF THE RELEVANT INCOME AS IS NOT EXEMPT UNDER SECTION 11 OR SECTION 12, AS IF THE RELEVANT INCOME NOT SO EXEMPT WERE THE INCOM E OF AN ASSOCIATION OF PERSONS. 5.1 FROM THE ABOVE PROVISION S OF SECTION 164(1), WE FIND THAT AS PER THE SECOND PROVISO TO SUB SECTION (1) OF SECTION 164, THE PROVISION OF THE FIRST PROVISO WILL BE APPLICABLE IF THE INCOME OF THE ASSESSEE TRUST INCLUDES PROFIT & GAINS OF BUSINESS. THE SECOND PROVISO IS FOR THE APPLICABILITY OF FIRST PROVISO TO SECTION 164(1) AND NOT FOR THE APPLICABILITY OF SUB SECTION (1) OF SECTION 164. IN FACT THE FIRST PROVISO TO SUB SECTION (1) TO SECTION 164 IS PROVIDING CERTAIN EXCEPTIONS WHERE MAXIMUM MARGINAL RATE CHARGEABLE AS 5 PER THE PROVISIONS OF SECTION 164(1) WILL BE CHARGEABLE ONLY TO THE RELEVANT INCOME OR PART OF RELEVANT INCOME AS IF IT WERE THE TOTAL INCO ME OF AOP. HENCE, IT IS SEEN THAT MERELY BECAUSE THE TOTAL INCOME OF A TRUST INCLUDES INCOME FROM PROFITS & GAINS OF A BUSINESS, IT CANNOT BE SAID THAT MAXIMUM MARGINAL RATE IS CHARGEABLE. IN FACT , MAXIMUM RATE IS CHARGEABLE ONLY WHEN THE BENEFIT OF THE BENEFICIARY IS NOT DETERMINABLE OR IS UNKNOWN. IN THE PRESENT CASE, IT IS SEEN THAT AS PER THE TRUST DEED, THERE IS ONLY ONE BENEFICIARY AND HENCE, THE SHARE OF BENEFICIARY IS KNOWN. THEREFORE , MAXIMUM MARGINAL RATE IS NOT CHARGEABLE IN THE PRESENT CASE. SO , THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS ALLOWED. (ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE) SD/. SD/. (SUNIL KUMAR YADAV) ( A. K. GARODIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 1 8 /09/2014. *C.L.SINGH COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A) 5. D.R., I.T.A.T., LUCKNOW ASSTT. REGISTRAR