NIMA SPECIFIC FAMILY TRUST V. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 5(2)

SCA/7075/2018

AI Insights

The case involves Nima Specific Family Trust, which contested the withholding of a tax refund by the Income Tax department following a favorable ruling from the Income Tax Appellate Tribunal. The Tribunal had previously determined that the trust was a specific trust, not a discretionary one, and thus the wealth should be assessed in the hands of the beneficiaries, not the trust itself. Despite this ruling, the department withheld the refund, leading the trust to file a petition. The court found that the department's actions in withholding the refund were unjustified and ordered the refund with interest, while also requesting the trust to provide beneficiary details for the relevant assessment years.

• Counselvise Citation: [2018] 140 COUNSELVISE.COM (IT) 685004 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 23-10-2018
• Assessment Year: misc
• Other Referred Cases: CIT v. Marsoos Beneficiary Trust (108 ITR 224)
• Laws Referred To: Wealth Tax Act
• Result in Favour of: Applicant
• Court: HIGH COURT
• Department Lawyers: MAUNA BHATT
• Assessee Lawyers: B S SOPARKAR
• Keywords: Family trust; Income tax appellate tribunal; Refund; Specific trust; Wealth Tax
• Section: 34A

Judgement Text

"C/SCA/7075/2018 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 7075 of 2018 ========================================================== NIMA SPECIFIC FAMILY TRUST Versus ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 5(2) ========================================================== Appearance: MR B S SOPARKAR(6851) for the PETITIONER(s) No. 1 MRS MAUNA M BHATT(174) for the RESPONDENT(s) No. 1 ========================================================== CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI and HONOURABLE MR.JUSTICE UMESH TRIVEDI Date : 23/10/2018 ORAL ORDER (PER : HONOURABLE MR.JUSTICE AKIL KURESHI) 1. The petitioner is a family trust. The petitioner's grievance is that Income­tax department has withheld the refund of the amount deposited with the Revenue which refund arises out of judgment of the Income Tax Appellate Tribunal. The petitioner's prayer therefore, is to direct the respondent Assistant Commissioner of Income­tax to give effect to the said order of the Tribunal and to refund the amount due to the petitioner with interest under section 34A of the Wealth Tax Act. 2. Facts in brief are as under. The petitioner trust had filed its wealth tax return for the assessment years 1987­1988, 1988­1989 and 1989­1990 declaring the taxable wealth as nil. This was mainly on the ground that the petitioner trust is a specific trust as 100 beneficiaries each with defined Page 1 of 7 C/SCA/7075/2018 ORDER 1% share of the proceeds and therefore, the assets belonging to the trust would form part of wealth of the beneficiaries in the proportion to their respective shares. The Assessing Officer rejected such stand of the assessee and passed separate orders of assessment for each year assessing the petitioner's net wealth according to the accounts of the trust. For example for the assessment year 1987­1988, the Assessing Officer had passed an order on 19.3.1991 in which he recorded detailed reasons why he did not accept assessee's contention that the trust was a specific trust. He referred to the trust deed and the different beneficiaries of the trust under such deed. He was of the opinion that there were in all 13 principal beneficiaries and ultimate destination of the income earned by the trust was these 13 persons through permutation and combination of various groups of beneficiaries. He was therefore, of the opinion that the petitioner had created a fasad to conceal the real identity of the real beneficiaries. He therefore, concluded that “The assessee's status is therefore, treated as individual in view of the discussion made above and taxed at the maximum marginal rate.” He eventually assessed the petitioner's net wealth for the said assessment year at Rs.2,16,25,662/­. Consequently, for the three assessment years 1987­1988, 1988­1989 and 1989­1990, he raised demands of Rs.4,32,514/­, Rs.34,47,603/­ and Rs.48,98,772/­ respectively. The petitioner preferred appeals against such orders of assessment passed by the Assessing Officer. The Commissioner of Wealth Tax dismissed such appeals against which the petitioner preferred further appeals before the Income Tax Appellate Tribunal. Page 2 of 7 C/SCA/7075/2018 ORDER 3. In the meantime and even after the order of the Tribunal, the department recovered entire unpaid taxes as per the orders of the Assessing Officer either by way of deposits made by the petitioner or by way of adjustment of the refund. 4. The Tribunal allowed the appeals of the petitioner by a common order dated 12.10.1995. This order reads as under : “In all these appeals the main dispute is as to whether appellant is a discretionary trust or not. The learned counsel for the assessee has filed a copy of the order of B­ Bench of Bombay Appellate Tribunal in assessee's own income­tax case for the assessment year 1987­88 where it has been held that the assessee is not a discretionary trust. Respectfully following that decision we hold that the assessee is a specific trust and the ratio of the decision of Hon'ble Bombay High Court int eh case of CIT v. Marsoos Beneficiary Trust (108 ITR 224) applies to it. The learned departmental representative also agreed that the objection of the assessee in these appeals are covered by the decision of the Tribunal in its income­tax. Accordingly all the three appeals filed by the assessee are allowed.” 5. By virtue of the said order of the Tribunal, the wealth tax demands raised by the Assessing Officer for the said three assessment years came to be set aside. Since the department already recovered such taxes pending such appeals and after the order of the Tribunal, the petitioner's case for refund thereof arose. The petitioner wrote to the department for the first time on 28.10.1995 and pointed out that the Tribunal has allowed the petitioner's appeals for all the three assessment years holding that trust is a specific trust and accordingly assessment should be made. Page 3 of 7 C/SCA/7075/2018 ORDER Request was therefore, made to give effect to the said order of the Tribunal. Since the department did not do so, the petitioner wrote several further letters and made representations. It is not necessary to record all such communications. Suffice it to state, the petitioner made several efforts to get the refund of the amounts collected pending appeals before the Tribunal and after the order of the Tribunal. The petitioner in the meantime had also represented to the Central Board of Direct Taxes without success. Finally, the present petition came to be filed. 6. The petitioner would point out that the department has not disputed the basic fact of the petitioner's claim of refund arising out of the common order of the Income Tax Appellate Tribunal. The department is however, raising frivolous demands from the petitioner of providing indemnity bond and asking for further details which legally cannot be done. 7. Appearing for the petitioner, learned counsel Shri Bandish Soparkar stated that the department has unlawfully and illegally withheld the refund for a long period of time without valid reasons. The petitioner has made several representations without success. Directions may therefore be issued to refund the amount within the shortest possible time with interest. 8. Learned counsel Shri Bhatt for the department principally raised two fold contentions. His first contention is that by virtue of the judgment of the Tribunal dated 12.10.1995 not the trust but the respective trustees had to account for Page 4 of 7 C/SCA/7075/2018 ORDER the wealth in their respective proportions in their returns. It is not clear whether the beneficiaries had accounted for such wealth and paid taxes as and when found so payable. The petitioner should have provided such details to the department. His second contention was that on the same issue of the petitioner's trust being specific trust or discretionary trust, issues had arisen in the income­tax assessments where it was found that neither the trust nor the beneficiaries had offered the income to tax. He further submitted that being an old case, department did not have all the records to make necessary verification. 9. The petitioner's demand for refund of the amount collected by the department pending appeals before the Tribunal and after the order of the Tribunal simply cannot be refused. Facts are clear. The Assessing Officer rejected the petitioner's contention that it was a specific trust and therefore wealth, if at all, had to be assessed in the hands of beneficiaries and not in the hands of trust. He accordingly raised wealth tax demands. Tribunal reversed this view and held that the trust was a specific trust. As a simple consequence thereof, amount recovered by the department by way of wealth tax, a liability which arose out of the assessment orders became refundable. If as a necessary corollary to the judgment of the Tribunal, it was open for the department to ascertain whether the beneficiaries in turn had accounted for the assets of the trust as their wealth proportionately, it was open for the department to do so. We do not see any provision under which the department can cast such burden on the petitioner to establish that it was so done by the Page 5 of 7 C/SCA/7075/2018 ORDER beneficiaries of the trust. If the department had acted in time when the petitioner made first representation and followed up with several subsequent representations, the difficulty of record not readily available would not have arisen. Under no circumstances, department can refuse to refund the amounts in question to the petitioner. 10. Statement of the counsel for the Revenue regarding the position of income­tax proceedings in case of the trust and its beneficiaries, at best, can be seen as a passing reference but not a ground to withhold refund in the present case. Department surely would not require the Court's observations to take legal recourse if still available in law. 11. We however, accept the department's request to the limited extent of asking the petitioner trust to provide the list of names of beneficiaries of the trust at the relevant time for the period during the said three assessment years. 12. Under the circumstances, the petition is disposed of with the following directions : 1) The respondent shall refund the amount collected from or adjusted in case of the petitioner for the said three assessment years pending appeals before the Tribunal and after the order of Tribunal with statutory interest latest by 30.11.2018. 2) The petitioner shall provide latest by 15.11.2018, list of names of beneficiaries to the department during the period Page 6 of 7 C/SCA/7075/2018 ORDER relevant to the said assessment years. (AKIL KURESHI, J) (UMESH TRIVEDI, J) Raghu Page 7 of 7 "