ITO Vs Aam Family Private Trust (ITAT Mumbai)
ITAT Mumbai held that provisions contained in section 56(2)(x) of the Income Tax Act are not attracted in case of the trust created for the benefit of the members / relatives of the settler who have been identified as beneficiaries.
Facts- The assessee is a private discretionary trust created by registered trust deed dated 22/12/2017 has filed its return of income which was subjected to scrutiny. The Assessing Officer framed the assessment under section 143(3) read with sections 143(3A) & 143(3B) of the Act at the total income of Rs.9,04,96,847/- by treating the entire value of movable assets (value of equity shares) settled by the settler of the trust, namely, Smt. Archana Miglani in favour of the trust, i.e. trust fund and being income under section 56(2)(x) of the Act.
Assessee carried the matter before Ld.CIT(A) by way of filing appeal, who has partly allowed the same. Feeling aggrieved with the impugned order passed by Ld.CIT(A), the Revenue has come up before the Tribunal by way of filing the present appeal.
Conclusion- Held that provisions contained in section 56(2)(x) of the Act are not attracted in case of the trust created for the benefit of the members / relatives of the settler who have been identified as beneficiaries.
It is not in dispute that the assessee trust was created for the benefit of the settler, Mrs. Archana Miglani herself and her relatives as a private discretionary trust vide trust deed dated 22/12/2017. When it is so, there is an exclusion clause under section 56(2)(x) vide proviso 5(X) that this clause shall not apply “to any sum of money or any property received from an individual by a trust created or established solely for the benefit of relative of the individual”.
Moreover, assesse in this case is pass through entity and it was the settlers money / property which is given to the private discretionary trust for benefit of herself and her relatives. Hence, question framed in the preceding para is answered in the negative.
In view of what has been discussed above, Ld.CIT(A) has rightly reached the conclusion that assessee trust is exempt from the applicability of section 56(2)(x) of the Act . So finding no illegality or perversity in the impugned order, appeal filed by the Revenue is hereby dismissed.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
Appellant, Income Tax Officer-19(1)(1), Mumbai(hereinafter referred to as the ‘Revenue’) by filing the aforesaid appeal, sought to set aside the impugned order dated 14/09/2022 passed by the National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘the Ld.CIT(A] on the grounds interalia that –
1. “Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in directing the AO to delete the addition of Rs.9,04,96,847/- which is taxable under section 56(2)(x) of the Income Tax Act, 1961?”
2. “Whether on the facts and circumstances of the case and in law, the Ld. … CIT(A) has erred in ignoring the fact that, the Trust has been created by Smt. Archana Miglani and Smt. Archana Miglani herself is one of the beneficiaries of the trust and her nephew and niece are also beneficiaries of the trust who do not fall under the meaning of “relative” as defined in explanation to clause (vii) of section 56 (2) of the IT act, 1961. Hence, provision of clause (x) of sub section (2) of section 56 of the Income Tax Act, 1961, is applicable in respect of the movable property received by the assessee trust?”
3. The appellant craves leave to add, delete, alter, amend and modify any or all grounds of appeal.”
2. Briefly stated, facts necessary for consideration and adjudication of the issues at hand are : The assessee is a private discretionary trust created by registered trust deed dated 22/12/2017 has filed its return of income which was subjected to scrutiny. The Assessing Officer framed the assessment under section 143(3) read with sections 143(3A) & 143(3B) of the Act at the total income of Rs.9,04,96,847/- by treating the entire value of movable assets (value of equity shares) settled by the settler of the trust, namely, Smt. Archana Miglani in favour of the trust, i.e. trust fund and being income under section 56(2)(x) of the Act.
3. Assessee carried the matter before Ld.CIT(A) by way of filing appeal, who has partly allowed the same. Feeling aggrieved with the impugned order passed by Ld.CIT(A), the Revenue has come up before the Tribunal by way of filing the present appeal.
4. We have heard the Ld.AR & the Ld.DR of the Revenue, gone through the documents available on record, order passed by the lower Revenue Authorities in the light of facts and circumstances of the case and the case law applicable thereto.
5. Undisputedly, the assessee is a private discretionary trust created by virtue of trust deed dated 22/12/2017 and this is first year of the filing return of income of the trust. It is also not in dispute that Mrs Archana Miglani wife of Mr. Anuj Miglani, is the settler of trust and Smt. Sheetal Ansal, wife of Mr. Pranav Ansal and Mrs. Shruti Munja, daughter of Mr. Rajiv Munja are the trustees of the trust. It is also not in dispute that beneficiary of the trust as per trust deed are as under:-
