Case Law Details
Aquagel Promoter Group Shareholders Trust Vs DCIT (ITAT Ahmedabad)
ITAT Ahmedabad held that the income of beneficiaries of trust cannot be treated as income in the hands of the trust. Accordingly, disallowance under section 143(1) of the Income Tax Act not justified.
Facts- The assessee is an Association of Person (Trust) which came into existence vide Trust Deed dated 24.12 2012. The Trust is comprising of 38 members who are having definite shares as beneficiaries in the assessee-trust and was created for the specific purpose namely to transfer the shares of M/s. Aquagel Chemicals Pvt. Ltd. to the Hindustan Uniliver Ltd. in an escrow mechanism manner. Thus the assessee-trust is escrow agent and essentially a holding tank. For the year under consideration the assessee has shown a total receipt of Rs.3,63,21,748/- which was liable to be distributed between its beneficiaries with their appropriate shares. Thus the assessee trust filed its Return of Income declaring Nil Income. However, one of the group of beneficiary comprising of 5 members have not received their shares of income as distributed by the assessee-trust on account of some dispute. Therefore, the CPC held that such income has to be taxed in the hands of the Assessee Trust only and accordingly added to the total income, while processing the intimation made u/s.143(1)(a) of the Act.
CIT(A) confirmed the addition. Being aggrieved, the present appeal is filed.
Conclusion- Held that the issue before us is that the income of beneficiaries of assessee-trust can be treated as income in the hands of the assessee-trust. Th e CPC while processing the Return of Income held that entire income of Rs.3,63,21,750/- has to be taxed in the hands of the assessee trust and demanded tax of Rs.1,56,31,870/-. Whereas the Co-ordinate Bench of this Tribunal in assessee’s own case for the earlier Asst. Year 2013-14 in ITA No.1348/Ahd/2017 [cited supra] held in favour of the assessee. Therefore the CPC is not correct in making such disallowance u/s.143[1] for the subsequent asst. year. Further there seems to be no change in the facts of the present case in hand.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
These two appeals are filed by the Assessee as against separate appellate orders both dated 15.12.2023 passed by the National Faceless Appeal Centre (NFAC), Delhi arising out of the intimation orders passed under section 143(1)of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Years 2017-18 and 2019-20. Since identical issues are involved in both the appeals the same are disposed of by this common order for the sake of conveyance.
2. ITA No.53/Ahd/2024 is taken as the lead case. The facts in brief are that the assessee is an Association of Person (Trust) which came into existence vide Trust Deed dated 24.12 2012. The Trust is comprising of 38 members who are having definite shares as beneficiaries in the assessee-trust and was created for the specific purpose namely to transfer the shares of M/s. Aquagel Chemicals Pvt. Ltd. to the Hindustan Uniliver Ltd. in an escrow mechanism manner. Thus the assessee-trust is escrow agent and essentially a holding tank. For the year under consideration the assessee has shown a total receipt of Rs.3,63,21,748/- which was liable to be distributed between its beneficiaries with their appropriate shares. Thus the assessee trust filed its Return of Income declaring Nil Income. However, one of the group of beneficiary comprising of 5 members have not received their shares of income as distributed by the assessee-trust on account of some dispute.
2.1 The Centralized Processing Centre (for short CPC), Bangalore found that the one group of beneficiary comprising of 5 Members have not received their shares of income and also not offered to tax by them in their respective Return of Income on account of some dispute. Therefore, the CPC held that such income has to be taxed in the hands of the Assessee Trust only and accordingly added to the total income, while processing the intimation made u/s.143(1)(a) of the Act.
3. Aggrieved against the same the assessee filed an appeal before the learned CIT(A) who has confirmed the adjustment made by CPC and dismissed the appeal without considering Co-ordinate Bench decision in assessee’s own case for earlier Asst. Year 2013-14.
4. Aggrieved against the appellate orders, the assessee is in appeal before us raising the following grounds of Appeal in ITA No.53/Ahd/2024 for AY 2017-18.
1. The Ld. CIT(A) has erred in law and on facts in confirming the addition of Rs.3,63,21,748/ by holding that the share of the beneficiaries is taxable in the hands of the Appellant Trust.
2. Both the lower authorities have erred in law and on facts in not appreciating that the amount of Rs.3,63,21,748/- cannot be said to have accrued as income in the hands of the Appellant Trust.
3. The Ld. CIT(A) has erred in law and on facts in not following the binding judgement of the jurisdictional Tribunal in assessee’s own case for earlier years. Moreover, Ld. CIT(A) has also not followed and ignored the scrutiny assessment orders for earlier years wherein Appellant trust was accepted as pass thru entity.
4. Both the lower authorities have passed the order without properly appreciating the facts and they further erred in grossly ignoring various submissions, explanations and information submitted by the appellant from time to time which ought to have been considered before passing the impugned order. This action of the lower authorities is in clear breach of law and Principles of Natural Justice and therefore deserves to be quashed.
5. The Ld. CIT(A) has erred in law and on facts of the case in confirming action of the Ld. AO in levying interest u/s. 234A/B/C of the Act.
6. The Ld. CIT(A) has erred in law and on facts of the case in confirming action of the Ld. AO in initiating penalty u/s. 271(1)(c) of the Act.
7. The Appellant craves leave to add, amend, alter, edit, delete
5. Learned Senior Counsel Shri Tushar Hemani appearing for the assessee drawn our kind attention stating that the Ld.CIT(A) conveniently ignored the assessee’s Written Submission wherein it was dealt with the order passed by the Co-ordinate Bench of this Tribunal in assessee’s own case for the earlier Asst. Year 2013-14 in ITA No.1348/Ahd/2017 and No.553/Ahd/2018 vide order dated 02.06.2020 and also not justifying the ground that such disallowance cannot be done under section 143(1) proceedings. Thus, the Ld. Senior Counsel prayed that the order passed by the Ld.CIT(A) is liable to be quashed.
6. Per Contra, the Ld.DR Shri Sudhendu Das, appearing for the Revenue supported the order passed by the lower authorities and requested to uphold the same.
7. We have given our thoughtful consideration and perused the materials available on record. The issue before us is that the income of beneficiaries of assessee-trust can be treated as income in the hands of the assessee-trust. Th e CPC while processing the Return of Income held that entire income of Rs.3,63,21,750/= has to be taxed in the hands of the assessee trust and demanded tax of Rs.1,56,31,870/=. Whereas the Co-ordinate Bench of this Tribunal in assessee’s own case for the earlier Asst. Year 2013-14 in ITA No.1348/Ahd/2017 [cited supra] held in favour of the assessee. Therefore the CPC is not correct in making such disallowance u/s.143[1] for the subsequent asst. year. Further there seems to be no change in the facts of the present case in hand.
8. Further, the disallowance made by the CPC, Bangalore is u/s. 143(1) proceedings which is beyond the provision of section 143(1) of the Act. Therefore the addition made by CPC is hereby directed to be deleted. In the result grounds raised by the assessee are hereby allowed.
9. In the result, the appeal filed by the assessee is allowed.
10. Now coming to the ITA No.54/Ahd/2024 relating to the Asst. Year 2019-20 wherein similar disallowance made u/s.143[1] of the Act. The Grounds of Appeal raised by the assessee are identical with that of the earlier year, except change in figure of disallowance.
11. Since the disallowance made is identical the decision rendered in ITA No.53/Ahd/2024 will be squarely applicable mutatis mutandis for the present Asst. Year 2019-20. Hence, the appeal filed by the assessee is allowed.
12. In the combined results, both the appeals filed by the assessee are allowed.
Order pronounced in the open court on 29 .11.2024
Author Bio
