Case Law Details
CIT Vs Shriram Ownership Trust (Madras High Court)
As per the Deed of Trust and the Supplemental Deed, the trust is created to benefit the members of owner group and the senior leader group of Shriram Group who are identified as beneficiaries as per the scheme laid out in the Trust Deed. The method of determining the beneficiaries of the owner group and the senior leader group is also provided in the Deed of Trust. In Annexure B of the Deed of Trust dated 11.09.2006, 13 persons have been identified and their names are in the list of beneficiaries who are in the owner’s group. Annexure C of the Deed of Trust mentions names of 23 persons who are beneficiaries under the senior leader group and all of them occupy senior positions comprised in Shriram Group. The sum of Rs.25 Crores which was contributed to the assessee are from Shriram Business Finance, Shriram Credit Syndicate, Shri SR E-Commerce Finance, Shriram Two Wheeler Finance, Shriram Domestic Finance and Shriram Professional Finance. The authorities noted that all the six concerns who have contributed the total amount of Rs.25 Crores are located in the same address in Chennai and form part of the Shriram Group. The donation which was given to the Trust are for the benefit of the persons occupying high positions in the Shriram Group and it will clearly go to show that the assessee has received the same on behalf of the beneficiaries who have been identified. If that is so, then the assessee is a representative assessee as defined under Section 160(1)(iv) of the Act and the benefit is derived by the assessee on behalf of the beneficiaries and to be taxed as an “individual”.
The authority on examining the factual position found that the assessee has adopted a ingenious method for the purpose of circumventing the provisions of the Act by accepting the gift on behalf of the individuals thereby acting as a conduit. Unfortunately, the Tribunal did not examine this aspect of the matter but proceeded on a different footing which we decline to approve. The Tribunal placed reliance on the decision of the Delhi Tribunal in Mridu Hari Dalmia Parivar Trust. We find that the said decision could not have been applied to the facts of the instant case, more particularly, when the Assessing Officer in the said case held that the assessee is an AoP. Furthermore, the finding rendered by the Tribunal with regard to the effect of insertion of clause (x) in Section 56(2) with effect from 01.04.2007 could not have been rendered in isolation without reference to the factual details where the beneficiaries were identified and therefore, the Tribunal erred in reversing the finding of the CIT(A) that the assessee has to be assessed as an “individual”. Therefore, we hold that the assessee Trust is a representative assessee as it represents the beneficiaries who are identified individuals and therefore to be assessed as an “individual” only. Consequently, the contribution of Rs.25 Crores is to be assessed as income under Section 56(1) under the head ‘income from other sources’.
It is submitted on behalf of the assessee that it is not in dispute that in terms of Section 160(1)(iv), a trustee is a representative assessee for a beneficiary. However, the revenue cannot place reliance on Section 161 of the Act as the said provision will apply only when the income is specifically receivable on behalf of or for the benefit of any one person who are known or whose shares are determined. It is further submitted that in the assessee’s case the beneficiaries are indeterminate and the individual shares of the income are also indeterminate and the voluntary contributions were received by the assessee Trust into their corpus and did not form part of the income distributed to the beneficiaries. This argument must necessarily fail for the reasons given by us earlier as we have held that the assessee is required to be assessed as an “individual”, the beneficiaries have been identified and are identifiable and Section 161 would apply because the income is specifically receivable on behalf of or for the benefit of any one person who are known and whose shares are determinate. The factual positions as brought by the JCIT and the CIT clearly show that the methodology adopted by the assessee was to circumvent the provisions of the Act.
For all the above reasons, we do not agree with reasons given by the Tribunal holding that the sum of Rs.25 Crores received by the assessee could not have been considered as income from other sources under section 56(2)(vii) read with Section 2(24)(xv) and accordingly, the same is set aside and the order passed by the CIT(A) is restored.
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