JEHAN TRUST, MUMBAI V. ITO 21(2)1, MUMBAI

ITA 7874/MUM/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3542 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-06-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Next Hearing Date: 04-06-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 21-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHATURBHUJ DAS CHATNANI
• Keywords: Charitable institution
• Section: 143(3); 147; 148; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH J, MUMBAI BEFORE SHRI RAJENDRA SINGH, ACCOUNTANT MEMBER AND DR. S.T.M. PAVALAN , JUDICIAL MEMBER ITA NO.7874/MUM/2011 ASSESSMENT YEAR : 2006-07 M/S. JEHAN TRUST C/O., A.R. SHETTY & CO. PLOT NO.112, SION KOLIWADA ROAD, SION MUMBAI-400 022. PAN :AAAAJ 1309 G VS. INCOME TAX OFFICER 21(2)1 MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SUBHASH S. SHETTY RESPONDENT BY : SHRI CHATURBHUJ DAS CHATNANI DATE OF HEARING : 04.06.2013 DATE OF PRONOUNCEMENT : 04.06.2013 O R D E R PER RAJENDRA SINGH, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 27.9.2011 OF CIT(A) FOR THE ASSESSMENT YEAR 2006-0 7. THE DISPUTES RAISED BY THE ASSESSEE IN THIS APPEAL RELATES TO LEGAL VALIDI TY OF RE-OPENING OF THE ASSESSMENT UNDER SECTION 147 OF THE ACT AND EXEMPTI ON OF INTEREST INCOME ON RBI RELIEF BONDS UNDER SECTION 10(15) OF THE INCOME TAX ACT. 2. AT THE TIME OF HEARING OF THE APPEAL THE LD. AR FOR THE ASSESSEE DID NOT PRESS THE GROUND CHALLENGING THE LEGAL VALIDITY OF RE-OPENING OF THE ASSESSMENT UNDER SECTION 147 OF THE ACT. THIS GROUN D IS, THEREFORE, DISMISSED AS NOT PRESSED. ITA NO.7874/M/11 A Y .06-07 2 3. THE SECOND DISPUTE IS REGARDING ALLOWABILITY OF CLAIM OF EXEMPTION OF INTEREST INCOME OF RS.7.00 LACS RECEIVED BY THE ASS ESSEE FROM RBI RELIEF BONDS UNDER SECTION 10(15) OF THE ACT. UNDER THE SAID PRO VISION THE INTEREST INCOME RECEIVED FROM RBI RELIEF BOND BY AN INDIVIDUAL OR H UF IS EXEMPT FROM TAX. 3.1 FACTS IN BRIEF ARE THAT THE ASSESSEE FOR THE AS SESSMENT YEAR 2006-07 HAD DECLARED TOTAL INCOME OF RS.6,22,460/- WHICH HA D BEEN ACCEPTED BY ASSESSING OFFICER IN THE ASSESSMENT MADE UNDER SECT ION 143(3) ON 26.6.2008. SUBSEQUENTLY THE ASSESSMENT WAS RE-OPENED BY ISSUIN G NOTICE UNDER SECTION 148 OF THE ACT ON THE GROUND THAT THE INTEREST INCO ME WAS NOT EXEMPT UNDER SECTION 10(15) AS THE ASSESSEE BEING A TRUST WAS NO T AN INDIVIDUAL AND THUS NOT ENTITLED FOR EXEMPTION. THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS SUBMITTED THAT THE ASSESSEE WAS HOLDING FUNDS FOR T HE TRUST ON BEHALF OF THE BENEFICIARIES IN CAPACITY OF TRUSTEE AND REPRESENTA TIVE ASSESSEE OF THE BENEFICIARY. THE INCOME TAX HAD TO BE LEVIED ON TR USTEE IN A LIKE MANNER AS TAXED IN HANDS OF THE BENEFICIARY. THERE WAS ONLY O NE BENEFICIARY IN THIS CASE AND, THEREFORE, INCOME HAD TO BE TAXED IN THE STATU S OF AN INDIVIDUAL. THE ASSESSING OFFICER HOWEVER DID NOT ACCEPT THE EXPLAN ATION GIVEN AND OBSERVED THAT THE ASSESSEE TRUST WAS NEITHER INDIVIDUAL NOR HUF. HE, THEREFORE, REJECTED THE CLAIM AND TAXED THE INTEREST INCOME OF RS.7.00 LACS. IN APPEAL, CIT(A) OBSERVED THAT RBI RELIEF BONDS WERE DULY APPEARING IN BALANCE SHEET OF THE TRUST. THEREFORE, INVESTMENT AS WELL AS INCOME BOTH BELONGED TO THE TRUST. THE INCOME THUS HAD TO BE TAXED IN THE NAME OF TRUS T WHICH WAS NEITHER INDIVIDUAL NOR HUF. THEREFORE, CIT(A) UPHELD THE VI EW TAKEN BY THE ASSESSING OFFICER THAT ASSESSEE WAS NOT ENTITLED FOR EXEMPTIO N UNDER SECTION 10(15) OF ITA NO.7874/M/11 A Y .06-07 3 THE ACT AND ACCORDINGLY CONFIRMED THE ADDITION MADE BY ASSESSING OFFICER AGGRIEVED BY WHICH ASSESSEE IS IN APPEAL BEFORE US. 4. BEFORE US, THE LD. AR FOR THE ASSESSEE SUBMITTED THAT THE TRUST IN THIS CASE HAD ONLY ONE BENEFICIARY AND THERE WAS ALSO ON E TRUSTEE. THE INTEREST INCOME HAD BEEN RECEIVED ON BEHALF OF THE BENEFICIA RY AND, THEREFORE HAS TO BE TAXED IN THE LIKE MANNER AS IN CASE OF BENEFICIA RY WHO WAS AN INDIVIDUAL. THEREFORE, THE ASSESSEE WAS ENTITLED FOR EXEMPTION UNDER SECTION 10(15) OF THE ACT. THE LD. AR REFERRED TO THE JUDGMENT OF HON 'BLE HIGH COURT OF BOMBAY IN THE CASE OF DIRECTOR OF INCOME-TAX (EXEMPTIONS) VS SHARDABEN BH AGUBHAI MAFATLAL PUBLIC CHARITABLE TRUST (247 ITR 1) IN WHICH IT HAS BEEN HELD THAT THE ASSESSEE TRUST HAD TO BE ASSESSED AS INDIVIDUAL AND NOT ASSOCIATION OF PERSONS AND WAS THUS ENTITLED FOR DEDUCTION UNDER SECTION 8 0L OF THE ACT. HE ALSO PLACED RELIANCE ON THE JUDGMENT OF HON'BLE HIGH COU RT OF BOMBAY IN CASE OF AMY F. CAMA (MRS.) (TRUSTEE OF THE ESTATE OF LATE M .R. ADENWALLA) VS. CIT (237 ITR 82) IN WHICH IT WAS HELD THAT THE ASSESSEE TRUST WAS E NTITLED FOR EXEMPTION UNDER SECTION 254 WHICH WAS AVAILABLE ONL Y TO INDIVIDUAL AND HUF. THE LD. DR ON THE OTHER HAND PLACED RELIANCE ON THE ORDERS OF AUTHORITIES BELOW. 5. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE R IVAL CONTENTIONS CAREFULLY. THE DISPUTE IS REGARDING ALLOWABILITY OF EXEMPTION OF INTEREST INCOME UNDER SECTION 10(15) OF THE ACT. UNDER THE SAID SEC TION, INTEREST RECEIVED BY INDIVIDUAL AND HUF FROM RBI RELIEF BONDS IS EXEMPT FROM TAX. THERE IS NO DISPUTE IN THIS CASE THAT INTEREST INCOME HAD BEEN RECEIVED FROM RBI RELIEF ITA NO.7874/M/11 A Y .06-07 4 BONDS. THE LIMITED DISPUTE IS WHETHER EXEMPTION UND ER SECTION 10(15) IS AVAILABLE TO A TRUST. THE AUTHORITIES BELOW HAVE HE LD THAT THE TRUST BEING NOT AN INDIVIDUAL OR HUF EXEMPTION CAN NOT BE ALLOWED W HEREAS ARGUMENT OF THE ASSESSEE IS THAT THE TRUST HAD BEEN CREATED FOR THE BENEFIT OF BENEFICIARIES AND THEREFORE HAS TO BE ASSESSED IN THE CAPACITY OF IND IVIDUAL. WE FIND THAT THE SAME ISSUE HAS ALREADY BEEN CONSIDERED BY THE HON'B LE HIGH COURT OF BOMBAY IN THE CASE OF DIRECTOR OF INCOME-TAX (EXEMPTIONS) VS SHARDABEN BH AGUBHAI MAFATLAL PUBLIC CHARITABLE TRUST (SUPRA). IN THE SAID CASE THE ISSUE WAS WHETHER THE DEDUCTION UNDER SECTION 80L CAN BE ALLO WED TO A TRUST WHICH IS ALLOWABLE TO INDIVIDUAL OR HUF. THE HON'BLE HIGH CO URT REFERRED TO THE JUDGMENT OF MADRAS HIGH COURT IN THE CASE OF CIT VS. VS. VENU SURESH SANJAY TRUST (221 ITR 649) IN WHICH IT WAS HELD THAT A DISCRETIONARY TRUST IN WHICH SHARES OF THE BENEFICIARIES WERE NOT ASCERTAINABLE WAS NOT A HUF OR ASSOCIATION OF PERSON. SUCH TRUST WAS AN INDIVIDUAL AND THUS ENTITLED TO DEDUCTION UNDER SECTION 80L OF THE ACT. THE HON'BLE HIGH COURT ALSO OBSERVED THAT THE TERM INDIVIDUAL DID NOT MEAN SINGLE HUMA N BEING AND THAT IT INCLUDED A BODY OF INDIVIDUALS CONSTITUTING A UNIT FOR THE PURPOSE OF THE ACT. THE ASSESSMENT OF INCOME IN THE HANDS OF THE TRUST HAD THEREFORE TO BE MADE IN THE SAME MANNER AND TO THE SAME EXTENT AS IT WOU LD HAVE BEEN MADE IN THE HANDS OF BENEFICIARIES. THE HON'BLE HIGH COURT THEREFORE, HELD THAT THE REPRESENTATIVE OF THE ASSESSEE IN CASE OF DISCRETIO NARY TRUST HAS TO BE REGARDED AS INDIVIDUAL AND WOULD BE ENTITLED FOR DE DUCTION UNDER SECTION 80L. THE HON'BLE HIGH COURT OF BOMBAY ALSO REFERRED TO I TS EARLIER JUDGMENT IN THE CASE OF CIT VS. MARSONS BENEFICIARY TRUST (188 ITR 224) IN WHICH THE HON'BLE HIGH COURT OBSERVED THAT THE TRUSTEE DID NOT DERIVE AUTHORITY FROM THE ITA NO.7874/M/11 A Y .06-07 5 BENEFICIARIES. THEY DERIVED AUTHORITY FROM THE SETT LER OF THE TRUST UNDER DEED OF TRUST. THE BENEFICIARIES WERE MERELY RECIPIENTS OF INCOME FROM TRUST AND HAD NOT COME TOGETHER FOR COMMON PURPOSE FOR EARNIN G INCOME. THEREFORE, BENEFICIARIES COULD NOT BE CONSIDERED AS ASSOCIATIO N OF PERSONS OR BODY OF INDIVIDUALS. THE HON'BLE HIGH COURT THEREFORE HELD THAT ASSESSEE TRUST WAS ASSESSABLE AS INDIVIDUAL AND NOT AS AOP. FOLLOWING THESE JUDGMENTS, WE HOLD THAT ASSESSEE TRUST HAS TO BE ASSESSED AS AN INDIVI DUAL WHO WILL BE ENTITLED FOR EXEMPTION UNDER SECTION 10(15) OF THE ACT. WE THERE FORE, SET ASIDE THE ORDER OF CIT(A) AND ALLOW THE CLAIM OF THE ASSESSEE. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 04.06.2013. SD/- SD/- (SANJAY GARG) JUDICIAL MEMBER (RAJENDRA SINGH) ACCOUNTANT MEMBER MUMBAI, DATED: 04.06. 2013. JV. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.