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

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.

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 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.

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.

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.”

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. 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.

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.

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.

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 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.

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

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.

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.

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 relevant to the said assessment years.