DWARKA PRASAD AGARWAL, MUMBAI V. ITO 21(1)(3), MUMBAI

ITA 4591/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9327 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-10-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 04-07-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B PURESH
• Assessee Lawyers: ARVIND SONDE
• Keywords: Capital asset; Gift; Recovery proceedings; Income from undisclosed sources; Residential status; Principle of natural justice; Diversion of income; Source of fund; Additional evidence; Advance ruling; Date of conversion; Wholly owned subsidiary; Difference of opinion; Avoidance of tax; Assessment record; Notional interest; Tax effect; Capital receipt; Commercial expediency
• Section: 143(3); 142(1); 56(2); 37(1); 147; 148; 63; 139

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL BENCH D MUMBAI BEFORE SHRI D.T.GARASIA , JM AND SHRI RAJESH KUMAR, AM I.T.A. NO. 4591 AND 4592 /MUM/20 1 6 ( / ASSESSMENT YEAR : 20 1 0 - 11 AND 2011 - 12 ) SHRI D WARKA PRASAD AGARWAL, 113/114 SAMUNDRA MAHAL, WORLI, MUMBAI - 400018 / VS. INCOME TAX OFFICER 2 1 ( 3 )( 1 ), MUMBAI . ./ PAN : A C XPA2281J ( / APPELLANT) : ( / RESPONDENT ) I.T.A. NO. 1055 /MUM/20 16 ( / ASSESSMEN T YEAR : 2011 - 12 ) ASSTT.CIT - 21(2), ROOM NO.115, 1 ST FLOOR, PIRAMAL CHAMBERS, PAREL, MUMBAI - 400012 / VS. SMT.KIRAN AGGARWAL, 113/114 SAMUNDRA MAHAL, WORLI, MUMBAI - 400018 ./ PAN : ADDPA5222A ( / APPELLANT) : ( / RES PONDENT ) / A SSESSEE BY : SHRI ARVIND SONDE / RE VENUE BY : SHRI B PURESH / DATE OF HEARING : 25 .7 .2017 / DATE OF PRONOUNCEMENT : 5. . 10 . 201 7 / O R D E R PER RAJESH KUM AR, A. M: THE CAPTIONED ARE A PPEAL S BY THE ASSESSEE S AND THE REVENUE PERTAINING TO ASSESSMENT YEAR 2010 - 11 AND 2011 - 12 . THE APPEALS BEARING ITA 2 I.T.A. NO. 4591 /MUM/201 6 AND OTHER TWO APPEALS NO.4591 AND 4592/MUM/2016 ARE DIRECTED AGAINST THE ORDER OF LD.CIT(A) DATED 17.5.201 6 AND THE APPEAL BEARING N O.1055/MUM/2016 IS AGAINST THE ORDER OF LD.CIT(A), DATED 12.12.2015. SINCE THE ISSUES AGITATED IN ALL THESE APPEALS ARE ALMOST IDENTICAL IN NATURE, WE SHALL TAKE UP THE APPEAL RELATING TO THE ASSESSMENT YEAR 20 10 - 11 FILED BY THE ASSESSEE FIRST AS THIS BE ING THE LEAD CASE. THE FACTS RELATING TO THE ISSUES UNDER CONSIDERATION ARE DISCUSSED HEREUNDER WITH REFERENCE TO A.Y 20 10 - 11 . ITA NO.4591/MUM/2016 2 . THE FACTS OF THE CASE ARE THAT THE ASSESSEE FILED RETURN OF INCOME ON 26.7.2010 DECLARING TOTAL INCOM E OF RS.1,44,340/ - WHICH WAS PROCESSED UNDER SECTION 143(1) OF THE ACT. SUBSEQUENTLY, THE AO RECEIVED A LETTER FROM THE ERSTWHILE ACIT - 18(1), MUMBAI THAT THE ASSESSEE IS A BENEFICIARY OF ANIL AGARWAL DISCRETIONARY TRUST HEREINAFTER CALLED (AADT), BAH AMAS AND DURING THE YEAR ENDED ON 31.3.2010 THE ASSESSEE HAS RECEIVED A SUM OF RS.59,55,59,638/ - FROM THE SAID TRUST. ON THE BASIS OF THE SAID INFORMATION THE CASE OF THE ASSESSEE WAS REOPENED U/S 147 R.W.S.148 OF THE ACT AND A NOTICE WAS ISSUED AND SERV ED ON ASSESSEE ON 19.12.2014. THE SAID INFORMATION CAME TO THE ERSTWHILE ACIT - 18(1), MUMBAI NOW ACIT - 21(1), IN THE CASE OF ANOTHER BENEFICIARY OF THE SAME TRUST MRS KIRAN AGARWAL FROM THE FOREIGN TAX AND TAX RESEARCH DIVISION, MINISTRY OF FINANCE. THE AO FOUND THAT THE ASSESSEE 3 I.T.A. NO. 4591 /MUM/201 6 AND OTHER TWO APPEALS HAS NOT DISCLOSED ANY RECEI PT FROM THE SAID DISCRETIONARY TRUST IN THE RETURN FILED IN THE RELEVANT ASSESSMENT YEAR AND THEREFORE, HE FORMED A BELIEF THAT THE INCOME CHARGEABLE TO TAX HA S ESCAPED ASSESSMENT WITHIN THE MEANING O F SECTION 147 R.W.S.148 OF THE ACT. THE REASONS RECORDED U/S 148 OF THE ACT WERE SUPPLIED TO THE ASSESSEE. THE CASE W A S ADJOURNED SEVERAL TIMES AND FINALLY, THE AO ISSUED NOTICE ON 4.3.2014 CALLING UPON THE ASSESSEE TO FURNISH DETAILS OF AMOUNT RECEIVE D FROM AADT FROM FY 2007 - 08 TO FY 2012 - 13, DETAILS OF ANIL AGARWAL DISCRETIONARY TRUST, BAHAMAS, THE METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE AND WHY THE AMOUNT OF RS.59,55,59,638/ - SHOULD NOT BE ADDED TO THE TOTAL INCOME OF ASSESSEE. 3 . ON 28.4 .2014 THE ASSESSEE SUBMI TT ED BEFORE THE AO THAT NO INCOME HAS ESCAPED ASSESSMENT AS ALLEGED A ND REQUESTED THE AO TO TREAT THE RETURN FILED U/S 139 ON 26.7.2010 AS IN COMPLIANCE TO THE NOTICE ISSUED U/S 148 OF THE ACT . THEREAFTER , THE AO ISSUED NOTICE U /S 143(2) AND 142(1) WHICH WERE DULY SERVED ON THE ASSESSEE ON 12.6.2014. IT WAS SUBMITTED BEFORE THE AO THAT THE ASSESSEE HAS RECEIVED THE SAID AMOUNT DURING AY 2010 - 11 WHICH WAS DULY REFLECTED IN THE BALANCE SHEET AS CAPITAL RECEIPT . IT WAS FURTHER S UBMITTED BEFORE THE AO THAT THE SAID RECEIPT BY THE ASSESSEE WAS OUT OF DISTRIBUT ION OUT OF THE INCOME OF THE AADT EARNED IN FINANCIAL YEAR 200 8 - 09 WHICH WAS ACCUMULATED IN THAT YEAR BY FORMING THE SAME AS PART OF THE CORPUS OF THE TRUST AND THEREFOR E CAN NOT TREATED AS INCOME IN THE HANDS OF 4 I.T.A. NO. 4591 /MUM/201 6 AND OTHER TWO APPEALS BENEFICIARY. IN OTHER WORDS , THE ASSESSEE HAS NOT RECEIVED ANY INCOME FROM THE TRUST DURING FINANCIAL YEAR 2008 - 09 IN WHICH IT WAS EARNED BY THE TRUST BUT IN THE SUBSEQUENT FINANCIAL YEAR 2009 - 10 . THE ASSESSEE EXPLAINED BEFORE THE AO THAT AN AMOUNT OF RS.59,55,59,630/ - WAS RECEIVED OUT OF THE CORPUS OF THE TRUST. THE ASSESSEE WAS ONE OF THE BENEFICIAR IES OF THE TRUST AND THE AMOUNT RECEIVED WAS SHOWN AS A CAPITAL RECEIPT IN THE BOOKS OF ACCOUNT OF THE ASSES SEE. HOWEVER, THE AO DID NOT ACCEPT THE CONTENTIONS OF THE ASSESSEE AND HELD THAT THE INCOME HAD ACCRUED OR ARISEN TO THE ASSESSEE OUTSIDE INDIA AND HIS GLOBAL INCOME IS TAXABLE IN INDIA . T HE AO OBSERVED THAT THE ASSESSEE WAS BOTH A SETTLER AS WELL AS BENEFICIARY OF THE TRUST BY REFERRING TO TRUST DEED FORWARDED BY THE TAX AUTHORITY OF BAHAMAS THROUGH FOREIGN TAX & TAX RESEARCH DIVISION ( FT&TR ) , MINISTRY OF FINANCE, GOVERNMENT OF INDIA, NEW DELHI. THE AO OBSERVED THAT THE TRANSACTIONS WERE ROUT ED IN A WAY TO BRING IN UNACCOUNTED MONEY OF THE ASSESSEE THROUGH DISCRETIONARY TRUST I.E AADT AND THEREFORE IT SHOULD BE TREATED AS RECEIPT FROM UNEXPLAINED SOURCES CREDITED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. ACCORDINGLY, THE AO ADDED THE SAID RECEI PT OF RS.59,55,59,638/ - TO THE INCOME OF THE ASSESSEE BY FRAMING ASSESSMENT U/S 147 R.W.S 147 OF THE ACT VIDE ORDER DATED 31.3.2015 . 4. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT(A), WHO ALSO DISMISSED THE APPEAL OF THE ASSESSES AFTER TAKING INTO CONSIDERATION THE SUBMISSIONS AND CONTENTIONS OF THE ASSESSEE AS 5 I.T.A. NO. 4591 /MUM/201 6 AND OTHER TWO APPEALS INCORPORATED IN PARA 15 OF THE APPELLATE ORDER BY OBSERVING AND HOLDING VIDE PARA 16 TO 19 OF THE SAID ORDER AS UNDER : 16. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE APPELLANT, FINDINGS MADE IN THE ASSESSMENT ORDER AND FATS ON RECORD. MU FINDINGS ARE AS UNDER : 16.1 THE APPELLANT HAS PLAYED TWIN ROLE AS ONE OF THE BENEFICIARIES OF ANIL AGARWAL DISCRETIONARY TRUST FORMED ON 11THDECEMBER 2007 IN BAHAM AS AS WELL AS SETTLER OF THE TRUST WITH INITIAL CONTRIBUTION OF USD 1000 TOWARDS SETTLEMENT OF THE TRUST. OTHER TWO BENEFICIARIES ARE MRS. KIRAN AGARWAL AND MR. AGNIVESH AGARWAL, ANOTHER SETTLER. APART FROM THE CONTRIBUTION OF USD 1000 BY SHRI DWARKA PRASA D AGARWAL, THE TWO SETTLERS ALSO GIFTED SHARES OF VOLCAN INVESTMENTS LIMITED HELD BY THEM INTO THE TRUST. THE GIFTED SHARES OF VOLCAN INVESTMENT LIMITED REPRESENTED 100% OF ITS ISSUED AND PAID UP CAPITAL. ON THE SAID INVESTMENT OF VOLCAN INVESTMENT LIMITED HELD BY THE TRUST UPON SETTLEMENT BY THE TWO SETTLERS, IT RECEIVED A DIVIDEND OF USD 200,00,000 FROM VOLCAN INVESTMENT LIMITED ON 31ST MARCH, 2009. 16.2 IT IS ALSO OBSERVED THAT ANIL AGARWAL DISCRETIONARY TRUST IS A DISCRETIONARY TRUS T AND THEREFORE, IT IS LEFT TO THE DISCRETION OF THE TRUSTEES FOR THE DISTRIBUTION OF INCOME AMONG THE BENEFICIARIES KEEPING IN VIEW THE PROVISIONS OF SEC. 164 - 166 OF THE I T. ACT. HON'BLE SUPREME COURT, IN THE LANDMARK CASE OF CIT VS. KAMALINI KHATAU 209 ITR 101 (SE) HAS CLE ARLY LAID DOWN THAT THE INCOME OF THE TRUST IS EITHER TAXABLE IN THE HANDS OF THE TRUST OR BENEFICIARIES SINCE THE SAID INCOME WILL BE TREATED AS ACCRUED OR ARISEN IN THE HANDS OF THE BENEFICIARIES ONCE DISTRIBUTION OF INCOME TAKES PLACE AS THE RIGHTS OF B ENEFICIARIES IN SUCH INCOME ARE INDETERMINATE AND UNCERTAIN. 17. IN THE INSTANT CASE, THE APPELLANT HAS RECEIVED FUNDS FROM THE TRUST DURING F.Y.S 2009 - 10 AND 2010 - 11 OF RS. 59,55,59,638/ - AND RS. 1,01,57,932/ - EQUIVALENT TO USD 1,26,60,000 AND USD 2,25, 000 RESPECTIVELY FROM THE TRUST ACCOUNT MAINTAINED WITH DEUTSCHE BANK, ZURICH (ALC NO. 2015075). THE AR OF THE APPELLANT, WHILE CLAIMING THE ABOVE RECEIPT FROM THE TRUST AS TAX FREE, HAS PRIMARILY RELIED ON THE ARGUMENT THAT IT WILL BE CAPITAL RECEIPT IN T HE HANDS OF THE APPELLANT, AS THE INCOME WAS RECEIVED BY THE TRUST IN F.Y. 2008 - 09 WHILE THE SAME HAS REACHED TO THE APPELLANT IN F.Y.S 2009 - 10 AND 2010 - 11. HENCE, THE DISTRIBUTED AMOUNT IS PREVIOUS YEAR'S ACCUMULATION OF FUNDS. THE AR OF THE APPELLANT HAS ALSO RELIED UPON THE HON'BLE SUPREME COURT JUDGMENT 6 I.T.A. NO. 4591 /MUM/201 6 AND OTHER TWO APPEALS IN THE CASE OF CIT VS KAMALINI KHATAU (SUPRA) AND HOSTS OF OTHER JUDGMENTS. IT IS ALSO SUBMITTED THAT IN THE CASE OF MRS. KIRAN AGARWAL, ANOTHER BENEFICIARY, SIMILAR RECEIPT OF RS. 5,34,28,047/ - IN F.Y. 2010 - 11 RELEVANT TO A.Y.2011 - 12 WAS HELD TO BE NON - TAXABLE BY THE UNDERSIGNED AS FIRST APPELLATE AUTHORITY IN APPEAL NO. CIT(A) 33/ RG.21/ 269/ 2013 - 14 DATED 21.12.2015. 18. ON CAREFUL EXAMINATION OF THE FACTS OF THE INSTANT CASE WITH THE CASE OF MRS. K IRAN AGARWAL IN APPEAL NO. CIT(A) 33/ RG.21/ 269/ 2013 - 14 DATED 21.12.2015, I FIND A NO. OF DISTINGUISHING FEATURES WHICH WILL MAKE THE RECEIPT OF FUNDS FROM THE TRUST DURING F.Y.S 2009 - 10 AND 2010 - 11 AS TAXABLE IN THE HANDS OF MR. DWARKA PRASAD AGARWAL WH EN COMPARED WITH THE CASE OF MRS. KIRAN AGARWAL, WHEREIN IT WAS HELD TO BE TAX FREE. THIS IS FURTHER ELABORATED IN THE FOLLOWING PARAGRAPHS. 19. THIS FIRST AND FOREMOST DISTINGUISHING FEATURE IS THE MANNER OF RECEIPT OF THE FUND IN THE HANDS OF MR. DWARK A PRASAD AGARWAL, WHICH IS COMPLETELY DIFFERENT AS COMPARED TO MRS. KIRAN AGARWAL, NOTWITHSTANDING THE FACT THAT BOTH ARE BENEFICIARIES OF THE TRUST. AS OBSERVED FROM THE TRUST DEED, ANIL AGARWAL DISCRETIONARY TRUST IS A DISCRETIONARY TRUST SINCE THE SHARE S OF THE BENEFICIARIES ARE INDETERMINATE AND IT IS UPTO THE DISCRETION OF THE TRUSTEES TO DECIDE THE MANNER OF DISTRIBUTION OF THE IN COME OF THE TRUST, AS TO WHEN, TO WHAT EXTENT AND IN WHAT PROPORTION THE INCOME OF ANY PREV IOUS YEAR WILL BE DISTRIBUTED. THE BENEFICIARIES DO NOT HAVE ANY RIGHT TO CLAIM ANY INCOME OF THE TRUST OR THE CAPITAL FUNDS WITHOUT THE DISCRETION OF THE TRUSTEES IN THEIR FAVOUR. IT IS SOLE LY UPTO THE TRUSTEES TO DISTRIBUTE ANY AMOUNT AS PER THEIR DISCRETION. AND SUCH DISCRETION IS ALWAYS APPLIED WITH A WRITTEN RESOLUTION CLEARLY SPECIFYING THE TERMS AND CONDITIONS OF THE DISTRIBUTION OF INCOME AS PROVIDED IN THE TRUST DEED. IN SUCH A SCENARIO, THE PROVISIONS OF SECTION 166 WILL BE APPLICABLE AS EITHER THE DISCRETIONARY TRUST REPRES ENTED BY THE TRUSTEES WILL BE TAXED OR IF THE TRUSTEES HAVE TAKEN A DECISION TO DISTRIBUTE THE INCOME . 20. THE HON'BLE KERALA HIGH COURT IN THE CASE OF CIT VS. FERTILISERS & CHEMICALS (TRAVANCORE) LTD. 166 ITR 823 (KER.) HAS HELD THAT SECTION 166 VIRTUAL LY OVERRIDES THE PROVISIONS CONTAINED IN SECTIONS 160 TO 165, AND CONFERS POWERS ON THE ASSESSING OFFICER TO ASSESS EITHER THE REPRESENTATIVE ASSESSEE OR THE PERSON REPRESENTED BY HIM (THE PRINCIPAL) IN RESPECT 01 \ THE INCOME MENTIONED IN SECTION 160. SIMI LARLY HON'BLE SUPREME COURT IN THE CASE OF JYOTENDARSINGHJI VS.S.I.TRIPATHI 201 ITR 611 (SC) HAS ALSO RULED THAT THE REVENUE HAS AN OPTION IN CASE 7 I.T.A. NO. 4591 /MUM/201 6 AND OTHER TWO APPEALS OF A DISCRETIONARY TRUST EITHER TO MAKE AN ASSESSMENT UPON TRUSTEES OR TO MAKE AN ASSESSMENT UPON BENEFICIARI ES. THE HON'BLE SUPREME COURT IN THE CASE OF KAMALINI KHATAU (SUPRA) HAS HELD THAT IN AN EVENT, BEFORE THE RESPECTIVE YEAR END, IDENTITY OF BENEFICIARY ENTITLED TO INCOME EARNED IN THAT YEAR STANDS - CRYSTALLIZED , THE INCOME CAN BE TAXED IN THE HANDS OF BEN EFICIARY HIMSELF. 21. FROM THE ABOVE' ONE MAJOR ASPECT ABOUT TAXABILITY OF DISCRETIONARY TRUST EMERGES IS THAT THE ONUS OF TAXING INCOME IN THE HANDS OF THE BENEFICIARIES CAN BE SHIFTED ONLY IF (I) THE BENEFICIARY IS IDENTIFIED FOR RECEIVING THE INCOME OF THE TRUST, (II) THE TRUSTEES MAKE A CHOICE TO DISTRIBUTE THE INCOME (III) THE DISCRETION USED BY THE TRUSTEES ARE IN ACCORDANCE WITH THE TRUST DEED IN MY CONSIDERED OPINION, THERE CAN BE NO DOUBT THAT SUCH DISCRETION SHOULD BE BONAFIDE, CONFIRM TO THE TERMS AND CONDITIONS SPECIFIED IN THE TRUST DEED AND PROPERLY COMMUNICATED TO THE BENEFICIARIES AFTER ADOPTING A SPECIFIC RESOLUTION TO T HAT EFFECT IN THE MEETING OF THE BOARD OF TRUSTEES. SUCH COMMUNICATION OF .. 22. IF THE CASES OF TWO BENEFICIARIE S ARE EXAMINED IN THE LIGHT OF THE ABOVE OBSERVATION IT IS CLEAR THAT BOTH OF THEM STAND ON DIFFERENT FOOTINGS. WHILE IN THE CASE OF MRS.KIRAN A GARWAL, THERE ARE TWO WRITTEN RESOLUTIONS DATED 03.01.2011 AND 26.1.2011 PASSED IN THE MEETINGS OF TRUSTEES BEF ORE DISTRIBUTION OF THE INCOME OF THE USD 67 5,000 AND USD 5,00,000 RESPECTIVELY. THUS PASSING OVER THE TRUST'S INCOME TO M RS. KIRAN AGARWAL, EACH TIME, IS FULLY BACKED BY THE RESOLUTIONS PASSED IN THE MEETINGS OF THE TRUSTEES AS APPROVED BY THE PROTECTOR MR. ANI L AGARWAL KEEPING IN VIEW THE TERMS AND CONDITIONS OF THE TRUST DEED. THE SCANNED COPIES OF THE RESOLUTIONS ARE AS UNDER - ANIL AGAR'WAL DISCRETIONARY TRUST MEE TING OF TRUSTEES HELD AT LOYALIST P L AZA. DON MACKAY BLVD. AND OVER THE PHONE ON 3RD JANUARY 2011 PRESENT: E ISAAC COLLE (CHAIRMAN) ANIL AGARWAL (PROTECTOR BY PHONE) 8 I.T.A. NO. 4591 /MUM/201 6 AND OTHER TWO APPEALS APOLOGIES: D P AGAWAL KI RAN AGARWAL 1. QUORUM CHAIRMAN CONFIRMED THA A QUORUM BEING PRESENT THE MEETING STARTED. 2. PURPOSE OF THE MEE TING CHAIRMAN OF THE MEETING INFORMED THE TRUSTEES THAT THE MEETING HAD BEEN CALLED TO CONSIDER A DISTRIBUTION OF $ 5675.NOO.O 0 TO MRS. KI RAN AGARWA L. HE FURTHER STA T ED THAT THE TRUSTEES HAD RECEIVED THE CONSENT LETTER FROM THE PROTECTOR. 3. DISTRIBU TION AFTER D UE DISCUSSION IT WAS RESOLVED THAT THE CO NSENT OF THE PROTECTOR MR. ANIL AGAWAL HAVING BEEN RECEIVED AS PER THE TRUST DEED. THE TRUSTEES APPROVED AND CONSENTED TO MAKE DISTRIBUTION OF USD675 OOO TO K IRAN AGARWAL. IT WAS FURTHER NOTED THAT T HIS DISTRIBUTION WOULD BE FROM THE ACCUMULATED FUNDS OF THE TRUST ARISING OUT OF INCOME OF THE EARLIER YEARS. 4. ANY OTHER BUSINESS THERE BEING NO OTHER BUSINESS THE MEETING WAS ADJOURNED. ANIL AGAR'WAL DISCRETIONARY TRUST MEETING OF TRUSTEES HELD A T LOYALIST PLAZA. DON MACKAY BLVD. AND OVER THE PHONE ON 26TH JANUARY 2011 PRESENT: E ISAAC COLLE (CHAIRMAN) ANIL AGARWAL (PROTECTOR BY PHONE) APOLOGIES: D P AGAWAL KIRAN AGARWAL 1. QUORUM CHAIRMAN CONFIRMED THAT A QUOR UM B E ING PRESENT THE MEETING STARTED. 9 I.T.A. NO. 4591 /MUM/201 6 AND OTHER TWO APPEALS 2. PURPOSE OF THE MEETING CHAIRMAN OF THE MEETING INFORMED THE TRUSTEES THAT THE MEETING HAD BEEN CALLED TO CONSIDER A DISTRIBUTION OF $500.000.00TO MRS KIRAN AGA RWAL . HE FURTHER STATED THAT THE TRUSTEES HAD RECEI VED THE CONSENT LETTER FROM THE PROTECTOR - . 3 . DISTRIBUTION AFTER DUE DISCUSSION IT WAS RESOLVED THAT THE CONSENT OF THE PROTECTOR MR. ANIL AGARWAL HAV ING BEEN RECEIVED AS PER THE TRUST DEED , THE TRUSTEE APPROVED AND CONSENTED TO MAKE A DISTRIBUTION O F USD $500,000.00 TO KIRA N AGARWAL. IT WAS FURTHER NOTED THAT THIS DISTRIBUTION WOULD BE FROM THE ACCUMULATED FUNDS OF THE TRUST ARISING OUT OF IN COME OF THE EARLIER YEARS. 4. ANY OTHER 8USINESS THERE BEING NO OTHER BUSINESS THE MEETING WAS ADJOURNE D. CHAIRMAN . 23. HOWEVER, THAT IS NOT THE CASE WITH THE APPELLANT, MR. DWARKA PRASAD AGARWAL. HE RECEIVED THE INCOME OF THE TRUST DURING F.Y.S 2009 - 10 AND 2010 - 11 OF RS.59,55,59,638/ - AND RS. 1,01,57,9321 - RESPECTIVELY WITHOUT ANY RESOLUTION OR DOCUME NTED DECISION FOR DISTRIBUTION OF THE INCOME OF THE TRUST IN FAVOUR OF THE APPELLANT. IN OTHER WORDS, THE TRUSTEES HAVE NOT USED THEIR DISCRETION BEFORE THE INCOME OF THE TRUST WAS DIVERTED TO THE APPELLANT IN BOTH THE YEARS. EVEN IN THE REPLY DATED 02'.05 .2016 OF THE AR OF THE APPELLANT DURING APPELLATE PROCEEDINGS, AS REPRODUCED IN THE AFORESAID PARAGRAPHS, TWO MEETINGS OF TRUSTEES DATED 03.01.2011 AND 26.01.2011 ARE MENTIONED, WHICH ACTUALLY PERTAIN TO MRS. KIRAN AGARWAL AND NOT MR. DWARKA PRASAD AQARWA L. EVEN THE RECEIPT OF RS. 59,55,59,638/ - IN F.Y. 2009 - 10 PRECEDES THE TWO MEETINGS OF TRUSTEES DATED 03.01.2011 AND 26.01.2011 CITED ABOVE . 24. IT IS FURTHER OBSERVED FROM THE CAREFUL READING OF THE VARIOUS CLAUSES OF THE TRUST SETTLEMENT DEED DATED 1 1 .12.2007 THAT THE 10 I.T.A. NO. 4591 /MUM/201 6 AND OTHER TWO APPEALS TRUSTEES WITH THE PRIOR WRITTEN CONSENT OR DIRECTION OF SHRI ANIL AGARWAL, THE PROTECTOR CAN ONLY DISTRIBUTE T HE INCOME OR THE FUNDS OF THE TRUST, IN THE INSTANT CASE, WHEN THERE WAS NO APPROVAL OR DISCRETION USED BY THE TRUSTEES AND THE INCOME H A S REACHED TO THE APPELLANT, THERE IS NO QUESTION OF PRIOR WRITTEN CONSENT OR DIRECTION OF SHRI ANI L L AGARWAL, TE PROTECTORS. TE RELEVANT CLAUSES OF THE T RUST SETTLEMENT DEED ARE RE - PRODUCED AS UNDER : (A) THE TRUSTEE, WITH THE PRIOR WRITTEN CONSENT OF THE PROTECTOR, SHALL DURING THE TRUST PERIOD PAY OR APPLY THE INCOME OF THE TRUST FUND (OR THE BALANCE THEREOF NOT ACCUMULATED OR OTHERWISE APPLIED BY THE TRUSTEE UNDER ANY OF THE PROVISIONS HEREOF) AND MAY, ON THE WRITTEN DIRECTION OF THE PROT ECTOR, FROM TIME TO TIME PAY OR APPLY THE WHOLE OR ANY OF THE CAPITAL OF THE TRUST FUND TO OR FOR THE ADVANCEMENT MAINTENANCE OF BENEFIT OF THE BENEFICIARIES. (B) XXXXXXX (C) XXXXXXXX (D) IN THE CASE OF ANY OF THE BENEFICIARIES WHO ARE FOR THE TIME B EING UNDER THE AGE OF TWENTY FIVE(25) YEARS THE TRUSTEE MAY, WITH THE PRIOR WRITTEN CONSENT OF THE PROTECTOR, PAY THE INCOME FOR THE MAINTENANCE, EDUCATION OR BENEFIT OF SUCH BENEFICIARY TO HIS OR HER PARENT OR GUARDIAN, WHETHER OR NOT THERE IS OTHER FUND APPLICABLE TO THE SAME PERSON OR TO ANY PERSON BOUND BY THE LAW TO PROVIDE FOR ,HIS OR HER MAINTENANCE EDUCATION OR BENEFIT AND SUCH PAYMENT SHALL BE GOOD DISCHARGE TO THE TRUSTEE. (E) ON THE WRITTEN DIRECTION 'OT THE PROTECTOR, THE TRUSTEE MAY PAY ALL O R PART OF .., THE INCOME OF THE TRUST FUND TO THE PERSONS FROM TIME TO TIME ENTITLED TO IT. 25. FROM THE DISCUSSION MADE IN THE PRECEDING PARAGRAPHS, IT IS CLEAR THAT THE INCOME OF THE TRUST WAS RECEIVED BY MR. DWARAKA PRASAD AGARWAL, THE APPELLANT WITHO UT ANY MANDATE FROM THE TRUSTEES OR PROTECTOR I.E., THE RECEIPTS IN THE HANDS OF THE APPELLANT DURING F.Y.S 2009 - 10 AND 2010 - 11 CORRESPONDING TO A.Y.S 2010 - 11 AND 2011 - 12 CAN NOT BE SAID AS DISTRIBUTION OF INCOME OR FUND OF THE TRUST AS LAID DOWN IN THE P ROVISIONS OF SEC. 160 - 165 OF THE LT. ACT OR AS DECIDED IN THE JUDICIAL PRONOUNCEMENTS CITED ABOVE. CLEARLY, SUCH RECEIPTS CAN ONLY BE TERMED AS APPLICATION OF INCOME OF THE TRUST RECEIVED ON 31.03.2009 AND NOT DIVERSION OF INCOME BY OVERRIDING TILE, AS IT IS NOT AUTHORIZED BY 11 I.T.A. NO. 4591 /MUM/201 6 AND OTHER TWO APPEALS THE TRUSTEES. IN MY CONSIDERED OPINION, SINCE THE T RUS T EE APPLIED THEIR DISCRETION IN THE DISTRIBUTION OF THE INCOME OF THE TRUST, THE SHARE OF INCOME AND THE YEAR OF DISTRIBUTION IS NOT DETERMINATIVE OR SAID TO BE CRYSTALLIZE IN THE H ANDS OF MR. DWARKA PRASAD AGARWAL AS A BENEFICIARY, THE RATIO OF THE JUDGMENT IN THE CASE OF KAMALINI KHATAU (SC) (SUPRA) TO THE EXTENT OF 'DISTRIBUTED AND RECEIVED BY THE BENEFICIARIES' WILL NOT BE APPLICABLE. MOREOVER, THE APPELLANT CANNOT CLAIM THA T THE RECEIPTS IN HIS HANDS DURING F.Y.S 2Q09 - 10 AND 2010 - 11 ARE CAPITAL RECEIPTS SINCE IT IS JUST APPLICATION OF INCOME OF THE TRUST RECEIVED ON 31.03.2009 AND ACCRUED AND ARISEN TO THE APPELLANT DURING THE YEAR UNDER CONSIDERATION. 26. HON'BLE SUPREME COURT IN THE CASES OF CIT VS SITALDAS TIRATHDAS (1961) 41 ITR 367 (SE) AND VIBHUTI GLASS WORKS VS. CIT (1989) 177 ITR 439 (SC) HAVE CLEARLY HELD THAT WHERE THE INCOME ACCRUES TO THE ASSESS.EE DIRECTLY AND IS MERELY APPLIED UPON SUCH ACCRUAL, IT IS A CASE O F APPLICATION OF THE INCOME OF THE ASSESSEE. HON'BLE SUPREME COURT IN ANOTHER CASE OF E.O. SASSOON & CO. LTD. VS CIT (1954) 26 ITR 27 HAS RULED THAT AN OBLIGATION TO USE THE INCOME IN A PARTICULAR MANNER DOES NOT REMOVE IT FROM THE CATEGORY OF INCOME - TAX; THIS IS EVEN IF THE OBLIGATION IS A PART OF THE ORIGINAL CONTRACT. 27. THE SECOND DISTINGUISHING FEATURE OF THE APPELLANT CASE WITH THE OTHER BENEFICIARY MRS. KIRAN AGARWAL IS THAT WHILE MR. DWARKA PRASAD AGARWAL RECEIVED THE INCOME OF RS. 5 9 ,55,59,638/ - IN LESS THAN ONE YEAR, 365 DAYS, OF THE RECEIPT OF DIVIDEND BY THE TRUST ON 31ST MARCH, 2009 WHILE MRS. KIRAN AGARWAL RECEIVED THE FUND OF THE TRUST WELL BEYOND ONE YEAR OF. THE SAME BY THE TRUST. NO DOUBT FINANCIAL YEAR CHANGED ON 31.03.2009 I.E. THE DAY DIVIDEND WAS RECEIVED BY THE TRUST, BUT THE APPELLANT RECEIVED THE SAME WITHIN A YEAR. 28. - YET ANOTHER DISTINGUISHING FEATURE IS THE ROLE PLAYED BY MR. DWARKA PRASAD AGARWAL IN THE TRUST, WHICH IS BOTH AS SETTLER AS WELL AS BENEFICIARY. ON THE OTHER HAND, MRS. KIRAN AGARWAL HAS BEEN DESIGNATED ONLY AS A BENEFICIARY OF THE TRUST. ALTHOUGH THERE IS NO PROHIBITION IN NOMINATING A SETTLER AS A BENEFICIARY, IF THE TERMS OF THE TRUST DEED PROVIDE SO. HOWEVER, IT IS CUSTOMARY FOR DISCRETIONARY TRUST DEEDS TO EXCLUDE THE SETTLER OF A TRUST FROM BEING A BENEFICIARY. OTHERWISE IT LEADS THE TRUST TO ACQUIRE THE CHARACTERISTIC OF A 'REVOCABLE TRUST' AS THE SETTLERS RETAIN FULL CONTROL OVER THE TERMS OF THE TRUST AND THE ASSETS CONTAINED WITHIN IT. IN SUCH A SITU ATION, ANY INCOME 12 I.T.A. NO. 4591 /MUM/201 6 AND OTHER TWO APPEALS GENERATED BY RE V OCABLE TRUST IS TAXABLE TO THE TRUSTS SETTLERS DURING HIS LIFETIME. AS DISCUSSED IN DETAIL WHILE HIGHLIGHTING THE FIRST DISTINGUISHING FACTOR, THE RECEIPT OF INCOME IN THE HANDS OF THE APPELLANT BEING 'APPLICATION OF INC OME OF THE TRUST RECEIVED IN F.Y. 2008 - 09' AND NOT IN THE NATURE OF CAPITAL RECEIPT, THERE REMAINS NO DOUBT THAT THE PROVISIONS OF SECTION 61 - 63 ARE APPLICABLE TO THE INCOME OF THE TRUST RECEIVED BY THE APPELLANT DURING A.Y.S 2010 - 11 AND 2011 - 12. 29. I N THE LIGHT OF DISCUSSION MADE IN THE PRECEDING PARAGRAPHS, IT IS CONCLUDED THAT THE RECEIPT OF INCOME OF THE TRUST BY MRS. KIRAN AGARWAL AS A BENEFICIARY CAN NOT BE COMPARED WITH THE RECEIPT OF THE INCOME BY THE APPELLANT DURING A.Y.S 2010 - 11 AND 2011 - 12 AS FACTS ARE CLEARLY DISTINGUISHABLE. IT IS ALSO EXTENSIVELY DISCUSSED THAT THE RATIO OF THE JUDGMENTS IN THE CASE KAMALINI KHATAU (SE) (SUPRA) AND OTHER HOSTS OF JUDGMENTS RELIED UPON BY THE APPELLANT ARE CLEARLY DISTINGUISHABLE ON FACTS AND HENCE OF NO H ELP TO THE APPELLANT. 'HENCE, THE AO HAS CORRECTLY BROUGHT TO TAXRECEIPT OF RS.59,55,59,638/ - BY THE APPELLANT DURING A.Y. 2010 - 11 TO THE TOTAL INCOME OF THE APPELLANT. THEREFORE, GROUND OF APPEAL NO. 2 IS DISMISSED. AGGRIEVED BY THE ORDER OF THE CIT(A ) , THE ASSESSEE IS IN APPEAL BEFORE US. 5. THE LD. AR VEHEMENTLY SUBMITTED BEFORE US THAT THE ORDER PASSED BY THE LD. CIT(A) WAS INVARIANCE TO THE IDENTICAL CASE DECIDED BY THE LD.CIT(A) IN THE CASE OF ANOTHER BENEFICIARY OF THE TRUST SMT. KIRAN AGARWA L IN APPEAL NO. CIT(A) 33/ RG.21/ 269/ 2013 - 14 DATED 21.12.2015 IN WH ICH THE SIMILAR DISTRIBUTION OF AMOUNT OUT CORPUS FUNDS BY AADT AS RECEIVED BY SMT KIRAN AGARWAL ONE OF THE BENEFICIARIES OF AADT WAS TREATED TO BE A CAPITAL RECEIPT NOT LIABLE TO TAX. THE LD. AR STATED THAT THE SOLE BASIS ON WHICH THE LD.CIT(A) UPHELD THE ORDER OF THE AO WAS THREEFOLD NAMELY (I) THE ASSESSEE BEING THE BENEFICIARY AS WELL AS SETTLER OF THE DISCRETIONARY TRUST ; (II) THE RECEIPT OF 13 I.T.A. NO. 4591 /MUM/201 6 AND OTHER TWO APPEALS AMOUNT BY THE ASSESSEE WAS WITHOUT ANY RES OLUTION OR DOCUMENTATION DISTRIBUTING THE INCOME IN FAVOUR OF THE ASSESSEE ; AND (III) THE ASSESSEE RECEIVED THE AMOUNT WITHIN LESS THAN 365 DAYS WHEREAS MRS.KIRAN AGARWAL ANOTHER BENEFICIARY OF AADT RECEIVED AMOUNT OF DISTRIBUTION BY AADT WELL BEYOND ONE YEAR AND THEREFORE THE LD.CIT(A) WAS TOTALLY ERRED IN HOLDING THAT THE CASE OF THE ASSESSEE STOOD ON DIFFERENT FOOTINGS AND DISTINGUISHABLE TO THAT OF MRS. KIRAN AGARWAL DESPITE THAT MRS.KIRAN AGARWAL AS WELL THE ASSESSEE BOTH WERE BENEFICIAR IES OF AAD T AND RECEIVED THE AMOUNTDISTRIBUTED IN THE LIKE MANNER . SO FAR AS THE RESOLUTIONS AUTHORIZING DISTRIBUTION THE INCOME BY THE TRUSTEE ARE CONCERNED , THE LD COUNSEL SUBMITTED THAT T HE LD.CIT(A) DID NOT CALL FOR THE RESOLUTION S IN THE APPELLATE PROCEEDING S TAKING THE SAME AS COVERED BY THE CASE OF MRS.KIRAN AGARWAL. THE ASSESSEE WAS NOT DIRECTED TO FILE RESOLUTIONS ALONG WITH THE APPROVAL FROM THE PROTECTOR OF T HE TRUST. THE LD COUNSEL SUBMITTED THAT THE SAME WERE FILED BEFORE THE ITAT AS ADDITIONAL EVIDENCE S UNDER RULE 29 OF THE INCOME TAX APPELLATE PROCEDURE RULES WITH THE PRAYERS THAT THE SAME MAY KINDLY BE ADMITTED IN THE INTEREST OF JUSTICE . THE LD. AR FURTHER STA T ED THAT AADT WAS CREATED BY THE TRUST SETTLEMENT DEED DATED 11.12.2007 BY . THE LD. AR SUBMITTED THAT THE SAID TRUST DEED WAS MADE 11.12.2007 BETWEEN SHRI DWARKA PRA S AD AGARWAL, ONCLAVE PTC LTD AND ANIL KUMAR AGRAWAL . THAT SHRI DWARKA PRASAD AGARWAL IS A THE SETTLER , ONCLAVE PTC LTD IS TRUST EE AND ANIL AGARWAL IS THE PROTECTOR. THUS THE 14 I.T.A. NO. 4591 /MUM/201 6 AND OTHER TWO APPEALS SETTLER MADE AN IRREVOCABLE SETTLEMENT CALLED ANIL AGARWAL DISCRETIONARY TRUST (AADT). IT WAS ALSO EXPRESSLY PROVIDED IN THE PREAMBLE THAT THE SETTLER WAS DESIROUS OF MAKING AN IRREVOCABLE SETTLEMENT. THE BENEFICIARIES OF AADT ARE MRS. KIRAN AGARWAL, MR. DWARKA PRA S AD AGARWAL AND MR.AGNIVESH AGARWAL. THE OBLIGATIONS OF THE TRUSTEE ARE SET OUT IN ARTICLE 3 ( C ) OF THE TRUST SETTLEMENT DEED AND STIPULATE D THAT THE TRUST FUNDS SHALL BE FOR THE ADVANCEMENT AND MAINTENANCE OF BENEFICIARIES AT T HE DISCRETION OF THE PROTECTOR. AS REGARDS THE SOURCE OF RECEIPT BY AADT, THE LD.AR SUBMITTED THAT THE SUM OF USD 20,000,000/ - WAS RECEIVED AS DIVIDEND FROM V OLCAN INVESTMENTS LIMITED DURING THE FINANCIAL YEAR 2008 - 09 IN WHICH AADT H E LD THE ENTIRE SHA RE CAPITAL OF THE SAID COMPANY. M/S V OLCAN INVESTMENTS LIMITED DECLARED THE DIVIDEND OF USD 20,000,000 FOR THE YEAR ENDED 31.3.2009 AND THE SOURCE OF THE DIVIDEND IN TURN WAS OUT OF THE DIVIDEND RECEIVED BY VALCON INVESTMENTS LTD FROM VEDANTA RESOURCES PLC A COMPANY REGISTERED UNDER THE LAWS OF UK IN WHICH 53.8% SHARES WERE HELD BY VALCON INVESTMENTS LTD AND REMAINING 48.2% WERE HELD BY PUBLIC AND OTHER SHAREHOLDERS. THE LD. AR STATED THAT ONC1AVE PTC LTD AS TRUSTEE FOR AADT RECEIVED THE AMOUNT OF USD 20,000,000 IN THE BANK ACCOUNT WITH DEUTSHE BANK, ZURICH ON 31 ST MARCH 2009 IN ACCOUNT NO . 2015075 . THE LD. AR FURTHER STATED THAT THE TRUSTEES IN THEIR MEETING HELD ON 31ST MAR, 2009 NOTED THAT THE AMOUNT OF USD 20,000,000 HAD NOT YET BEEN PASSED ON TO THE BENEFICIARIES AND 15 I.T.A. NO. 4591 /MUM/201 6 AND OTHER TWO APPEALS THEREFORE , I T WAS DECIDED THAT THE SURPLUS BE TRANSFERRED TO THE CORPUS FUND OF THE TRUST AND BE ACCUMULATED UNTIL DISTRIBUTED TO THE BENEFICIARIES IN THE MEETING THAT - 'IT WAS RESOLVED THAT THE SURPLUS ARISING OUT OF THE INCOME AND EXPENDITURE ACCOUNT OF ANIL AGARWAL DISCRETIONARY TRUST AMOUNTING TO USD 20,00,000 FOR THE PERIOD ENDED 31ST MAR., 2009 BE TRANSFERRED TO THE CORPUS FUND OF THE TRUST AND BE ACCUMULATED UNTIL DISTRIBUTED TO THE BENEFICIARIES . THE LD AR TOOK US THRO UGH THE MANNER AND MODE OF DISTRIBUTION BY THE TRUSTEES OF AADT TO THE APPELLANT ASSESSEE . THE LD. AR SUBMITTED T HAT FROM THE ABOVE UNDISPUTED DETAILS, THE FOLLOWING FACTS HAVE BEEN ESTABLISHED THAT THE AADT IS A DISCRETIONARY TRUST, IT HAS RECEIVED INCOM E IN FINANCIAL YEAR 2008 - 09 AND ACCUMULATED THE SAME TO THE CORPUS . THE A SSESSEE RECEIVED BY WAY OF DISTRIBUTION FROM THE CORPUS OF AADT AN AGGREGATE AMOUNT USD 12,660,000 IN FINANCIAL YEAR 2009 - 10 RELEVANT TO THE IMPUGNED ASSESSMENT YEAR 2010 - 11. THE L D AR ALSO TOOK US THROUGH THE DETAILS OF MONEY RECEIVED FROM AAD AMOUNTING TO RS. 59,55,59,638/ - . TO SUM UP, THE LD.AR SUBMITTED THAT THE DIVIDEND DECLARED AND PAID IN MARCH, 2009 BY VOLCAN TO AADT, THE INCOME OF AADT SUCH INCOME BEING DECLARED OUTSIDE INDIA BY THE FOREIGN COMPANY TO ITS FOREIGN SHAREHOLDER COULD NOT BE SUBJECT MATER OF ANY TAX IN INDIA. THE TRUSTEE OF AADT CAPITALIZED THE INCOME AND ADDED IT TO THE CORPUS OF THE TRUST IN THE FINANCIAL YEAR 2008 - 09 AND IN NEXT FINANCIAL YEAR THE TRU ST DISTRIBUTED A PAT OF THE CORPUS USD 12,660,000 EQUIVALENT TO 16 I.T.A. NO. 4591 /MUM/201 6 AND OTHER TWO APPEALS RS.59,55,59,638/ - TO MR.DWARKA PRASAD AGARWAL ONE OF THE BENEFICIARY OF AADT. THUS, THE AMOUNT RECEIVED BY MR.DWARKA PRASAD AGARWAL ON DISTRIBUTION OF CORPUS FROM AADT WAS THEREFORE A CAP ITAL RECEIPT AND NOT CHARGEABLE TO TAX. FINALLY, THE LD.AR ARGUED THAT THE AO BROUGHT TO TAX CAPITAL RECEIPT IN THE HANDS OF THE ASSESSEE MERELY ON THE GROUND THAT THE AADT WAS NOT LIABLE TO TAX ON ITS INCOME AS NO LEGAL BASIS. IN SUPPORT OF HIS CONTENT ION, THE LD. AR RELIED UPON THE FOLLOWING DECISIONS: I) CIT V/S KAMALINI KHATAU - 209 ITR 101(SC); II) VIKRAMSINGHJI GONDAL - 363 ITR 679 (SC); III) JYOTHIRSINHJI GONDAL V/S CIT TAX APPEAL 229/2002 AND OTHERS DECIDED ON 12.9.2008 REPORTED IN 326 ITR 594 (GUJARAT HIGH COURT). IV) SHANTA BEN PATEL IN ITA NO.5000/MUM/2001 MUMBAI BENCH OF ITAT; THE LD. AR FINALLY PRAYED BEFORE THE BENCH THAT SINCE THE DISTRIBUTION OF CORPUS IN THE HANDS OF THE ASSESSEE OF AADT WAS A CAPITAL RECEIPT THE ORDER OF CIT( A) SHOULD BE REVERSED AND AO BE DIRECTED TO DELETE THE ADDITION . 6 . THE LD.DR ON THE OTHER HAND, VEHEMENTLY OPPOSED THE ARGUMENT S OF THE AR BESIDE OBJECTING THE PRAY ERS OF THE LD.AR FOR ADMISSION OF ADDITIONAL EVIDENCE S IN THE FORM OF RESOLUTION S, BANK ST ATEMENT S IN THE CASE OF SHRI D P AGARWAL. T HE LD.AR SUBMITTED THAT THE TRUST IS IN BAHAMAS WHICH IS A TAX HEAVEN AND THE ASSESSEE USED THE TAX HEAVEN TO BRING HIS OWN MONEY THROUGH THE TRUST ROOT AND THUS ESCAPE D THE TAXATION UNDER THE INDIAN LAWS. TH E LD. DR SUBMITTED BEFORE US THAT THE ASSESSEE IS BOTH SETTLER AS WELL AS BENEFICIARY OF THE TRUST AND AS A SETTLER OF THE TRUST HE CONTRIBUTED USD 1000 17 I.T.A. NO. 4591 /MUM/201 6 AND OTHER TWO APPEALS TO THE CORPUS OF THE AADT AND LATER ON GOT AN AMOUNT OF RS.59,55,59,638/ - IN LIEU OF USD 1000 . T HE REFORE CREATION OF TRUST WAS TO TRANSFER THE UNACCOUNTED MONEY THROUGH ENTITIES CREATED IN TAX HEAVEN I.E. BAHAMAS . THE LD., DR SUBMITTED THAT MR. AGNIVESH AGARWAL IS THE GRANDSON OF THE ASSESSEE AND BOTH SETTLERS HAD GIFTED SHARES OF M/S VOLCAN INVEST MENT LTD AS HELD BY THEM TO THE TRUST . THE LD DR SUBMITTED THAT IT IS ONLY ON ACCOUNT OF THESE SHARES THE SAID TRUST RECEIVED DIVIDEND USD 20 , 000 , 000 / - . THE LD. DR ARGUED THAT THE AO HAS RELIED ON THE DECISION IN THE CASE OF SHRI MOHAN MANOJ DHUPELIA, I N ITA NO.3544/MUM/2011 TO 3546/MUM/2011 AND RIGHTLY TREATED THE AMOUNT RECEIVED AS TAXABLE INCOME FROM OTHER SOURCES. THE LD. DR STATED THAT THE ASSESSEE HAS RELIED HEAVILY ON THE DECISION OF THE SUPREME COURT IN THE CASE OF KAMALINI KHATAU - 209 ITR 101( SC); AND THE DECISION OF THE LD.CIT(A) IN THE CASE OF MRS.KIRAN AGARWAL (SUPRA) TO CLAIM ABOVE SUM A S NOT TAXABLE WHEREAS THE LD.CIT(A) HAS CLEARLY DISTINGUISHED THESE CASE LAW S RELIED UPON BY THE ASSESSEE . THUS THE DEFENCE OF THE LD AR HAS BEEN DEMOLIS HED. 7 . AS REGARDS, THE ADDITIONAL EVIDENCE FILED BY THE ASSESSEE, THE LD. DR SUBMITTED THAT THESE EVIDENCES WERE NOT SUBMITTED BEFORE THE LD.CIT(A) DURING THE APPELLATE PROCEEDINGS AND WHATEVER DATA IN THE CASE OF MRS. KIRAN AGARWAL RECEIVED THROUGH F T&TR DIVISION, MINISTRY OF FINANCE, GOVERNMENT OF INDIA, NEW DELHI WAS EXAMINED. T HEREFORE THE ADDITIONAL EVIDENCE S WERE AN AFTERTHOUGHT AND NOT GENUINE AND SHOULD BE REJECTED . THE LD. DR 18 I.T.A. NO. 4591 /MUM/201 6 AND OTHER TWO APPEALS SUBMITTED THAT THE ASSESSEE HAS MADE SELF SERVING ARRANGEMENTS BY WHICH THE DISTRIBUTION OF WAS MADE IN THE SUBSEQUENT YEARS THAN THE YEAR IN WHICH THE FOREIGN DIVIDEND WAS RECEIVED BY DISCRETIONARY TRUST. THE LD. DR FURTHER SUBMITTED THAT THE DIVIDEND WAS RECEIVED BY AADT ON 31.3.2009 AND THE FORMALIT IES SUCH AS MEETING OF THE BOARD OF TRUST AND OTHER VARIOUS FORMALITIES A R E REQUIRED TO BE FULFILLED WHICH W ERE NOT POSSIBLE IN A SINGLE DAY. HENCE THE RECEIPT BY THE ASSESSEE WAS NOT A CAPITAL RECEI PT AS HAS BEEN MADE OUT BY THE ASSESSEE. THE LD. DR , WHILE POINTI NG OUT THE WHOLE STRUCTURE AND ARRANGEMENT , SUBMITTED THAT SETTLER AND TRUSTEE AND BENEFICIAR IES WERE THE SAME AND THEY HAVE MANAGED AND ARRANGED THE WHOLE DRAMA IN SUCH A MANNER THAT NO TAX WOULD BE PAID BY THE ASSESSEE ON THE MONEY RECEIVED WH ICH O THERWISE IS LAIBLE TO TAX ININDIA. THE LD.DR ALSO SUBMITTED THAT IT WAS NOT CLEAR AS TO WHEN THE DIVIDEND DECLARED BY VEDANTA RESOURCES PLC AND THE PERI OD FOR WHICH THE SAID DIVIDEND WAS DECLARED AND C REDITED . THE LD DR STATED THAT IT WAS FOR THE FINAN CIAL YEARS 2007 - 08 AND 2008 - 09 THE DIVIDEND COULD NOT HAVE BEEN DECLARED AND PAID ON 31.3.2009. THE LD DR ARGUED THAT T HE ASSESSEE NEVER FILED BEFORE THE AUTHORITIES BELOW ANY RESOLUTION S OF M/S VOLCAN INVESTMENT LTD . THE LD. DR DISTINGUISHED THE ON F ACTS THE DECISIONS AS RELIED UPON BY THE AO IN SUPPORT OF HIS CASE . WHILE DISTINGUISHING THE CASE OF KAMALINI KHATAU(SUPRA), THE DR SUBMITT ED THAT IN THE SAID CASE OF TRUST THE BENEFICIARIES WERE RESIDENT OF INDIA. HOWEVER, IN 19 I.T.A. NO. 4591 /MUM/201 6 AND OTHER TWO APPEALS THE PRESENT CASE, THE TRUST IS RESIDENT OF BAHAMAS AND THE BENEFICIAR IES ARE RESIDENTS OF INDIA . THE LD. DR IN DEFENSE OF HIS ARGUMENTS RELIED UPON THE SERIES OF DECISIONS AS UNDER : I) MCDOWELL AND CO LTD - 154 ITR 148 (SC); II) TWINSTAR HOLDINGS LTD V/S DCIT 260 IT R 0006 (BOM); III) NAYANTARA G AGARWAL V/S CIT - 207 ITR 639 (BOM); IV) ONAM AGARBATHI CO V/S DCIT - 310 ITR 56 (KAR); V) PRAVINBHAI M KHENI V/S ACIT - 28 TAXMANN.COM 111(GUJ); VI) CIT V/S RO TH MAN CYCLE IND. PVT.LTD (2011) 203 TAXMAN 302; VII) CIT V/S BH ARTI DEVI SARABHI - 231 ITR 526 (SC); VIII) MOTI TRUST KOTA VS COMMR. OF INCOME TAX, 1999 236 ITR 37 SC, THE LD. DR FILED DETAILED WRITTEN SUBMISSIONS AND FINALLY PRAYED BEFORE THE BENCH IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND POSITION OF LAW AND THE RATIO LAID DOWN IN THE VARIOUS DECISION S RELIED , THE ORDER PASSED BY THE LD.CIT(A) SHOULD BE UPHELD. 8 . IN THE REJOINDER, THE LD.AR SUBMITTED THAT THE DOCUMENTS RELIED UPON BY THE ASSESSEE WE RE SAME AND THEREFORE DID NOT FORM PART OF THE N EW MATERIAL S. S O FAR AS THE ADDITIONAL EVIDENCE ARE CONCERNED , H E HAS SPECIFICALLY POINTED OUT THAT IN THE CASE OF MRS. KIRAN AGARWAL T HESE DOCUMENTS WERE CALLED FOR AND SUBMITTED BEFORE THE LD.CIT(A). HOWEVER IN THE CASE OF DWARKA PRASAD AGARWAL, THES E DOCUMENTS WERE NOT CALLED POSSIBLY FOR THE REASONS THAT THESE WERE CALLED FOR BY THE LD.CIT(A) IN THE CASE OF MRS. KIRAN AGARWAL AND IT WAS A COVERED ISSUE SO FAR AS THE CASE OF DWARKA PRASAD AGARWAL WAS CONCERNED. NEVERTHELESS, THE LD.AR MOVED AN A PPLICATION UNDER 20 I.T.A. NO. 4591 /MUM/201 6 AND OTHER TWO APPEALS RULE 29 OF THE ITAT RULES FOR FILING T HE ADDITIONAL EVIDENCES AND RESOLUTION S ETC IN THE FORM OF ADDITIONAL EVIDENCES IN THE RIGHT SPIRIT AND PERSPECTIVE. THE LD. AR WHILE DISTINGUISHING THE CASE LAWS RELIED UPON BY THE REVENUE SUBMITTE D THAT IN THE CASE OF TWINSTAR HOLDINGS LTD (SUPRA) THE ENTIRE CASE ALTOGETHER WAS ON DIFFERENT FOOTINGS. THE ISSUANCE OF NO OBJECTION CERTIFICATE U/S 281 OF THE ACT, THE TRANSACTIONS WERE TOOK PLACE IN THE YEAR 1999 AND THEREFORE THEY HAVE NO RELEVA NCE OF THE ISSUE INVOLVED IN THE PRESENT APPEAL. THE LD. AR SUBMITTED THAT VEDANT A RESOURCES PLC IS A COMPANY FORMED UNDER UK RULES AND REGISTERED IN STOCK EXCHANGE AND THE SAID ENTITY WAS REQUIRED TO COMPLY WITH THE REQUIREMENT S OF SECURITY EXCHANGE. IN RESPECT OF THE OTHER DECISION S IN THE CASE OF MCDOWELL AND CO LTD AND OTHER DECISIONS (SUPRA), THE LD.AR ARGUED THAT ALL THESE DECISION S ARE RELATING TO COLOURABLE DEVICES. HOWEVER, IN THE PRESENT CASE, THE TRANSACTIONS WERE GENUINE AND HAVE BEEN EX PLAINED WITH THE HELP OF THE DOCUMENTS EXCHANGED UNDER EXCHANGE OF INFORMATION UNDER TREATY ( TIEA ) BETWEEN INDIA AND BAHAMAS. THE LD. AR FURTHER STATED THAT EVEN IF THE TRANSACTIONS WERE TREATED AS COLORABLE DEVICE AS CONTENDED BY THE LD.DR, THE AMOUN T SHOULD NOT HAVE B EN E TAXED IN THE IMPUGNED ASSESSMENT YEAR AS THE ASSESSEE RECEIVED ONLY PART OF THE AMOUNT RECEIVED BY AADT IN THAT YEAR AND IN THE SUBSEQUENT YEARS. AS REGARDS RELIANCE ON MOHAN MANOJ DHUPELIAS DECISION, THE LD.AR DISTINGUISHED THE S AME BY SUBMITTING THAT IN THE DHUPELIAS CASE, THE ASSESSEE WAS NOT 21 I.T.A. NO. 4591 /MUM/201 6 AND OTHER TWO APPEALS ABLE TO EXPLAIN THE NATURE OF RECEIPT IN THE LUXEMBOURG TRUST AND HENCE THE TRUST WAS IGNORED AND THE ENTIRE INCOME WAS HELD TO BE THE INCOME OF MOHAN DHUPELIA, WHEREAS IN THE PRESENT C ASE, THE SOURCES OF INCOME IN AADT WAS EXPLAINED AND THE DEPARTMENT INVOKED THE POWERS UNDER TIEA BETWEEN THE INDIA AND COMMONWEALTH OF BAHAMAS AND ALL THESE TRANSACTIONS STAND EXPLAINED THROUGH THE OFFICIAL CHANNELS OF FT&TR WING OF CBDT AND THERE FORE THE ARGUMENT OF T HE LD. DR ARE NOT LEGALLY SUSTAINABLE. 9 . WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL PLACED BEFORE US INCLUDING THE IMPUGNED ORDERS AND CASE LAW RELIED UPON BY BOTH THE PARTIES. THE UNDISPUTED FACTS OF THE CASE ARE THAT THE ASSESSEE IS A BENEFICIARY OF TRUST CALLED AADT AND IS FORMED UNDER THE LAWS OF UNION OF INDIA AND COMMONWEALTH OF BAHAMAS. THE TRUST WAS CREATED BY A VALIDLY EXECUTED TRUST SETTLEMENT DEED WHICH WAS MADE ON 11.12.2007 BETWEEN SHRI DWARKA PRASAD AGARWAL, ONCLAVE PTC LTD AND ANIL KUMAR AGRAWAL. THAT SHRI DWARKA PRASAD AGARWAL IS A THE SETTLER, ONCLAVE PTC LTD IS TRUSTEE AND ANIL AGARWAL IS THE PROTECTOR. THUS THE SETTLER MADE AN IRREVOCABLE SETTLEMENT CALLED ANIL AGARWAL DISCR ETIONARY TRUST (AADT). IT WAS ALSO EXPRESSLY PROVIDED IN THE PREAMBLE THAT THE SETTLER WAS DESIROUS OF MAKING AN IRREVOCABLE SETTLEMENT. THE BENEFICIARIES OF AADT ARE MRS. KIRAN AGARWAL, MR. DWARKA PRA S AD AGARWAL AND MR.AGNIVESH AGARWAL. THE OBJ ECTS/OBLIGATIONS AND DUTIES OF THE TRUST EES ARE SET OUT IN THE TRUST DEED 22 I.T.A. NO. 4591 /MUM/201 6 AND OTHER TWO APPEALS EXECUTED ON 11.12.2007. AS PER THE TRUST DEED THE TRUSTEES WERE UNDER OBLIGATION TO ACCUMULATE THE SURPLUS INCOME AND DEAL WITH THE SAME AS IF IT WERE CAPITAL OF THE TRUST. THE T RUST DEED FURTHER STIPULATES THAT THE TRUST FUND SHALL BE FOR THE ADVANCEMENT AND MAINTENANCE OF THE BENEFICIARIES AT THE DISCRETION OF THE PROTECTOR. THE LD. AR INVITED OUR ATTENTION TO THE RELEVANT ARTICLES IN THE TRUST DEED FILED AT PAGES 1 - 11 OF THE PAPER BOOK. IN THE FINANCIAL YEAR 2008 - 09, AADT RECEIVED USD 20,000,000 FROM VOLCAN INVESTMENTS LTD, A COMPANY FORMED UNDER THE LAWS OF THE COMMONWEALTH OF BAHAMAS BY WAY OF DIVIDEND ON SHARES HELD BY THE AADT IN VOLCAN INVESTMENT S LTD. THE SOURCE F ROM WHICH THE DIVIDEND OF UDS 20,000,000 WAS DECLARED BY VOLCAN INVESTMENTS LTD WAS RECEIVED BY THE SAID COMPANY BY WAY OF DIVIDEND FROM VEDANTA RESOURCES PLC, A COMPANY INCORPORATED IN UK. THE VOLCAN INVESTMENTS HELD ABOUT 58.8% OF THE SHARE CAPITAL O F VEDANTA RESOURCES PLC AT THE RELEVANT POINT OF TIME . THE DIVIDEND RECEIVED BY AADT WAS DEPOSITED IN IT S ACCOUNT WITH DEUTSHE BANK COPY OF WHICH IS AS FILED AT PAGES 12 OF THE PAPER BOOK. THE TRUSTEE IN THEIR MEETING HELD ON 31.3.2009 NOTED THAT T HE AMOUNT RECEIVED FROM VOLCAN INVESTMENTS LTD HAS NOT BEEN PASSED ON TO THE BENEFICIARIES AND IT WAS DECIDED THAT T HE SURPLUS BE TRANSFERRED TO THE CORPUS FUND AND BE ACCUMULATED UNTIL DISTRIBUTED TO THE BENEFICIARIES . THE ASSESSEE RECEIVED THE FOLLOWIN G AMOUNTS DURING THE FINANCIAL YEAR 2008 - 09 AS DISTRIBUTION OF CORPUS US 1 2,6 6 0, 000 . FOR THE SAKE 23 I.T.A. NO. 4591 /MUM/201 6 AND OTHER TWO APPEALS CONVENIENCE , THE DETAILS OF THE MONEY RECEIVED DATE WISE WITH NECESSARY DETAILS ARE GIVEN HEREUNDER: - (I) . RECEIPT OF USD 7,000,000 = INR 33,53,90,975 (A) . THE TRUSTEES IN THEIR MEETING HELD ON 22ND SEP., 2009 RESOLVED TO MAKE DISTRIBUTION OF USD 7,000,000 TO DP AGARWAL (THE ASSESSEE). THE TRUSTEES ALSO NOTED THAT THIS DISTRIBUTION WOULD BE FROM THE ACCUMULATED FUNDS OF THE TRUST ARISING OUT OF INCOME OF EARL IER YEARS. IN TER MS OF THE TRUST DEED THE TRUSTEES RECEIVED THE CONSENT OF THE PROTECTOR ANIL AGARWAL . (B) THE AMOUNT OF USD 7,000,000 WAS DEBIT ED TO THE BANK ACCOUNT OF AADT N 24TH SEP., 2009 IN ACCOUNT NO 2015075. (C) THE ASSESSEE RECEIVED THE AMOUN T OF USD 7,000,000 IN INDIAN RUPEE ON 25TH SEP., 2009 IN HIS BANK ACCOUNT WITH ICICI BANK ACCOUNT NO. 000401556481. THE AMOUNT IN INDIAN RUPEE WAS RS.33,53,90,975/ - . (II) RECEIPT OF USD 5,000,000 = INR 22,95,62,475 A ) THE TRUSTEES IN THEIR MEETING HELD ON 12 TH OCT., 2009 RESOLVED TO MAKE DISTRIBUTION OF USD 5,000,000 TO DP AGARWAL (THE ASSESSEE). THE TRUSTEES ALSO NOTED THAT THIS DISTRIBUTION WOULD BE FROM THE ACCUMULATED FUNDS OF THE TRUST ARISING OUT OF INCOME OF EARLIER YEARS. IN 24 I.T.A. NO. 4591 /MUM/201 6 AND OTHER TWO APPEALS TER MS OF THE TRUST DEED THE TRUSTEES RECEIVED THE CONSENT OF THE PROTECTOR ANIL AGARWAL. B ) THE AMOUNT OF USD 5000,000 WAS DEBITED TO THE BANK ACCOUNT OF AADT ON 14TH OCT., 2009 IN ACCOUNT NO . 2015075 C ) THE ASSESSEE RECEIVED THE AMOUNT OF USD 5000,000 IN INDIAN RUPEE ON 15 TH OCT ., 2009 IN HIS BANK ACCOUNT WITH ICICI BANK ACCOUNT NO 000401556481. THE AMOUNT IN INDIAN RUPEE WAS RS.22,95,62,475/ - . (III) RECEIPT OF USD 350,000 = INR 1,63,61,667/ - A ) THE TRUSTEES IN THEIR MEETING HELD ON 14TH DEC., 2009 RESOLVED TO MAKE DISTRIBUTION O F USD 350,000 TO DP AGARWAL (THE ASSESSEE). THE TRUSTEES ALSO NOTED THAT THIS DISTRIBUTION WOULD BE FROM THE ACCUMULATED FUNDS OF THE TRUST ARISING OUT OF INCOME OF EARLIER YEARS. IN TERMS OF THE TRUST DEED THE TRUSTEES RECEIVED THE CONSENT OF THE PROTECTO R ANIL AGARWAL. B ) THE AMOUNT OF USD 350,000 WAS DEBITED TO THE BANK ACCOUNT OF AADT ON 16TH DEC., 2009 IN ACCOUNT NO 2015075. C ) THE ASSESSEE RECEIVED THE AMOUNT OF USD 350,000 IN INDIAN RUPEE ON 17 TH DEC 2009 IN HIS BANK ACCOUNT WITH ICICI BANK ACCOUNT NO 000401556481. THE AMOUNT IN INDIAN RUPEE WAS RS.1,63,61,667/ - . 25 I.T.A. NO. 4591 /MUM/201 6 AND OTHER TWO APPEALS (IV) RECEIPT OF USD 200,000 = INR 92,16,446/ - A) THE TRUSTEES IN THEIR MEETING HELD ON 4TH JAN., 2010 RESOLVED TO MAKE DISTRIBUTION OF USD 200,000 TO DP AGARWAL (THE ASSESSEE). THE TRUSTE ES ALSO NOTED THAT THIS DISTRIBUTION WOULD BE FROM THE ACCUMULATED FUNDS OF THE TRUST ARISING OUT OF INCOME OF EARLIER YEARS. IN TERMS OF THE TRUST DEED THE TRUSTEES RECEIVED THE CONSENT OF THE PROTECTOR ANIL AGARWAL B) THE AMOUNT OF USD 200,000 WAS DE BITED TO THE BANK ACCOUNT OF AADT ON 6TH JAN., 2010 IN ACCOUNT NO 2015075 . C) THE ASSESSEE RECEIVED THE AMOUNT OF USD 200,000 IN INDIAN RUPEE ON 6TH JAN., 2010 IN HIS BANK ACCO UNT WITH ICICI BANK ACCOUNT NO 00401556481. THE AMOUNT IN INDIAN RUPEE WAS R S.92,16,446 (RS.91,64,554 9 PLUS 51,892/ - ) (V) RECEIPT OF USD 11 0,000 = INR 50,28,075 / - A) THE TRUSTEES IN THEIR MEETING HELD ON 29TH JAN., 2010 RESOLVED TO T AKE DISTRIBUTION OF USD 110,000 TO DP AGARWAL (THE ASSESSEE). THE TRUSTEES ALSO NOTED THAT T HIS DISTRIBUTION WOULD BE FROM THE ACCUMULATED FUNDS OF THE TRUST ARISING OUT OF INCOME OF EARLIER YEARS. IN TERMS OF THE TRUST DEED THE TRUSTEES RECEIVED THE CONSENT OF THE PROTECTOR ANIL AGARWAL. 26 I.T.A. NO. 4591 /MUM/201 6 AND OTHER TWO APPEALS B) THE AMOUNT OF USD 110,000 WAS DEBITED TO THE BANK AC COUNT OF AADT ON 2ND FEB., 2010 IN ACCOUNT NO 2015075. C) THE ASSESSEE RECEIVED THE AMOUNT OF USD 110,000 IN INDIAN RUPEE ON 3RD FEB., 2010 IN HIS BANK ACCOUNT WITH ICICI BANK ACCOUNT NO 000401556481 . THE AMOUNT IN INDIAN RUPEE WAS RS.50,28,075/ - . THE NECESSARY DETAILS QUA AMOUNT S IN INDIAN RUPEE ARE EXTRACTED BELOW TO GIVE A COMPACT VIEW OF THE MONEY RECEIVED WHICH ARE AS UNDER: - S.NO. DATE OF RESOLUTION AMOUNT USD ($) DATE OF PAYMENT DEUTSHE BANK DATE OF RECEIPT ICICI BANK AMOUNT IN INR (RS.) 1 22 - 9 - 2009 7,000,000 24 - 9 - 2009 25 - 9 - 2009 33,53,90,975 2 12 - 10 - 2009 5,000,000 14 - 10 - 2009 15 - 10 - 2009 22,95,62,475 3 14 - 10 - 2009 350,000 16 - 12 - 2009 17 - 12 - 2009 1,63,61,667 4 4 - 1 - 2010 2,00,000 6 - 1 - 2010 6 - 1 - 2010 92,16,446 5 29 - 1 - 2010 1,10,000 2 - 02 - 2010 3 - 02 - 2010 50,28,075 TOTAL 12,660,000 59,55,59,638 10. AFTER EXAMINING THE MERIT OF VALIDITY OF ADDITIONAL EVIDENCES AS FILED UNDER REULE 29 OF ITAT RULES , WE FIND THAT THE EVIDENCES SUCH AS RESOLUTIONS, BANKS STATEMENTS AND MINUTES WERE OF GREAT RELEVANCE IN ORDER TO ARRIVE AT A CORRECT CONCLUSION. MOREOVER MOST OF THESE EVIDENCES WERE BEFORE THE CIT(A) IN THE CASE OF MRS KIRAN AGARWAL ANOTHER BENEFI CIARY OF THE SAME TRSUT. WE ARE THEREFORE INCLINED TO ADMIT THE SAME. WE HAVE ALSO PERUSED THE ORDERS, MATERIAL AND COPY OF RESOLUTION S PASSED BY THE TRUSTEES IN THE MEETING AND 27 I.T.A. NO. 4591 /MUM/201 6 AND OTHER TWO APPEALS ENTRIES IN THE BOOKS OF ACCOUNT OF AADT OF THE RESPECTIVE AMOUNT S OF USD 20 , 0 00 , 000 WITH DEUTSHE BANK AND RECEIPT OF THE SAME IN INDIAN RUPEES ON VARIOUS DATES IN THE ACCOUNT OF ASSESSEE WITH ICICI BANK . WE ALSO NOTED THAT THE REVENUE OBTAINED ALL THESE DOCUMENTS FROM COMMONWEALTH OF BAHAMAS THROUGH FT&TR , MINISTRY OF FIN ANCE WHICH WERE SOUGHT FROM COMMONWEALTH OF BAHAMAS UNDER TIEA IN THE CASE OF MRS.KIRAN AGARWAL IN WHOSE CASE SIMILAR ADDITION WAS MADE BY THE AO WHILE FRAMING ASSESSMENT U/S 143(3) OF THE ACT. T HE CIT ON 21.2.2014 SOUGHT INQUIRY INTO THE TAX AFFAIRS OF KIRAN AGARWALS WITH RESPECT TO BAHAMAS ENTITY AADT BY INVOKING INDO BAHAMAS TIEA AND THE SAID INQUIRY WAS MADE THROUGH MINISTRY OF FINANCE , FT&TR, OF GOVERNMENT OF INDIA AND PENDING THE INFORMATION FROM BAHAMAS AND FT&TR, THE AO PASSED THE ASSE SSMENT ON 21.3.2014 IN RESPECT OF KIRAN AGARWAL . THE COMMONWEALTH OF BAHAMAS REPLIED TO FT&TR VIDE THEIR LETTER DATED 14.10.2014 WHICH IS PLACED ON RECORD AT PAGE 103 OF THE PAPER BOOK SENDING VARIOUS DOCUMENTS SUCH AS TRUST SETTLEMENT DEED DATED 11.12 .2007 PLACED AT PAGES 1 TO 11 OF THE PAPER BOOK, BANK STATEMENT S OF DEUTSHE BANK FROM FINANCIAL YEAR 2008 TO 2013 PLACED AT PAGES 12 TO 75 OF THE PAPER BOOK AND OTHER INFORMATION AS CALLED FOR BY FT&TR. THE SAME BANK STATEMENT S /DETAILS CONTAIN ED TH E DETAILS OF DISTRIBUTION MADE TO THE ASSESSEE AS WELL AND THEREFORE THE SAME W ERE RELEVANT IN THE CASE OF THE ASSESSEE ALSO. THE FT&TR VIDE LETTER DATED 7.11.2014 FORWARDED T HE 28 I.T.A. NO. 4591 /MUM/201 6 AND OTHER TWO APPEALS INFORMATION RECEIVED FROM BAHAMAS TO CIT, MUMBAI WHO HAS JURISDICTION OVER M RS.KIRAN AGARWAL PLACED AT PAGE 102 O F THE PAPER BOOK AS WELL AS THE ASSESSEE. IT IS ON THE BASIS OF THE SAID INFORMATION, THE AO REOPENED THE ASSESSMENT IN THE CASE OF DWARKA PRASAD AGARWAL FOR THE CURRENT YEAR AS WELL AS THE NEXT YEAR. IN THE CASE OF MRS. KIRAN AGARWAL, THE ADDITION WAS MADE IN THE REGULAR ASSESSMENT ITSELF THOUGH THE INFORMATION FROM FT&TR WAS PENDING WHILE FRAMING THE ASSESSMENT . IN THE APPELLATE PROCEEDINGS IN THE CASE OF MRS.KIRAN AGARWAL, THE CIT(33) CALLED FOR REMAND REPORT FROM THE AO . T HE AO FORWARDED THE SAME TO THE CIT(33) WHO CONSIDERED THE SAID REPORT WHILE ADJUDICATING THE APPEAL OF MRS.KIRAN AGARWAL AND DECIDED HE ISSUE THAT THE DIVIDEND INCOME DECLARED AND PAID IN MARCH, 2009 TO AADT BY THE FOREIGN COMPANY OUTSIDE INDIA TO ITS FOREIGN SHAREHOLDER IS NOT A SUBJECT MATTER OF TAX IN INDIA. THE TRUSTEE S OF AADT CAPITALIZED THE INCOME RECEIVED IN FY 2008 - 09 AND ADDED TO THE CORPUS OF THE TRUST AS O N 31.3.2009. THE TRUSTEE DECIDED TO DISTRIBUTE THE AMOUNT OUT OF CORP US I N THE SUBSEQUENT YEARS INCLUD ING THE CURRENT YEAR UNDER CONSIDER A TION . T HE TRUSTEE S DISTRIBUTED A PART OF THE CORPUS TO THE ASSESSEE BESIDES OTHER BENEFICIARY MRS.KIRAN AGARWAL . THE AMOUNT RECEIVED BY THE ASSESSEE ON DISTRIBUTION OF CORPUS WAS TRE ATED AS CAPITAL RECEIPT NOT CHARGEABLE TO TAX . T HE UNDISPUTED POSITION IS THAT THE ASSESSEE RECEIVED RS.59,55,59,638/ - FROM AADT THE DISCRETIONARY TRUST IN THE FINANCIAL YEAR 2009 - 10 OUT OF THE CORPUS WHICH 29 I.T.A. NO. 4591 /MUM/201 6 AND OTHER TWO APPEALS WAS RECEIVED BY THE SAID DISCRETIONARY TRUST AS DIVIDEND FROM VOLCON INVESTMENT LTD IN THE FINANCIAL YEAR 2008 - 09 ACCUMULAT ING THE SAME IN THE CORPUS AS ON 31.3.2009 . IN OUR CONSIDERED OPINION THE SAID DISTRIBUTION IS OUT OF THE CORPUS FUND AND THEREFORE CONSTITUTES CAPI T AL RECEIPT IN THE HANDS OF SHRI DWARKA PRASAD AGARWAL . THE CASE OF THE ASSESSEE IS SQUARELY COVERED BY THE DECISION OF THE APEX COURT IN KAMALINI KHATAU (SUPRA) WHICH IS DISCUSSED AS UNDER: - IN THE CASE OF KAMALINI KHATAU (SUPRA), THE HONBLE SUPREME COURT HELD THAT THE REV ENUE HAS THE OPTION TO ASSESSEE AND RECOVER TA X FROM EITHER THE TRUSTEES OR THE BENEFICIARIES OF A DISCRETIONARY TRUST IN RESPECT OF SUCH INCOME THEREOF AS HAS BEEN DISTRIBUTED TO AND RECEIVED BY THE BENEFICIARIES IN THE COURSE OF THE ACCOUNTING YEAR. THE OPERATIVE PART OF THE JUDGMENT IS AS UNDER: 25. WHY, THEN, SHOULD THE BENEFICIARY OF A DISCRETIONARY TRUST STAND ON A FOOTING DIFFERENT FROM THAT OF THE BENEFICIARY OF A SPECIFIC TRUST? IT IS TRUE THAT THE LANGUAGE OF SECTION 166 DOES NOT AVAIL THE REVEN UE BECAUSE IT STATES THAT SECTIONS 160 TO 165 DO NOT PREVENT EITHER THE DIRECT ASSESSMENT OF THE PERSON ON WHOSE BEHALF OR FOR WHOSE BENEFIT INCOME THEREIN REFERRED TO IS RECEIVABLE OR THE RECOVERY FROM SUCH PERSON OF TAX PAYABLE IN RESPECT OF SUCH INCOME. THE SECTION IS CLEARLY CLARIFICATORY. IT DOES NOT EMPOWER ANY ASSESSMENT OR RECOVERY BY ITSELF. IT ONLY MAKES IT CLEAR THAT SECTIONS 160 TO 165 DO NOT BAR THE DIRECT ASSESSMENT OF THE PERSON ON WHOSE BEHALF OR FOR WHOSE BENEFIT THE INCOME IS RECEIVABLE OR THE RECOVERY FROM SUCH PERSON OF THE TAX PAYABLE THEREON, PROVIDED THAT IS PERMISSIBLE UNDER ANY OTHER PROVISIONS OF THE ACT. EVEN SO, SINCE THE WORD USED IN SECTION 166 IS 'RECEIVABLE', IT CANNOT APPLY TO A DISCRETIONARY TRUST FOR, IT CANNOT BE SAID THAT THE INCOME THEREON IS RECEIVABLE FOR ONE OR MORE BENEFICIARIES, IT BEING LEFT TO THE DISCRETION OF THE TRUSTEES WHETHER OR NOT THE INCOME 30 I.T.A. NO. 4591 /MUM/201 6 AND OTHER TWO APPEALS 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 DOES NOT FALL WITHIN THE AMBIT OF SECTION 166, MAY NOT BE ASSESSED UPON INCOME RECEIVED BY HIM AND TAX RECOVERED FROM HIM THEREON IF THAT IS PERMISSIBLE UNDER ANY OTHER PROVISIONS OF THE ACT FOR, AS AFORESTATED, SECTION 166 IS MERELY CLARIFICATORY. SECTION 5 DEFINES THE TOTAL INCOME OF ANY PERSON TO INCLUDE INCOME RECEIVED BY HIM OR RECEIVED ON HIS BEHALF OR WHICH ACCRUES OR ARISES TO HIM. A PERSON MAY BE DIRECTLY ASSESSED IN RESPECT OF SUCH INCOME. THE INCOME OF A DISCR ETIONARY TRUST WHICH IS WITHIN THE ACCOUNTING YEAR DISTRIBUTED TO AND RECEIVED BY THE BENEFICIARY WOULD, THEREFORE, BE SUBJECT TO ASSESSMENT IN HIS HANDS AND TAX THEREON WOULD BE RECOVERABLE FROM HIM. SUCH INCOME WOULD SQUARELY FALL WITHIN THE BROAD SWEEP OF TOTAL INCOME UNDER SECTION 5 AND THE BENEFICIARY WOULD BE LIABLE TO ASSESSMENT AND RECOVERY OF TAX THEREON UNDER SECTION 4. IN THE CASE OF VIKRAMSINGHJI GONDAL (SUPRA) IT HAS BEEN HELD AS UNDER : 18. A DISCRETIONARY TRUST IS ONE WHICH GIVES A BENEF ICIARY NO RIGHT TO ANY PART OF THE INCOME OF THE TRUST PROPERTY, BUT VESTS IN THE TRUSTEES A DISCRETIONARY POWER TO PAY HIM, OR APPLY FOR HIS BENEFIT, SUCH PART OF THE INCOME AS THEY THINK FIT. THE TRUSTEES MUST EXERCISE THEIR DISCRETION AS AND WHEN THE IN COME BECOMES AVAILABLE, BUT IF THEY FAIL TO DISTRIBUTE IN DUE TIME, THE POWER IS NOT EXTINGUISHED SO THAT THEY CAN DISTRIBUTE LATER. THEY HAVE NO POWER TO BIND THEMSELVES FOR THE FUTURE. THE BENEFICIARY THUS HAS NO MORE THAN A HOPE THAT THE DISCRETION WILL BE EXERCISED IN HIS FAVOUR. IN THE CASE OF JYOTHIRSINHJI GONDAL THE HONBLE (GUJARAT HIGH COURT) HELD AS UNDER:. PG - 23 IN THIS CASE THE FOLLOWING QUESTIONS WERE ADJUDICATED: I) WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE TRIB UNAL HAS ERRED IN LAW IN ITS INTERPRETATION AND/OR APPLICATION OF CLAUSES 3(2) AND 4 OF THE UK TRUSTS IN HOLDING THAT THE SAME ARE SPECIFIC TRUSTS AND NOT DISCRETIONARY TRUSTS? 31 I.T.A. NO. 4591 /MUM/201 6 AND OTHER TWO APPEALS (II) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE TRIBUNAL HAS ERRE D IN HOLDING THAT EVEN IF UK SETTLEMENTS ARE TO BE TREATED AS DISCRETIONARY TRUSTS, ASSESSEE SHALL BE LIABLE TO BE TAXED UNDER SECTION 166 OF THE IT ACT FOR THE INCOME NOT DISTRIBUTED OR RECEIVABLE ON HIS BEHALF, ENTIRE INCOME OF THE TRUST HAVING BEEN RETA INED BY THE TRUSTEES? (III) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE TRIBUNAL HAS ERRED IN LAW IN FOLLOWING THE ORDER OF SETTLEMENT COMMISSION AS WELL AS THE HON'BLE SUPREME COURT FOR EARLIER ASSESSMENT YEARS IN SPITE OF THE FACT THA T THE APPELLANT HAS NOT RECEIVED ANY INCOME FROM ANY OF THE TRUSTS FOR THE YEAR UNDER APPEALS? THE HIGH COURT HELD AS UNDER : THE TRUSTEES HAVE EXERCISED. THEIR DISCRETION BY RETENTION. THE UK TRUSTS ARE DISCRETIONARY TRUSTS AND NOT SPECIFIC TRUSTS AS TH E NET INCOME OF THE TRUSTS BY POSITIVE ACT RETAINED BY THE TRUSTEES AND CARRIED FORWARD AND BROUGHT FORWARD FROM YEAR TO YEAR. THIS POSITIVE ACT TAKEN BY THE TRUSTEES SUFFICIENTLY ESTABLISHES THAT THE TRUSTS ARE DISCRETIONARY TRUSTS. (I) THE DICTIONARY MEA NING OF WORD 'RETAIN' IS RELEVANT TO DECIDE THE ISSUE. INTERNATIONAL WEBSTER NEW ENCYCLOPEDIC DICTIONARY DEFINES THE WORD 'RETAIN' AS HOLD BACK, KEEP, TO KEEP POSSESSION OF; TO CONTINUE TO USE OR PRACTICE; AS, TO RETAIN A SYSTEM; TO CONTINUE TO HOLD OR HAV E; AS, TO RETAIN HEAT OR MOISTURE; TO KEEP IN MIND; REMEMBER; TO HOLD IN PLACE OR POSITION; TO ENGAGE, ESPECIALLY, BY THE PAYMENT OF A PRELIMINARY FEE, AS A LAWYER. MORE OR LESS SAME MEANINGS ARE ASSIGNED TO THE WORD 'RETAIN' IN CHAMBER'S TWENTIETH CENTURY DICTIONARY, THE RANDOM HOUSE DICTIONARY, THE NEW OXFORD ILLUSTRATED DICTIONARY, BLACK'S LAW DICTIONARY, BOUVIER'S LAW DICTIONARY AND WEBSTER'S NEW WORLD DICTIONARY. (J) NOTHING IS RECEIVABLE IN THESE YEARS BY ANY OF THE BENEFICIARIES AND HENCE, OPTION UND ER SECTION 166 IS NOT AVAILABLE TO REVENUE. FOR THIS PURPOSE, RELIANCE IS PLACED ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT V. SMT. KAMALINI KHATAU : [1994]209ITR101(SC) WHEREIN IT IS HELD THAT SECTION 166 OF THE ACT IS NOT APPLICABLE AS THE WORD USED IN SECTION 166 OF THE ACT IS 'RECEIVABLE' WHICH CANNOT BE APPLIED TO DISCRETIONARY TRUST. 32 I.T.A. NO. 4591 /MUM/201 6 AND OTHER TWO APPEALS ALSO IN CONCLUSION, THE GUJARAT HIGH COURT OBSERVED: .A CLOSE AND COMBINED READING OF CLAUSES 3 AND 4 OF THE TRUST DEED MAKES IT ABUNDANTLY CLEA R THAT THE SOLE TRUSTEE HAS EVERY POWER OR AUTHORITY TO TAKE DECISION WITH REGARD TO THE TRUST PROPERTY AND SINCE IT HAS BEEN DECIDED BY THE TRUSTEE TO RETAIN THE INCOME OF THE TRUST, IT CANNOT BE SAID THAT SUCH INCOME IS BEING RECEIVED BY THE ASSESSEE. WHILE DECIDING GONDALS CASE GUJARAT HIGH COURT MADE THE FOLLOWING OBSERVATIONS WITH RESPECT OF KAMALINI KHATAU 201 ITR 101 (SC): IN CIT V. KAMALINI KHATAU (1994) 209 ITR 101(SC), THE HON'BLE SUPREME COURT HAS HELD THAT SECTION 166 IS CLARIFICATORY. IT DOES NOT EMPOWER ANY ASSESSMENT OR RECOVERY BY ITSELF. IT ONLY MAKES IT CLEAR THAT SECTIONS 160 - 165 DO NOT BAR THE DIRECT ASSESSMENT OF THE PERSON ON WHOSE BEHALF OR FOR WHOSE BENEFIT THE INCOME IS RECEIVABLE OR THE RECOVERY FROM SUCH PERSON OF THE TAX P AYABLE THEREON, PROVIDED THAT IS PERMISSIBLE UNDER ANY OTHER PROVISIONS OF THE ACT. EVEN SO, SINCE THE WORD USED IN SECTION 166 IS 'RECEIVABLE', IT CANNOT APPLY TO A DISCRETIONARY TRUST, FOR IT CANNOT BE SAID THAT THE INCOME THEREON IS RECEIVABLE FOR ONE O R MORE BENEFICIARIES, IT BEING LEFT TO THE DISCRETION OF THE TRUSTEES WHETHER OR NOT THE INCOME SHOULD BE DISTRIBUTED TO ONE OR MORE OF THE BENEFICIARIES OR NOT AT ALL . THE DECISION OF GUJARAT HIGH COURT WAS APPEALED BY THE REVENUE AUTHORITIES IN THE S UPREME COURT. THE SUPREME COURT IN THE CASE OF VIKRAMSINH JI GONDALS (REFERRED IN PARA 5.3 ABOVE ) AFFIRMING THE VIEW HELD AS UNDER : 19. HAVING REGARD TO HE ABOVE LEGAL POSITION ABOUT THE DISCRETIONARY TRUST WHICH IS ALSO APPLIED BY THIS COURT IN THE EARLIER JUDGMENT AND THE FACT THAT THE INCOME HAS BEEN RETAINED AND NOT DISBURSED TO THE BENEFICIARIES, THE VIEW TAKEN BY THE HIGH COURT CANNOT BE SAID TO BE LEGALLY FLAWED. 33 I.T.A. NO. 4591 /MUM/201 6 AND OTHER TWO APPEALS IN THE CASE OF SHANTA BEN PATEL (SUPRA) THE TRIBUNAL HELD AS UNDER : 7. WE AGREE WITH THE FINDINGS OF THE LD.CIT(A) THAT THE DISTRIBUTION WAS MADE OUT OF THE INCOME OF THE EARLIER YEARS OR OUT OF CORPUS OF THE TRUST. AS PER SECTION 5 THE BASIS OF CHARGEABILITY IS THE RECEIPT OR ACCRUAL IN THE HANDS OF THE TRUST IN THE RELEVAN T PREVIOUS YEARS CANNOT BE SAID TO HA V E ACCRUED ONCE AGAIN IN THE HANDS OF THE BENEFICIARY IN THE YEAR OF IS DISTRIBUTION.. THE REVENUE ALSO RELIED UPON THE FOLLOWING DECISIONS WHEREIN IT HAS BEEN HELD AS UNDER : IN THE CASE OF ELIDE UPMCDOWELL , IT HAS BEEN HELD BY THE HONBLE SUPREME COURT: THE CHANGE IN RULE 76 OF THE DISTILLERY RULES, 1970 HAS CLEARLY AFFIRMED THE POSITION THAT LIABILITY FOR PAYMENT OF EXCISE DUTY IS OF THE MANUFACTURER. THE OTHER PROVISIONS OF THE DISTILLERY RULES ALSO DO NOT DETRAC T FROM THE POSITION THAT PAYMENT OF EXCISE DUTY IS THE PRIMARY AND EXCLUSIVE OBLIGATION OF THE MANUFACTURER AND IF PAYMENT BE MADE UNDER A CONTRACT OR ARRANGEMENT BY ANY OTHER PERSON, IT WOULD AMOUNT TO MEETING OF THE OBLIGATION OF THE MANUFACTURER AND NOT HING MORE. THE DEFINITION OF 'TURNOVER' GIVEN IN SECTION 2(5) OF THE RELEVANT SALES TAX ACT CLEARLY INDICATES THAT THE TOTAL AMOUNT CHARGED AS THE CONSIDERATION FOR THE SALE IS TO BE TAKEN INTO ACCOUNT FOR DETERMINING THE TURNOVER. WHERE A BILL OF SALE IS ISSUED, THE TOTAL AMOUNT SET OUT THEREIN IS TO BE TAKEN INTO CONSIDERATION. ADMITTEDLY, THE BILLS ISSUED BY THE APPELLANT, IN THE INSTANT CASE, DID NOT INCLUDE THE EXCISE DUTY. PAYMENT OF EXCISE DUTY IS A LEGAL LIABILITY OF THE MANUFACTURER; ITS PAYMENT WA S A CONDITION PRECEDENT TO THE REMOVAL OF THE LIQUOR FROM THE DISTILLERY AND PAYMENT BY THE PURCHASER WAS ON ACCOUNT OF THE MANUFACTURER. ACCORDING TO NORMAL COMMERCIAL PRACTICE, EXCISE DUTY SHOULD HAVE BEEN REFLECTED IN THE BILL EITHER AS MERGED IN PRICE OR SHOWN SEPARATELY. AS A FACT, IN THE HANDS OF THE BUYER THE COST OF LIQUOR WAS WHAT WAS CHARGED BY THE APPELLANT UNDER ITS BILL TOGETHER WITH EXCISE DUTY WHICH THE BUYER HAD DIRECTLY PAID ON SELLER'S ACCOUNT. THE CONSIDERATION FOR THE SALE WAS THUS THE T OTAL AMOUNT AND NOT WHAT WAS REFLECTED IN THE BILL. THEREFORE, THE EXCISE DUTY THOUGH PAID BY THE PURCHASER TO MEET THE LIABILITY OF THE APPELLANT, WAS A PART OF THE 34 I.T.A. NO. 4591 /MUM/201 6 AND OTHER TWO APPEALS CONSIDERATION FOR THE SALE AND WAS INCLUDIBLE IN THE TURNOVER OF THE APPELLANT. AS REGARDS THE CONCLUSION REACHED IN ME DOWELL & CO. LTD.'S CASE (SUPRA), ON THE ASPECT THAT WHEN THE EXCISE DUTY DOES NOT GO INTO THE COMMON TILL OF THE ASSESSEE AND IT DOES NOT BECOME A PART OF THE CIRCULATING CAPITAL, IT DOES NOT CONSTITUTE TURNOVER, THIS IS NOT THE DECISIVE TEST FOR DETERMINING WHETHER SUCH DUTY WOULD CONSTITUTE TURNOVER OR NOT. SO FAR AS THE CONTENTION THAT IT IS OPEN TO EVERY ONE TO SO ARRANGE HIS AFFAIRS AS TO REDUCE THE BRUNT OF TAXATION TO THE MINIMUM, WAS CONCERNED, THE TAX PLANNING MAY BE LEGITIMATE PROVIDED IT IS WITHIN THE FRAMEWORK OF LAW. COLOURABLE DEVICES CANNOT BE PART OF TAX PLANNING AND IT IS WRONG TO ENCOURAGE OR ENTERTAIN THE BELIEF THAT IT IS HONOURABLE TO AVOID THE PAYMENT OF TAX BY RESTORING TO DUBIOUS METHODS. IT IS THE OBLIG ATION OF EVERY CITIZEN TO PAY THE TAXES HONESTLY WITHOUT RESORTING TO SUBTERFUGES. COURTS ARE NOW CONCERNING THEMSELVES NOT MERELY WITH THE GENUINENESS OF A TRANSACTION, BUT WITH THE INTENDED EFFECT OF IT FOR FISCAL PURPOSES. NO ONE CAN NOW GET AWAY WITH A TAX AVOIDANCE PROJECT WITH THE MERE STATEMENT THAT THERE IS NOTHING ILLEGAL ABOUT IT. ACCORDINGLY, THE HIGH COURT WAS RIGHT IN THE INSTANT CASE IN REJECTING THE APPELLANT'S CLAIMS. IN THE CASE OF TWINSTAR HOLDINGS LTD (SUPRA), THE BOMBAY HIGH COURT HE LD AS UNDER : 16. IN CONCLUSION, WE MAY REFER TO THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF MCDOWELL & CO. LTD . V . CTO [1985] 154 ITR 148 1 IN WHICH IT HAS BEEN HELD THAT EVEN IF THE TRANSACTION IS GENUINE AND EVEN IF IT IS ACTUALLY ACTED UPON, BUT IF THE TRANSACTION IS ENTERED INTO WITH THE INTENTION OF TAX AVOIDANCE, THEN THE TRANSACTION WOULD CONSTITUTE A COLOURABLE DEVICE. THAT THE COURTS ARE NOW CONCERNED, NO T MERELY WITH THE GENUINENESS OF THE TRANSACTION, BUT WITH THE INTENDED EFFECT OF THE TRANSACTION ON THE FISCAL PURPOSE. THAT, THE TRUE PRINCIPLE IN CASE OF RAMSAY WAS THAT ONE MUST CONSIDER FISCAL CONSEQUENCES OF A PRE - PLANNED SERIES OF TRANSACTION AND ON E HAS NOT TO DISSECT THE SCHEME AND CONSIDER INDIVIDUAL STAGES SEPARATELY. THIS JUDGMENT SQUARELY APPLIES TO OUR CASE. 35 I.T.A. NO. 4591 /MUM/201 6 AND OTHER TWO APPEALS 17. WE MAY ADD THAT OUR OBSERVATIONS IN THIS CASE ON THE MERITS OF THE MATTER ARE TENTATIVE AND THEY ARE NOT BINDING ON THE APPELLATE AUT HORITY/RECOVERY AUTHORITY. THEY HAVE BEEN GIVEN ONLY TO EXPLAIN THE LEGAL POSITION ON SECTION 281. IN THE CASE OF NAYANTARA G AGARWAL (SUPRA) THE HONBLE BOMBAY HIGH COURT HELD AS UNDER: THE TRIBUNAL WAS FULLY JUSTIFIED IN COMING TO THE CONCLUSION THA T THE FIRM IN QUESTION WAS NOT GENUINE AND THAT THE INTEREST IN LAND GOT EXTINGUISHED AT LEAST ON THE DATE, WHEN THE SO - CALLED DEED OF PARTNERSHIP CAME TO AN END BY THE DEED OF DISSOLUTION AND IT BECAME THE PROPERTY OF THE OTHER PARTNER, I.E. , THE COMPANY, FOR A CONSIDERATION OF RS. 10 LAKHS WHICH WAS PAID TO THE ASSESSEE IN THE FORM OF SHARES. THE TRIBUNAL WAS RIGHT IN HOLDING THAT THE FIRM WAS NOT GENUINE AND THAT THERE WAS A TRANSFER OF CAPITAL ASSET FROM THE ASSESSEE TO THE COMPANY WITHIN THE MEANING OF SECTION 2(47) WHICH WAS SUBJECT TO CAPITAL GAINS TAX UNDER SECTION 45. THE FACTS CLEARLY WENT TO SHOW THAT THE VARIOUS TRANSACTIONS INCLUDING THE CREATION OF THE PARTNERSHIP, TRANSFER OF LAND TO THE FIRM BY WAY OF CAPITAL CONTRIBUTION OF THE ASSESSEE AND DISSOLUTION OF THE PARTNERSHIP WERE, IN FACT, ONLY DEVICES TO EVADE CAPITAL GAINS TAX THAT WOULD ARISE AS A RESULT OF TRANSFER OF THE LAND IN QUESTION BY THE ASSESSEE TO THE COMPANY. A CAREFUL PERUSAL OF THE ABOVE TRANSACTIONS CULMINATING IN THE TRANSFER O F LAND FROM THE ASSESSEE TO THE COMPANY CLEARLY WENT TO SHOW THAT THE REAL NATURE OF THE TRANSACTION WAS TRANSFER OF LAND. THE PRINCIPLES OF CONSTRUCTION OF SUCH TRANSACTIONS ARE WELL - SETTLED AND IT IS TOO LATE IN THE DAY TO SAY THAT THE COURT SHOULD GO ST RICTLY BY THE LANGUAGE OF THE DOCUMENTS PREPARED BY THE PARTIES OR THE FACTS PUT FORWARD BY THE PARTIES AND REFUSE TO REMOVE THE VEIL TO FIND OUT THE REAL NATURE OF THE TRANSACTION. THE PROPER WAY TO CONSTRUE A TAXING STATUTE, WHILE CONSIDERING A DEVICE TO AVOID TAX, IS NOT TO ASK WHETHER THE PROVISION SHOULD BE CONSTRUED LITERALLY OR LIBERALLY, NOR WHETHER THE TRANSACTION IS NOT UNREAL AND NOT PROHIBITED BY THE STATUTE BUT WHETHER THE TRANSACTION IS A DEVICE TO AVOID TAX, AND WHETHER THE TRANSACTION IS SUC H THAT THE JUDICIAL PROCESS MAY ACCORD ITS APPROVAL TO IT. IT IS UP TO THE COURT TO TAKE STOCK TO DETERMINE THE NATURE OF THE NEW AND SOPHISTICATED LEGAL DEVICES TO AVOID TAX AND TO CONSIDER WHETHER THE SITUATION CREATED BY THE DEVICES COULD BE RELATED TO THE EXISTING LEGISLATION WITH THE AID OF EMERGING TECHNIQUES OF INTERPRETATION TO EXPOSE THE DEVICES FOR WHAT THEY REALLY 36 I.T.A. NO. 4591 /MUM/201 6 AND OTHER TWO APPEALS ARE AND TO REFUSE TO GIVE JUDICIAL BENEDICTION. THE COURTS IN SUCH A CASE SHOULD NOT LAY UNDUE EMPHASIS ON THE LANGUAGE OF EACH INDIVI DUAL DOCUMENT AS THAT IS NOT DETERMINATIVE OF THE CONTROVERSY. WHAT IS REALLY NECESSARY TO BE CONSIDERED IN SUCH CASES IS THE TRUE NATURE AND EFFECT OF THE TRANSACTION. IF ON SUCH A CONSIDERATION, THE COURT ARRIVED AT A FINDING THAT THE TRUE NATURE WAS 'TR ANSFER OF LAND' AND THE VARIOUS STEPS ORIGINATING FROM THE AFFIDAVIT AND FORMATION OF PARTNERSHIP AND CULMINATING INTO DISSOLUTION OF THE SAME, IN THE PROCESS LEAVING THE LAND WITH THE COMPANY, WERE NOTHING BUT A DEVICE TO AVOID CAPITAL GAINS TAX LEVIABLE UNDER SECTION 45 ON 'TRANSFER OF THE LAND' TO THE COMPANY, SUCH A DEVICE COULD NOT GET THE SEAL OF APPROVAL OF THE HIGH COURT. IN THE LIGHT OF THE FOREGOING DISCUSSION, THE FIRM WAS NOT GENUINE. NOTE : THE CASE WAS DECIDED AGAINST THE ASSESSEE. IN THE CA SE OF ONAM AGARBATHI CO THE KARNATAKA HIGH COURT HELD AS UNDER : THOUGH A TAXPAYER MAY RESORT TO A DEVICE TO DIVERT THE INCOME BEFORE IT ACCRUES OR ARISES TO HIM, THE EFFECTIVENESS OF THE DEVICE DEPENDS UPON ITS GENUINENESS. THE SUBSTANCE OF THE TRANSAC TION HAS TO BE ASSESSED BY APPLYING THE TAXING STATUTE SO AS TO ASCERTAIN WHETHER IT IS A SHAM OR MAKE - BELIEVE TRANSACTION OR ONE WHICH IS GENUINE AND, THEREFORE, IS ELIGIBLE FOR DEDUCTION UNDER THE ACT. HENCE, COURTS HAVE TO LOOK INTO THE FORM OF THE TRAN SACTION TO FIND OUT ITS SUBSTANCE SO AS TO ENSURE THAT THERE IS NO AVOIDANCE OF TAX BY A METHOD IMPERMISSIBLE IN LAW. THE ASSESSEE - FIRM PAID COMMISSION TO A FIRM AND THE PARTNERS OF THE ASSESSEE - FIRM AND THE PAYEE - FIRM WERE THE SAME. THERE WAS NO EVIDENCE OF ANY SERVICES BEING RENDERED BY THE PAYEE - FIRM, EXCEPT TO THE ASSESSEE - FIRM. THE ASSESSING OFFICER HELD THAT IT WAS AN INSTANCE OF A COLOURABLE DEVICE ADOPTED BY THE ASSESSEE BY CREATING THE PAYEE FIRM, AS THE TWO CONCERNS WERE BROUGHT INTO EXISTENCE WIT H THE SOLE OBJECT OF DIVERTING THE PROFITS OF THE ASSESSEE AND THEREBY REDUCE THE TAX INCIDENCE OF THE FIRM. UNDER THE CIRCUMSTANCES, THE ASSESSING OFFICER DISALLOWED THE ENTIRE EXPENDITURE CLAIMED ON ACCOUNT OF MARKETING AND SALES PROMOTION EXPENSES PAID TO THE PAYEE FIRM AS THERE WAS NO MARKETING SURVEY ACTIVITY IN THAT YEAR AND, THEREFORE, THE 37 I.T.A. NO. 4591 /MUM/201 6 AND OTHER TWO APPEALS ENTIRE AMOUNT WAS ADDED BACK AS EXCESSIVE AND UNREASONABLE TO THE BENEFITS ACCRUED TO THE BUSINESS OF THE ASSESSEE. HELD THAT WHEN THE PARTNERS IN BOTH THE FIRMS W ERE THE SAME AND THERE WAS NOTHING ON RECORD TO INDICATE REGARDING ANY OTHER SERVICES RENDERED BY THE PAYEE - FIRM EXCEPT TO THE ASSESSEE, SECTION 40(B) WAS RIGHTLY INVOKED. THE CREATION OF THE PAYEE - FIRM WAS NOTHING BUT A DEVICE ADOPTED BY THE ASSESSEE FOR SIPHONING OFF THE PROFITS IN THE FORM OF COMMISSION AS WELL AS MARKETING AND SALES PROMOTION EXPENSES. THE ASSESSING OFFICER WAS, THEREFORE, RIGHT IN NOT ALLOWING THE SAID EXPENSES. IN THE CASE OF PRAVINBHAI M KHENI (SUPRA), THE HONBLE HIGH COURT HELD A S UNDER : CONCLUSIONS CONCLUSIONS THEREFORE, ARE AS FOLLOWS: (1) THE RESPONDENT AUTHORITIES DID ESTABLISH THAT IT WAS NOT POSSIBLE TO RECOVER THE TAX DUES FROM THE COMPANY. (2) THE PETITIONER NEITHER PLEADED NOR SUCCEEDED IN ESTABLISHING THAT S UCH NON - RECOVERY WAS NOT ATTRIBUTABLE TO ANY GROSS NEGLECT, MISFEASANCE OR FAILURE IN DISCHARGING DUTY ON HIS PART IN CONNECTION WITH THE AFFAIRS OF THE COMPANY. (3) BEING A PUBLIC COMPANY, ORDINARILY, PROVISIONS OF SECTION 179(1) CANNOT BE APPLIED. HOW EVER, IF THE FACTORS NOTED BY THE ASSISTANT COMMISSIONER IN HIS IMPUGNED ORDER DATED 15 - 4 - 2002 AND HIGHLIGHTED IN THIS JUDGMENT ARE DULY ESTABLISHED, IT WOULD CERTAINLY BE A FIT CASE WHERE INVOCATION OF PRINCIPLE OF LIFTING OF CORPORATE VEIL WOULD BE JUSTI FIED. (4) HOWEVER, THE ASSISTANT COMMISSIONER PROCEEDED TO RECORD SUCH FINDINGS WITHOUT GIVING SUFFICIENT OPPORTUNITY OF HEARING TO THE PETITIONER AND WITHOUT DISCLOSING THE NECESSARY MATERIALS FOR COMING TO SUCH A CONCLUSION. (5) THE IMPUGNED ORDERS DATED 15 - 4 - 2002 AND REVISIONAL ORDER DATED 9 - 4 - 2003 ARE QUASHED. (6) THE PROCEEDINGS ARE HOWEVER, PLACED BACK BEFORE THE ASSISTANT COMMISSIONER FOR PROCEEDING FURTHER IN ACCORDANCE WITH LAW 38 I.T.A. NO. 4591 /MUM/201 6 AND OTHER TWO APPEALS AFTER GIVING A NOTICE TO THE PETITIONER INDICATING HIS TENTATI VE GROUNDS WHY HE DESIRES TO INVOKE THE CONCEPT OF LIFTING OF CORPORATE VEIL, GIVING SUFFICIENT OPPORTUNITY TO THE PETITIONER TO MEET WITH SUCH ALLEGATIONS. AFTER GIVING OPPORTUNITY OF HEARING TO THE PETITIONER AND FOLLOWING THE PRINCIPLES OF NATURAL JUSTI CE IT WOULD BE OPEN FOR THE ASSISTANT COMMISSIONER TO PASS FRESH ORDERS IN ACCORDANCE WITH LAW AS MAY BE FOUND APPROPRIATE ON THE BASIS OF MATERIAL ON RECORD. [PARA 23] IN THE CASE OF RO TH MAN CYCLE IND. PVT.LT D (SUPRA), THE HONBLE PUNJAB AND HARYANA HI GH COURT HELD AS UNDER : THE IMPORT OF SECTIONS 37(1)( III ) AND 57( III ) WAS CONSIDERED BY HON'BLE THE SUPREME COURT IN CIT V. RAJENDRA PRASAD MOODY [1978] 115 ITR 519 . IT WAS A CASE WHERE DIFFERENCE OF OPINION ON THE SUBJECT BETWEEN VARIOUS JUDGMENTS OF THE HIGH COURTS WAS CONSIDERED AS THE TRIBUNAL HAD DIRECTLY REFERRED THE MATTER FOR OPINION OF HON'BLE THE SUPREME COURT. THE ISSUE UNDER CONSIDERATION THEREIN WAS WHET HER INTEREST ON MONEY BORROWED FOR INVESTMENT IN SHARES WHICH HAD NOT YIELDED ANY DIVIDEND IS PERMISSIBLE UNDER SECTION 57( III ). IT WAS OPINED THAT EVEN THOUGH THE LANGUAGE OF SECTION 37(1) IS A LITTLE WIDER THAN THAT OF SECTION 57( III ), BUT THAT WAS OF NO EFFECT, AS THE LANGUAGE OF SECTION 57( III ) BEING CLEAR AND UNAMBIGUOUS HAS TO BE CONSIDERED ACCORDING TO ITS PLAIN NATURAL MEANING. IT SHOULD NOT BE GIVEN NARROW AND CONSTRICTED MEANING. IT DOES NOT PROVIDE THAT EXPENDITURE SHALL BE DEDUCTIBLE ONLY IF A NY INCOME IS MADE OR EARNED. [PARA 18] THE ISSUE AS TO WHETHER AN ASSESSEE, WHO HAD BORROWED FUNDS CARRYING INTEREST AND ADVANCED PART THEREOF TO ITS SISTER - CONCERN ON INTEREST FREE BASIS, CAN CLAIM DEDUCTION TO THAT EXTENT WAS CONSIDERED BY THE SUPREME CO URT IN SA BUILDERS LTD.'S CASE ( SUPRA ). IN THE AFORESAID CASE, THE SUPREME COURT OPINED THAT THE TAX AUTHORITIES MUST NOT LOOK AT THE MATTER FROM THEIR OWN VIEWPOINT BUT THAT OF A PRUDENT BUSINESSMAN. IN CASE, IT IS FOUND THAT TRANSFER OF BORROWED FUNDS TO A SISTER - CONCERN WAS ON ACCOUNT OF COMMERCIAL EXPEDIENCY EVEN IF THE SAME IS INTEREST FREE, THE DEDUCTION CLAIMED BY THE ASSESSEE CANNOT BE DISALLOWED. HOWEVER, IT WAS NOT LAID DOWN AS A RULE RATHER IT WAS OPINED THAT EACH CASE WILL DEPEND ON ITS OWN FACT S AND ASPECT OF COMMERCIAL EXPEDIENCY IS TO BE EXAMINED BY THE ASSESSING OFFICER. [PARA 20] THE ISSUE REGARDING JURISDICTION OF THE ASSESSING OFFICER TO GO INTO THE TRANSACTION AND CONSIDER WHETHER PREREQUISITES FOR CLAIMING DEDUCTION UNDER SECTION 57( III ) HAVE BEEN COMPLIED WITH OR NOT, WAS CONSIDERED 39 I.T.A. NO. 4591 /MUM/201 6 AND OTHER TWO APPEALS BY A DIVISION BENCH OF ALLAHABAD HIGH COURT IN CIT V. SMT. SWAPNA ROY [2010] 192 TAXMAN 105 AND IT WAS OPINED THAT THOUG H IT IS NOT UNFAIR TO BORROW MONEY OR TAKE LOAN FROM ONE CONCERN AND INVEST THE SAME IN ANOTHER CONCERN FOR THE PURPOSE OF PROFIT OR INCOME, BUT IN THE PROCESS THE ASSESSEE MUST ACT BONA FIDE . THE WORDS 'WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF MAKING OR EARNING SUCH INCOME' HAVE TO BE GIVEN ITS TRUE MEANING. IN CASE, THE DOMINANT PURPOSE FOR MAKING SUCH INVESTMENT WAS NOT TO EARN INCOME, THE DEDUCTION UNDER SECTION 57 MAY NOT BE AVAILABLE. TO ASCERTAIN THE PURPOSE, THE COURTS MAY LIFT THE VEIL. EVEN THE ASSESSING OFFICER HAS THE JURISDICTION TO FIND OUT THE DOMINANT PURPOSE WITH REGARD TO INVESTMENT OF BORROWED MONEY IN THE SISTER - CONCERN. [PARA 22] IN VIEW OF OUR AFORESAID DISCUSSION AND PRONUNCIATION OF LAW, THE QUESTION REFERRED FOR CONSIDERATION BY TH E LARGER BENCH CAN VERY WELL BE ANSWERED BY OPINING THAT THE ASSESSING OFFICER OR THE APPELLATE AUTHORITIES AND EVEN THE COURTS CAN DETERMINE THE TRUE LEGAL RELATION RESULTING FROM A TRANSACTION. IF SOME DEVICE HAS BEEN USED BY THE ASSESSEE TO CONCEAL TRUE NATURE OF THE TRANSACTION, IT IS THE DUTY OF THE TAXING AUTHORITY TO UNRAVEL THE DEVICE AND DETERMINE ITS TRUE CHARACTER. HOWEVER, THE LEGAL EFFECT OF THE TRANSACTION CANNOT BE DISPLACED BY PROBING INTO THE 'SUBSTANCE OF THE TRANSACTION'. THE TAXING AUTHO RITY MUST NOT LOOK AT THE MATTER FROM THEIR OWN VIEWPOINT BUT THAT OF A PRUDENT BUSINESSMAN. EACH CASE WILL DEPEND ON ITS OWN FACTS. THE EXERCISE OF JURISDICTION CANNOT BE STRETCHED TO HOLD A ROVING ENQUIRY OR DEEP PROBE. [PARA 23] IN THE CASE OF BHARTI DEVI SARABHI (SUPRA) THE HONBLE SUPREME COURT HELD AS UNDER : THE DECISION WHICH WAS RELIED ON BY THE HIGH COURT HAD BEEN REVERSED BY THE SUPREME COURT IN CIT V. KAMALINI KHATAU [1994] 209 ITR 101 . ACCORDINGLY, FOLLOWING THE AFORESAID DECISION OF THE SUPREME COURT, IT WAS TO BE HELD THAT THE TRIBUNAL WAS NOT JUSTIFIED IN LAW IN HOLDING THAT THE SUM RECEIVED BY THE ASSESSEE FROM VARIOUS DISCRETIONARY TRUSTS COULD NOT B E TAXED IN THE HANDS OF THE ASSESSEE UNDER SECTION 166. NOTE : THE CASE WAS DECIDED AGAINST THE ASSESSEE . IN THE CASE OF MOTI TRUST KOTA (SUPRA), THE HONBLE SUPREME COURT HELD AS UNDER : 40 I.T.A. NO. 4591 /MUM/201 6 AND OTHER TWO APPEALS EVEN IF THE TRUST IN QUESTION WAS REGARDED AS A DISCRETIONARY TRU ST INASMUCH AS THE PROFITS HAD DURING THE RELEVANT ASSESSMENT YEARS BEEN CREDITED TO THE RESPECTIVE ACCOUNTS OF THE BENEFICIARIES, THEREFORE, IN VIEW OF THE DECISION IN CIT V. KAMALINI KHATAU [1994] 209 ITR 101 , IT WAS THE BENEFICIARIES IN WHOSE HANDS THE INCOME WOULD BE ASSESSED. THAT BEING SO, THE APPEALS WERE ALLOWED AND THE QUESTIONS OF LAW REFERRED BY THE TRIBUNAL HAD TO BE ANSWERED IN FAVOUR OF THE ASSESSEE. NOTE : THE CASE WAS DECIDED IN FAVOUR OF THE ASSESSEE . 11 . HAVING HEARD BOTH THE PARTIES AND CONSIDERING THE FACTS IN THE LIGHT OF THE VARIOUS DECISIONS RELIED UPON BY THE RIVAL PARTIES, WE FIND THAT THE CASE OF THE ASSESSEE IS SQUARELY COVERED BY THE DE CISIONS REFERRED BY THE ASSESSEE WHEREAS THE FACTS IN THE CASES RELIED UPON BY THE REVENUE ARE DISTINGUISHABLE ON FACTS AND LAW. ACCORDINGLY, WE HOLD THAT THE DISTRIBUTION OUT OF CORPUS FUNDS RECEIVED BY THE ASSESSEE IS CAPITAL IN NATURE OF CAPITAL R ECEIPT NOT LIABLE TO TAX. ACCORDINGLY AO IS DIRECTED TO DELETE THE ADDITION. THE GROUND OF APPEAL BY THE ASSESSEE IS ALLOWED. 12. THE ASSESSEE IN ADDITION TO THE ORIGINAL GROUNDS HAS ALSO TAKEN ADDITIONAL GROUNDS WHICH READS AS UNDER : 6. ON THE FACTS A ND CIRCUMSTANCES OF THE CASE AND LAW, THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.72,92,100/ - TOWARDS GI FT OF SHA R ES RECEIVED BY APPELLANT FROM M/S VOLCAN INVESTMENT LTD ON THE PRETEXT TH A T COMPANY CANNOT BE HELD TO MAKE GIFT OUT OF NATURAL LOV E AND AFFECTION IS TOTALLY W RONG , ARBITRARY UNJUSTIFIED AND ILLEGAL AND IS LIABLE O TO BE DELETE; 7. ON T HE FACTS AND CIRCUMSTANCES OF THE CASE AND LAW, THE LD CIT(A) FAILED TO CONSIDERED THAT RECEIPT CANNOT BE TAXED IF RECEIPT IS NOT FALL WITHIN THE DEFI NITION OF INCOME OR IT IS NOT CHARGEABLE TO TAXED WHEN IT IS RECEIVED OR ACCRUED; 41 I.T.A. NO. 4591 /MUM/201 6 AND OTHER TWO APPEALS 13 . THE ISSUE RAISED IN ADDITIONAL GROUNDS OF APPEAL IS WITH REGARD TO THE CONFIRMATION OF ADDITION OF RS.72,92,100/ - BY THE LD.CIT(A) AS MADE BY THE AO. 14 . FACTS OF TH E ISSUE ARE THAT THE ASSESSEE HAS RECEIVED A GIFT OF RS.72,92,100/ - FROM M/S VOLCAN INVESTMENT LTD . THE AO ADDED THE SAME TO THE INCOME OF THE ASSESSEE ON THE GROUND THAT THE COMPANY IS A CORPORATE BODY AND CANNOT MAKE GIFT OUT OF NATURAL LOVE AND AFFE CTION TO THE ASSESSEE. 15 . THE LD. AR SUBMITTED BEFORE THE BENCH THAT THE SAID ISSUE INADVERTENTLY COULD NOT PUT IN THE MEMORANDUM OF APPEAL IN FORM NO.36, WHEREAS THE SAID ISSUE WAS DULY PLACED BEFORE THE LD.CIT(A), WHO DISMISSED THE GROUND RAISED BY THE ASSESSEE. SINCE, THE ISSUE EMANATES FROM THE ORDER OF THE LD. CIT(A) AND THE AO, THEREFORE REQUIRES NO FURTHER VERIFICATION OF FACTS. THUS, THE LD. AR PRAYED BEFORE THE BENCH THAT THE SAID ISSUE MAY BE ADMITTED FOR ADJUDICATION ON MERIT. 16 . ON THE OTHER HAND THE LD.DR OBJECTED TO THE SUBMISSIONS RAISED BY THE AR ON THE GROUND THAT THE ASSESSEE DID NOT RAISE ANY GROUND IN THE MEMORANDUM OF APPEAL AND IT IS JUST AFTER THOUGHT . 42 I.T.A. NO. 4591 /MUM/201 6 AND OTHER TWO APPEALS 17. AFTER HEARING BOTH THE PARTIES ON THE ISSUE OF ADMISSION OF ADDITIONA L GROUND AND AFTER EXAMINATION OF RECORDS, WE FIND THAT THE ISSUE ARISING OUT OF THE AO AS WELL AS LD.CIT(A), WHO DISMISSED THE APPEAL OF THE ASSESSEE ON THIS ISSUE . WE FIND FROM THE RECORD THAT THE ISSUE IS ARISING FROM THE ASSESSMENT RECORD BEFORE THE A UTHORITIES BELOW. THE MERE FACT THAT THE ASSESSEE DID NOT RAISE THE ISSUE IN MEMORANDUM OF APPEAL COULD NOT DEPRIVE THE ASSESSEE IN ITS LEGITIMATE RIGHT TO AGITATE THE SAME BEFORE THE HIGHER FORUM WHICH IS AGAINST THE PRINCIPLE OF NATURAL JUSTICE. ACCO RDINGLY, WE ARE INCLINED TO ADMIT THE SAME FOR ADJUDICATION. 18. FACTS OF THE ISSUE ARE THAT THE AO OBSERVED FROM THE BALANCE SHEET THAT THE ASSESSEE HAS RECEIVED AN AMOUNT OF RS.72,92,100/ - FROM M/S VOLCAN INVESTMENT LTD . ACCORDINGLY QUERI Y WAS RAI SED AND THE EXPLANATION SOUGHT FOR FROM THE ASSESSEE, WHICH WAS REPLIED VIDE LETTER DATED 31.3.2015, WHICH IS AS UNDER : 1 1 .1 IN RESPONSE TO THE ABOVE THE ASSESSEE FILED REPLY ON 31.03.2015 AS BELOW: 'WE UNDERSTAND THAT YOU HAVE RAISED A Q UERY THE G IFT AMOUNTING TO INR 72,92,100 RECEIVED BY THE ASSESSEE AND RECORDED ILL THE BALANCE SHEET FOR THE FY 2009 - 10. THIS IS TO CLARIFY THAT THIS GIFT, COMPRISING PREFERENCE SHARES OF HARE KRISHNA PACKING PRIVATE LIMITED WORTH INR 72,92,100, WAS RECEIVED FROM VOLCAN INVESTMENTS LIMITED BY THE ASSESSEE ON SEPTEMBER 25, 2009. IT IS SUBMITTED THAT SECTION 56(2)(VII) ( C ) OF THE INCOME TAX ACT, 1961, 43 I.T.A. NO. 4591 /MUM/201 6 AND OTHER TWO APPEALS ALLOWING FOR TAXABILITY OF MOVABLE PROPERTY (INCLUDING SHARES) RECEIVED BY AN INDIVIDUAL AS A GIFT WAS INSERTED O NLY F OR TRANSACTIONS COMMENCING FROM OCTOBER 1, 2009. IN LIGHT OF THIS, IT IS SUBMITTED THAT THE GIFT IN THE PRESENT CASE IS NOT TAXABLE IN THE HANDS OF THE ASSESSEE SINCE THE GIFT WAS RECEIVED PRIOR TO THE EN TRY INTO FORCE OF THE CONCERNED PROVISION. TH E GIFT DEED EVIDENCING THE AFOREMENTIONED GIFT HAS BEEN ATTACHED TO THIS LETTER AS AN ANNEXURE.' 19. THE AO WAS NOT CONVINCE D WITH THE REPLY OF THE ASSESSEE ON THE GROUND THAT THE G IFT RECEIVED FROM A M/S VOLCAN INVESTMENT LTD CANNOT BE HELD TO BE UNDE R LOVE AND AFFECTION AND ACCORDINGLY, TREATED THE SAME AS INCOME FROM UNDISCLOSED SOURCES AND ADDED THE SAME IN THE HANDS OF THE ASSESSEE AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. AGGRIEVED BY THE ORDER OF AO, THE ASSESSEE PREFERRED APPEAL BEFORE THE LD.CIT(A), WHO VIDE PARA 35 OF THE APPELLATE ORDER DISMISSED AS UNDER : 35. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE APPELLANT IN THE LIGHT OF THE FINDINGS MADE IN THE ASSESSMENT ORDER. MY OBSERVATIONS ARE AS UNDER. 35.1 IT IS OBSE RVED THAT THE ASSESSEE HAS SHOWN RECEIPT OF SHARES OF HARE KRISHNA PACKING PRIVATE LTD. WORTH RS. 72,92,1001 - FROM M/S. VOLCAN INVESTMENT LTD. WITHOUT ANY CONSIDERATION AND SHOWN IT AS GIFT DURING THE YEAR UNDER CONSIDERATION. ACCORDING TO THE APPELLANT, T HIS GIFT WAS RECEIVED ON 25 SEPTEMBER, 2009 I.E., 5 DAYS BEFORE AMENDMENT TO SEC. 56(2)(VII)(C) OF THE I.T. ACT WHEN SHARES RECEIVED BY AN INDIVIDUAL WITHOUT CONSIDERATION WAS BROUGHT TO TAX EFFECTIVE FROM 1ST OCT., 2009. AS STATED ABOVE, MLS VOLCAN INVEST MENT LIMITED WAS INCORPORATED IN BAHAMAS AND FULLY CONTROLLED BY THE APPELLANT AND HIS OTHER FAMILY MEMBERS & GROUP CONCERNS. IT IS VERY CLEAR THAT THE AMENDMENT TO SEC. 56(2) WAS ALREADY ANNOUNCED BY THE GOVT. AT THE TIME OF MAKING GIFT ALTHOUGH EFFECTED FROM 1ST OCT., 2009. 44 I.T.A. NO. 4591 /MUM/201 6 AND OTHER TWO APPEALS 35 - .2 IN THIS REGARD, I AGREE WITH THE AO THAT A GIFT CANNOT BE LOGICALLY MADE BY ONE ARTIFICIAL JURIDICAL ENTITY BECAUSE THE BASIC CONDITION OF LOVE AND AFFECTION FOR MAKING GIFTS DOES NOT EXIST BEING ARTIFICIAL ENTITIES LACKING EM OTION NEUTRAL. THOUGH THE TRANSFER OF SHARES HAS BEEN GIVEN THE COLOUR OF A GIFT, NOTHING HAS BEEN BROUGHT ON RECORD TO SUGGEST ITS GENUINENESS AND COMPLIANCE WITH DOMESTIC OR FOREIGN LAWS. GIFTING OF SHARES OF THE COMPANY, WHICH IS CONTROLLED BY THE APPE LLANT AND HIS FAMILY IS NOTHING, BUT GIFTING TO ONESELF, WHICH IS NEVER THE INTENTION OF I.T. ACT EVEN BEFORE AMENDMENT. THE SCHEME OF THE ACT THAT ANY INCOME CAN ONLY BE EXCLUDE FROM THE TOTAL INCOME OF THE TAXPAYER IF THE ACT SPECIFICALLY PROVIDES F OR SUCH EXEMPTION AND THAT, IN THE INSTANT CASE NO EXEMPTION IS SPECIFICALLY PROVIDED FOR SUCH TRANSFER. 35.3 APART FROM THAT I FIND THE RELIANCE OF THE AR OF THE APPELLANT ON VARIOUS CASE LAWS ARE MISPLACED AS FACTS ARE DISTINGUISHABLE. IN THE CASE OF CI T VIS NADATUR HOLDINGS AND INVESTMENTS (P.) LTD. [2012) 26 TAXMANN.COM 224 (KAR.), THE ISSUE BEFORE THE HONBLE KARNATAKA HIGH COURT WAS WHETHER THE GIFT FROM SHAREHOLDERS TO THE COMPANY WAS GENUINE AND PERMISSIBLE WHILE IN THE INSTANT CASE THE SITUATION IS JUST OPPOSITE AND- INVOLVES A FOREIGN COMPANY AS DONOR. BASED ON THE PECULIAR FACTS OF THE CASE, HON' BLE HIGH COURT HELD THAT THERE IS NO BAR IN RECEIPT OF A GIFT BY A COMPANY FROM ITS SHAREHOLDERS. IN THE CASE OF CIT VIS GROZ - BECKERT SA BOO LTD. [197 9] 116 ITR 125 (SC) THE COMPANY WAS' SET UP IN COLLABORATION WITH A FOREIGN COMPANY FOR FABRICATION AND MANUFACTURE OF HOSIERY NEEDLES. IT RECEIVED CERTAIN GOODS, RAW MATERIAL AND SEMI- FINISHED NEEDLES, FREE OF COST FROM FOREIGN COMPANY. THE ASSESSEE COMP ANY CLAIMED THAT WHILE CALCULATING PROFITS FROM SALE OF FINISHED GOODS VALUE OF THE SAID RAW MATERIALS AND SEMI - FINISHED NEEDLES WOULD BE DEDUCTED. BASED ON THE FACTS, THE ITO HELD THAT SINCE RAW MATERIALS AND SEMI FINISHED NEEDLESS WERE RECEIVED BY WAY OF GIFT FROM FOREIGN COLLABORATORS, NO AMOUNT WAS DEDUCTIBLE IN RESPECT OF VALUE OF THOSE GOODS. ON REFERENCE, THE HIGH COURT, HOWEVER, ACCEPTED ASSESSEE'S CLAIM THAT SINCE RAW MATERIALS AND SEMI - FINISHED NEEDLES WERE INTRODUCED IN THE BUSINESS AND CONVERTED INTO STOCK, THEIR MARKET VALUE ON THE DATE OF CONVERSION WOULD REPRESENT COST TO BUSINESS. THE AFORESAID CONCLUSION WAS UPHELD BY THE HON'BLE SUPREME COURT.THUS IT IS CLEAR THAT THE RATIO OF THIS CASE NOWHERE HELPS THE APPELLANT AS THE HON'BLE HIGH COURT, AND APPROVED BY THE HON'BLE SUPREME COURT, DID NOT ACCEPT THE ACTION OF THE AO IN CONSIDERING THE MATERIAL RECEIVED FROM FOREIGN COMPANY AS GIFT. IN THE CASE OF ASST. CIT VIS SET INDIA (P:) LTD. [2010) 3 ITR(TRIB.) 454 (MUM.), THE GIFT INVOLVED THE ASSESS EE COMPANY AND ITS HOLDING COMPANY. THE HON'BLE TRIBUNAL, TO THE FACT OF THE CASE, HELD THAT MONEY RECEIVED FROM A 45 I.T.A. NO. 4591 /MUM/201 6 AND OTHER TWO APPEALS HOLDING COMPANY WITH WHICH THE ASSESSEE COMPANY DOES NOT HAVE ANY TRADING OR BUSINESS TRANSACTION CANNOT BE CONSIDERED AS TRADING RECEIPT. WH EN THERE IS NO CONTRACTUAL AGREEMENT OR A RIGHT TO RECEIVE, THE AMOUNT IS NOT TAXABLE AS INCOME. IN THE INSTANT CASE, FACTS ARE ENTIRELY DIFFERENT AND THE APPELLANT CANNOT BE SAID TO HAVE NO TRADING OR BUSINESS RELATION WITH THE DONOR COMPANY. FURTHER, THE APPELLANT HAS NOT ESTABLISHED THAT THERE WAS NO CONTRACTUAL AGREEMENT OR A RIGHT TO RECEIVE THE AMOUNT EQUIVALENT TO THE GIFT FROM THE DONOR COMPANY. ON CAREFUL STUDY OF CIT V/S STEWARTS & LLOYDS OF INDIA LTD. [1986] 28 TAXMAN 381 (CAL.HC) TOO, IT IS OB SERVED THAT THE FACTS ARE DISTINGUISHABLE TOO AND INVOLVE DONOR AS WELL AS DONEE COMPANIES. 35.4 ON THE OTHER HAND, I FIND THAT RECENTLY THE AUTHORITY FOR ADVANCE RULINGS (AAR) IN THE CASE OF ORIENT GREEN POWER PTE LTD ORIENT GREEN POWER PTE. LTD [2012] 346 ITR HUMAN AGENCY. 35.5. THE CITATION OF AMENDMENT IN SECTION 56(2)(VII)( C ) OF THE IT ACT WITH EFFECT FROM 1 ST OCT, 2009 WILL NOT HAVE ANY EFFECT CONSIDERING THE OBSERVATIONS MADE IN THE PRECEDING PARAGRAPHS THAT THE APPELLANT IS OTHERWISE TAXABLE W ITH RESPECT TO THE GIFT RE C EI V ED FROM THE DONOR COMPANY. 36. CONSIDERING THE OVERA LL F AC T S AN D CIRCUMSTANCES OF THE ISSUE INVOLVED. I DO NOT FIND ANY INFIRMITY IN THE ACTION OF THE AO IN TREATING THE RECEIPT OF RS.72,92,100/ - AS INCOME IN THE HANDS OF TH E ASSESSEE UNDER THE HEAD INCOME FROM OTHER SOURCES. HENCE, THE ADDITION IS CONFIRMED. THUS GROUND NO.3 IS DISMISSED. 20. THE LD.AR VEHEMENTLY SUBMITTED THAT THE COMPANY M/S VALCON INVESTMENTS LTD COULD VALIDLY GIFT SHARES TO THE ASSESSEE AND THE LD C IT(A) GROSSLY ERRED IN AFFIRMING THE ORDER OF AO ON THIS ISSUE. IN SUPPORT OF HIS CONTENTION, THE LD.AR RELIED UPON ON SERIES OF DECISIONS : A) DP WORLD (P ) LTD V/S DCIT (MUM) 140 ITD 694; B) REDINGTON (I) LTD V/ JCIT (2014) 49 TAXMANN.COM 146 (CHENNAI - T RIB); C) DCIT V/S KDA ENTERPRISES (P)LTD (2015) 57 TAXMANN.COM 284 (MUMB TRIB) 46 I.T.A. NO. 4591 /MUM/201 6 AND OTHER TWO APPEALS THE LD. AR SUBMITTED THAT IN VIEW OF THE ABOVE DECISIONS, THE ADDITION MADE BY THE AO ON ACCOUNT OF GIFT AND CONFIRMED BY THE LD.CIT(A) SHOULD BE DELETED. 21. ON THE OTHER HAND, THE LD. DR RELIE D HEAVILY ON THE ORDERS OF AUTHORITIES BELOW AND PRAYED THAT THE SAME BE CONFIRMED AS THE GIFT RECEIVED BY THE ASSESSEE IS A SHAM TRANSACTION A BODY CORPORATE COULD NOT GIFT OUT OF LOVE AND AFFECTION. 22 . WE HAVE HEARD BO TH THE PARTIES AND PERUSED THE MATERIAL PLACED BEFORE US. WE FIND THAT THE ASSESSEE HAS RECEIVED GIFT FROM M/S V ALCON INVESTMENT LTD OF RS.72,92,100/ - IN RESPECT OF 72 LAKHS SHARES IN HARE KRISHNA PACKING PRIVATE LIMITED ON 25.9.2009. THE ISSUE BEFORE US WHETHER THE GIFT FROM THE COMPANY CAN BE TREATED AS GIFT OR UNEXPLAINED RECEIPT IN THE HANDS OF THE ASSESSEE . F OR THE SAKE OF READY REFERENCE WE REPRODUCE THE FINDINGS OF THE CASE RELIED UPON BY THE ASSESSEE AS ABOVE : IN THE CASE OF DP WORLD (P ) LTD (SUPRA) IT HAS BEEN HELD THAT : ACCORDING TO THE SCHEME, THE LEGISLATURE HAS DEFINED VARIOUS PRIVILEGES, BENEFITS OR AMENITIES ETC., WHICH CAN BE COVERED UNDER THE DEFINITION OF 'FRINGE BENEFITS' UNDER SECTION 115WB(1). SUB - SECTION (2) DEALS WITH CERTAI N DEEMED FRINGE BENEFITS WHICH ARE BASICALLY ORIGINATING FROM THE EXPENDITURE INCURRED BY A COMPANY DURING THE COURSE OF BUSINESS ON CERTAIN ACTIVITIES, E.G., ENTERTAINMENT. SECTION 115WC HAS GIVEN THE VALUATION RULES WHICH CAN BE PUT ON SUCH FRINGE BENEFI TS. THEREFORE, IT IS CLEAR THAT ALL THE AMENITIES, PRIVILEGES, ETC., CANNOT BE BROUGHT TO TAXATION UNDER THE CHAPTER AND IT IS ONLY THOSE PRIVILEGES OR AMENITIES WHICH HAVE BEEN SPECIFICALLY DEFINED AS FRINGE BENEFITS WHICH CAN BE BROUGHT TO TAX. THUS IT I S CLEAR FROM SECTION 115WC(1) THAT VALUATION RULES HAVE BEEN PROVIDED FOR ALL THE BENEFITS UNDER THE 47 I.T.A. NO. 4591 /MUM/201 6 AND OTHER TWO APPEALS CHAPTER. AT THE SAME TIME, IT WOULD BE NOTICED THAT NO VALUATION RULE HAS BEEN PROVIDED IN RESPECT OF FRINGE BENEFITS COVERED BY CLAUSE ( A ) OF SUB - SECTION (1) OF SECTION 115WB. IT IS A CARDINAL PRINCIPLE OF INTERPRETATION THAT AN ACT HAS TO BE INTERPRETED IN SUCH A WAY SO THAT NONE OF THE PROVISIONS BECOMES REDUNDANT. [PARA 8] HOWEVER, ALL THE PRIVILEGES, AMENITIES OR FACILITIES ETC., CANNOT ALWAYS BE AS SI MPLE. THERE MAY BE SITUATIONS WHERE VALUATION MAY BE REQUIRED. FOR EXAMPLE, IF A COMPANY HAS EMPLOYED A FULL - TIME GARDENER TO MAINTAIN THE GARDEN OF THE OFFICER AND HE ALSO SPENDS SOME TIME OCCASIONALLY FOR MAINTENANCE OF THE GARDEN IN THE HOUSE OF SOME DI RECTOR OR SENIOR OFFICIAL, THEN, IN THE ABSENCE OF RULE OF VALUATION, SUCH BENEFIT CANNOT BE SUBJECTED TO TAX PROVIDED UNDER THE CHAPTER. IT IS SO BECAUSE IN MOST OF THE CASES VALUATION RULES HAVE BEEN PROVIDED SO AS TO REMOVE THE DISCRETIONARY POWER OF TH E ASSESSING AUTHORITIES. UNDER SUB - SECTION (2) OF SECTION 115WC, DIFFERENT VALUATION RULES HAVE BEEN PROVIDED FOR CERTAIN SITUATIONS. FOR EXAMPLE, IN THE CASE OF A COMPANY WHICH IS RUNNING A HOTEL BUSINESS, THE VALUE OF THE FRINGE BENEFIT HAS BEEN SPECIFIE D AT 5 PER CENT INSTEAD OF 20 PER CENT IN A CASE WHERE SOME BENEFIT IN THE SHAPE OF ACCOMMODATION IN A HOTEL WAS GIVEN WHICH IS NOT OWNED BY ASSESSEE. IN OTHER WORDS, IT CAN BE SAID THAT WHEREVER SPECIFIC VALUE/COST, WHICH CAN BE DIRECTLY ARRIVED OR IMPUTE D, THEN SUCH VALUE CAN BE TAKEN AS THE AMOUNT OF FRINGE BENEFIT. AT THE SAME TIME, WHERE NO DIRECT SPECIFIC COST CAN BE ATTRIBUTED TO A PARTICULAR BENEFIT, THEN THE SAME CANNOT BE VALUED. FROM ABOVE ALSO IT BECOMES CLEAR THAT UNLESS AND UNTIL VALUATION RUL ES HAVE BEEN PROVIDED WHERE DETERMINATION OF DIRECT COST IS NOT POSSIBLE, THEN, SUCH FRINGE BENEFIT CANNOT BE SUBJECTED TO TAX. [PARA 9] IN THE INSTANT CASE, IT IS NOT DISPUTED THAT BENEFIT IN TERMS OF NOTIONAL INTEREST ON THE SECURITY DEPOSIT FOR HIRING THE FLAT FOR THE CHAIRMAN WOULD BE COVERED ONLY UNDER CLAUSE ( A ) OF SUB - SECTION (1) OF SECTION 115WB. THE QUESTION WHETHER ANY PARTICULAR COST CAN BE ARRIVED, THE ANSWER WOULD BE 'NO' IN THE INSTANT CASE BECAUSE, EVEN ACCORDING TO THE ASSESSING AUTHORITY, THE ASSESSEE HAD BORROWED ONLY A SUM OF RS. 2.54 CRORE WHICH MEANS THE BALANCE OF THE SECURITY (TOTAL SECURITY RS. 5 CRORE) HAS BEEN GIVEN OUT OF THE ASSESSEE'S OWN FUNDS AND, THEREFORE, THERE WAS NO COST TO THE ASSESSEE'S OWN FUNDS. FURTHER, THE ASSESSING OFFICER HAS ADOPTED 9 PER CENT RATE WHICH WAS GENERALLY AVAILABLE ON FDRS. ONE CAN ARGUE THAT THIS RATE MAY BE 20 PER CENT WHICH WAS APPLICABLE TO INTERCORPORATE DEPOSITS. THEREFORE, NO PARTICULAR COST OR 48 I.T.A. NO. 4591 /MUM/201 6 AND OTHER TWO APPEALS VALUATION IS APPROPRIATE AND, ACCORDINGLY, IN THE ABSENCE OF ANY VALUATION RULE IN RESPECT OF SUCH FRINGE BENEFIT, THE SAME CANNOT BE SUBJECTED TO TAX. IN ABOVE CIRCUMSTANCES, THE PROVISION OF SECURITY DEPOSIT IS DEFINITELY IN THE NATURE OF FRINGE BENEFIT UNDER CLAUSE ( A ) OF SUB - SECTION (1) OF SECTION 115 WB, BUT IN THE ABSENCE OF VALUATION RULES, THE SAME CANNOT BE SUBJECT TO TAX. ACCORDINGLY, THE ORDER OF THE COMMISSIONER (APPEALS) IS TO BE SET ASIDE AND THE ADDITION ON ACCOUNT OF FRINGE BENEFIT OF NOTIONAL INTEREST IS TO BE DELETED. [PARA 10] IN THE RESU LT, THE ASSESSEE'S APPEAL IS TO BE ALLOWED. [PARA 11] IN THE CASE OF REDINGTON (I) LTD (SUPRA) THE TRIBUNAL HELD AS UNDER : RGF GULF IS THE WHOLLY OWNED SUBSIDIARY OF THE ASSESSEE COMPANY. THE ASSESSEE COMPANY HAS TRANSFERRED ITS SHARES IN RGF GULF TO RIHL CAYMAN WHICH WAS A STEP DOWN SUBSIDIARY LOCATED IN CAYMAN ISLAND. IT IS A FACT THAT THE TRANSFER OF SHARES WAS MADE WITHOUT CONSIDERATION. IT IS FOR THIS REASON THAT THE ASSESSEE COMPANY CONTENDED THAT THE TRANSFER WAS A GIFT. AS IT IS A GIFT, IT IS T HE CASE OF THE ASSESSEE, THAT IF AT ALL IT IS TREATED AS A TRANSFER OF CAPITAL ASSET FOR THE PURPOSE OF CAPITAL GAINS TAXATION, IT WAS EXEMPT UNDER SECTION 47(III) OF THE INCOME - TAX ACT, 1961. THE CASE OF THE REVENUE IS THAT A COMPANY COULD NOT MAKE A GIFT AND ALSO EVEN IF IT WAS TREATED AS A GIFT, IT WAS NOT ELIGIBLE FOR EXEMPTION PROVIDED UNDER SECTION 47(III), AS CORRECT PROVISION OF LAW APPLIED TO THE CASE OF THE ASSESSEE WAS SECTION 47(IV) OF WHICH THE CONDITION HAD NOT BEEN SATISFIED BY THE ASSESSEE C OMPANY. [PARA 71] GIFT IS DEFINITELY A TRANSFER OF PROPERTY. THE MOTHER LAW GOVERNING THE SUBJECT MATTER OF TRANSFER OF PROPERTY IS TRANSFER OF PROPERTY ACT, 1882. SECTION 5 OF THE TRANSFER OF PROPERTY ACT, 1882, DEFINES THE TERM 'TRANSFER OF PROPERTY', A S AN ACT BY WHICH A LIVING PERSON CONVEYS PROPERTY, IN PRESENT OR IN FUTURE, TO ONE OR MORE OTHER LIVING PERSONS, OR TO HIMSELF, OR TO HIMSELF AND ONE OR MORE OTHER LIVING PERSONS; AND 'TO TRANSFER PROPERTY' IS TO PERFORM SUCH ACT. THIS IS THE MASTER DEFIN ITION OF 'TRANSFER OF PROPERTY'. OTHER FORMS OF TRANSFERS LIKE GIFT ARE SUBJECT TO THIS MASTER PROVISION. THE LAW PROVIDES IN THE SAME SECTION 5 OF THE TP ACT, 1882 THAT 'LIVING PERSON' INCLUDES A COMPANY OR ASSOCIATION OR BODY OF INDIVIDUALS, WHETHER INCO RPORATED OR NOT. THUS, TP ACT,1882 CONSIDERS A COMPANY NOT ONLY AS A PERSON BUT LITERALLY SPEAKING AS A 'LIVING PERSON', A PERSON WITH LIFE. THE SAME EXPRESSION 'PERSON' PROVIDED IN SECTION 5 IS TRANSPLANTED IN SECTION 122 OF THE TP ACT, WHICH DEFINES A 'G IFT'. 'GIFT' IS THE TRANSFER OF CERTAIN EXISTING MOVABLE OR IMMOVABLE PROPERTY MADE 49 I.T.A. NO. 4591 /MUM/201 6 AND OTHER TWO APPEALS VOLUNTARILY AND WITHOUT CONSIDERATION BY ONE PERSON, CALLED THE DONOR, TO ANOTHER, CALLED THE DONEE AND ACCEPTED BY OR ON BEHALF OF THE DONEE. WHEN THE PROVISIONS OF LAW CO NTAINED IN SECTIONS 5 & 122 OF THE TP ACT READ TOGETHER, IT EMERGES THAT A COMPANY BEING A LIVING PERSON CAN TRANSFER PROPERTY BY WAY OF GIFT. [PARA 72] IN THE CASE OF DCIT V/S KDA ENTERPRISES (P) LTD (2015) 57 TAXMANN.COM 284 (MUMBAI) IT HAS BEEN HELD 6 8. IN VIEW OF THE ABOVE DISCUSSION, ASSERTIONS MADE BY LD. AR AND DR IF KEPT IN JUXTAPOSITION TO THE OBSERVATION OF THE AO VIS - - VIS FINDINGS RECORDED BY THE CIT(A) IN THE IMPUGNED ORDER, AN IRRESISTIBLE CONCLUSION IS THAT THE AMOUNT OF GIFT SO RECEIVED IS NEITHER TAXABLE AS INCOME FROM OTHER SOURCES U/S. 56 NOR AS CAPITAL GAIN NOR AS INCOME U/S.2(22)(E) NOR U/S.115JB OF THE I.T.ACT. THE DETAILED FINDINGS RECORDED BY THE CIT(A) ARE AS PER MATERIAL ON RECORD, WHICH DO NOT REQUIRE ANY INTERFERENCE ON OUR P ART. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A). 69. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. 23. IN VIEW OF THE ABOVE DISCUSSION AND THE RATIO LAID DOWN IN THE ABOVE MENTIONED DECISIONS THE GIFT RECEIVED BY THE ASSESSEE I S PERMISSIBLE AND THE ELEMENT OF NATURAL LOVE AND AFFECTION IS NOT RELEVANT AND MATERIAL . WE ,THEREFORE, FOLLOWING THE RATIO LAID DOWN IN THE ABOVE DECISION HOLD THAT CORPORATE GIFT IS VALID. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD.CIT(A) AND DIRECT TH E AO TO DELETE THE SAME. THE ADDITIONAL GROUND RAISED BY THE ASSESSEE IS ALLOWED. THE APPEAL OF THE ASSESSEE IS ALLOWED. ITA NO.4592/MUM/2016 24 . THE GROUNDS OF APPEAL TAKEN IN THIS APPEAL ARE IDENTICAL TO THAT OF ITA NO.4591/MUM/2016. SINCE WE HAVE DE CIDED THE ISSUE IN ASSESSEES FAVOUR IN 50 I.T.A. NO. 4591 /MUM/201 6 AND OTHER TWO APPEALS ITA NO.4591/MUM/2016, THE DECISION TAKEN THEREIN WOULD , MUTATIS MUTANDIS, APPL Y TO THIS CASE AS WELL. ACCORDINGLY, THIS APPEAL IS ALSO ALLOWED. I.T.A. NO.1055/MUM/2016 25 . SINCE THE FACTS OF THE CASE ARE IDENT ICAL TO THAT OF ASSESSEES APPEAL IN ITA NO.4591/MUM/2016 AND THEREFORE , OUR DECISION IN THE ITA NO.4591/MUM/2016 WOULD , MUTATIS MUTANDI , APPLY TO THE REVENUES APPEAL AND HENCE DISMISSED. 2 6 . IN THE RESULT, THE APPEAL S OF THE ASSESSEE ARE ALLOWED AND T HAT OF REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 5TH OCT , 2017 . S D SD ( D.T.GARASIA ) ( RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : . 5 . 10 .2017 SR.PS:SRL: / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, T RUE COPY / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI