Loading judgment…
Facts
The assessee, a private trust with determinate beneficiary shares, appealed against the CIT(A)'s dismissal of appeals for AY 2011-12 & 2016-17, citing a delay of over six years. The assessee contended that there was no delay as the intimation under Section 143(1) was served on 15.01.2019, despite the order date being 01.10.2012. The core issue on merits was that the income was already offered by the beneficiaries, and therefore, the trust itself should not be taxed, citing CBDT Circular No. 157 and consistent past practice.
Held
The Tribunal found that there was no delay in filing the appeals, setting aside the CIT(A)'s order on that ground. On the merits, acknowledging the assessee's nature as a private trust with determinate beneficiary shares and the income having been offered by beneficiaries, the Tribunal recognized the potential for double taxation. The case was remanded to the Assessing Officer for fresh verification of the assessee's claim and to pass a new order after hearing the assessee.
Key Issues
1. Whether the appeals were time-barred due to delay in filing. 2. Whether a private trust with determinate beneficiary shares can be assessed on its income when the beneficiaries have already declared their respective shares.
Sections Cited
143(1), 143(3), 234B, 234C, 161, 166, 164, 41
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “B” BENCH: KOLKATA
Before: Shri Rajesh Kumar&Shri Pradip Kumar Choubey]
ORDER / आदेश Per Pradip Kumar Choubey, JM:
These are the appeals preferred by the assessee against separate orders of Commissioner of Income Tax (Appeal)-Addl/JCIT(A)-2, Chandigarh (hereinafter referred to as the Ld. CIT(A)] dated 11.01.2024 for AY 2011-12 & 2016-17 respectively & 563/Kol/2024 Assessment Years: 2011-12 & 2016-17 The George Telegraph Training Institute wherein the appeals of the assessee have been dismissed on account of delay in filing the appeal i.e. after the expiry of more than six years.
Brief facts of the case of the assessee in both the appeals are that the assessee is a private trust and shares of the beneficiary of the trust are determinate and known and the income of the trust is being assessed in the hands of the trustee directly. The trust was assessed u/s 143(3) of the Act for the AY 2011-12. The assessee had filed its return of income for AY 2011-12 by declaring an income of Rs. 48,41,065/- and claimed a refund of Rs. 6,03,049/- for AY 2016-17. The assessee declared an income of Rs. 1,51,98,110/- and claimed a refund of Rs. 21,61,670/-. The said return of income of the assessee was processed by order dated 01.10.2012 and 30.12.2016. In the said intimation, the income was assessed at Rs. 48,41,070/- and the tax demand was Rs. 9,11,010/- including interest u/s 234B and 234C of the Act and for AY 2016-17 intimation the income was assessed at Rs. 1,51,98,110/- and the tax demand was Rs. 32,64,030/- including interest u/s 234B and 234C of the Act.
3. The said order has been challenged by the assessee before the Ld. CIT(A). The Ld. CIT(A) vide its order dated 11.01.2024 in both the assessment year has dismissed the appeal of the assessee thereby holding that the assessee could not be able to satisfy the reason of delay i.e. more than six years though the assessee in its form No. 35 has written that there was no delay.
Being aggrieved and dissatisfied the assessee preferred two appeals before us.
The Ld. Counsel for the assessee challenges the impugned order thereby submitting that in fact there was no delay as the appeal had been filed in time as the service of intimation to the assessee was on 15.01.2019. The Ld. Counsel for the assessee submits that the Ld. CIT(A) did wrong by shifting his burden upon the assessee to furnish the evidence regarding service of intimation. The Ld. Counsel submits that he has clearly written in form no. 35 that assessee got notice of demand on 15.01.2019 and earlier to that there was no notice received by the assessee. The Ld. Counsel further on merit submitted that the assessee is a private trust and the shares of the beneficiaries & 563/Kol/2024 Assessment Years: 2011-12 & 2016-17 The George Telegraph Training Institute of the Trust are determinate and known. During the year under assessment, the respective beneficiaries had offered their respective shares of income from the Trust in filing the return of income as was consistently done from inception. As per the provisions of the Income Tax Act, 1961, under such circumstance, i.e. when the shares of the beneficiaries of a trust are known and they offered their share of income from the trust directly, the income of the Trust is not again assessable in its hand. While processing the return of the Trust u/s 143(1) of the Act on 01.10.2012 the trust was wrongly assessed for a sum of Rs. 48,41,070/- and a tax demand of Rs. 13,06,321/- was raised despite the fact that the beneficiaries had already offered the income in their hands. The Ld. Counsel had filed list of documents in support of its case. The Ld. Counsel also brought in the notice of the tribunal regarding CBDT Circular No. 157 [F. No. 228/8/73-IT(A-II) dated 26.12.1974. The Ld. Counsel submits that beneficiaries have offered the income in their respective hands and thus the trust cannot be taxed with respect to such income and according to him, this position was also accepted in the scrutiny assessment of the Trust for AY 2009-10 and 2012-13. He has placed the order u/s 143(3) of the Act for AY 2009-10 and for AY 2012-13. The prayer of the ld. Counsel is that the matter be restored in the file of AO for correct appreciation of law and for the verification of the fact which the assessee has brought before the Tribunal.
Contrary to that, the Ld. D.R supports the impugned order.
Upon hearing the submission of the Ld. Counsel of the respective parties, we have perused the order of Ld. CIT(A) and find that the Ld. CIT(A) has dismissed the appeal of the assessee on the ground that the assessee could not be able to furnish the evidence regarding service of intimation u/s 143(1) of the Act on 15.01.2019 though the date of intimation was in fact on 01.10.2012 as also mentioned by the assessee in Form no. 35. We have gone through the Form no.35 and find that on 01.10.2012 the date of order of intimation u/s 143(1) of the Act. There is nothing in the record regarding the date of service of order / notice of demand. The assessee has clearly been written in Form no. 35 that date of service of notice of demand on 15.01.2019 thereafter he filed an appeal, hence, there was no delay. Keeping in view of the above fact, we are in & 563/Kol/2024 Assessment Years: 2011-12 & 2016-17 The George Telegraph Training Institute conformity with the submissions of the ld. Counsel of the assessee that there was no delay, hence, the order passed by the Ld. CIT(A) on account of delay is hereby set aside.
Now coming to the factual position of the case of the assessee. It is the definite case of the assessee is that the assessee is a private trust and during the year under assessment the respective beneficiaries had offered their respective shares of income from the trust in filing the return of income and it was consistently done from inception. We have gone through the CBDT Circular No. 157 (supra) which deals thus:
Hon'ble CBDT has clarified on assessment of trust where share of beneficiaries are unknown. The CBDT's Circular No. 157fF. No. 228/8/73 -IT (A-LY], dated 26.12.1974 for the subject of "Assessment of discretionary trusts under section 164/166 - correct procedure thereof had clarified that the ITO should at the time of raising the initial assessment either of the trust or the beneficiaries adopt a course beneficial to the Revenue and having exercised his option once, it will not be open to him to assess the same income for that assessment year in the hands of the other person (i.e., the beneficiary or the trustee). 1. Attention is invited to Board's Instruction No. 45/78/66/ ITJ(5), dated 24.02.1967 [printed here as Clarification 2] on the subject of assessment made under section 41(2) of the 1922 Act/section 166 of the 1961 Act. In spite of the clear instructions to the effect that neither section 41 which give an option to the department to tax either the representative assessee or the beneficial owner of the income nor the parallel provisions of the 1961 Act contemplated assessment of the same income both in the hands of the trustees and the beneficiaries, instances have come to the notice of the Board of such double assessment. 2. According to the Scheme of the 1961 Act, even as it was under the 1922 Act, the general principle is to charge all income only once. The Board desire to reiterate the earlier instructions in this regard. In order that there is no loss of revenue, the Income-tax Officer should keep this point in view at the time of raising the initial assessment either of the trust or the beneficiaries and adopt a course beneficial to the revenue. Having exercised his option once, it will not be open to the Income-tax Officer to assess the same income for that assessment year in the hands of the other person (i.e., the beneficiary or the trustee).”
The subject was earlier clarified by the Board stating the same view in letter F. No. 45/78/66-ITJ(5), dated 24.02.1967 [Clarification 2] are as follows: 1. Recently an interesting case came to the notice of the Board. The assessee was one of the beneficiaries in the Trust. The shares of the beneficiaries were known and determinate. The Income tax Officer raised an assessment on the trustees taxing the income of the trust in their hands at the appropriate rate and to the amount which would have been recoverable in the hands of the beneficiaries. While dealing with the case of one of the beneficiaries of the trust, the income tax officer again included for rate purposes his share in the income of the trust. The reason advanced by him was that the amount of tax leviable should be the same whether the income from the trust is assessed in the hands of the trustees or in the hands of the beneficiaries and if the proportionate income from the trust is not included for rate purposes in the hands of the beneficiary, his income other than the income from the trust would be taxed at a rate lower than that which would have been applicable if the trust income were assessed directly in his hands.
& 563/Kol/2024 Assessment Years: 2011-12 & 2016-17 The George Telegraph Training Institute 2. The Board have been advised that the approach of the Income-tax Officer is not correct. Section 41 of the 1922 Act (corresponding to section 166 of the 1961 Act), gave an option to the department to tax either the representative assessee or the beneficial owner of the income. Once the choice is made by the department to tax either the trustee or the beneficiary, it is no more open to the department to go behind it and assess the other at the same time. The inclusion of the share income from the trust in the total income of the beneficiary for rate purposes would virtually amount to an assessment of the income which has already been assessed and subjected to tax. According to the scheme of the Act, if certain income is to be included for rate purposes in the total income, a specific provision in that behalf is made in the Act. In the absence of any such express provision, the general principle to charge all income only once would be applicable in such a case.
The position under the 1961 Act is also identical. In order that there is no loss to the revenue, the Income-tax Officers may keep this point in view while raising the initial assessment on the trust / beneficiaries.”
We further find that in the scrutiny assessment of the trust for AY 2009-10 and 2012-13 the trust was subject the scrutiny assessment in both the years, no income was assessed in the hands of trust where the trust income was allocated among the beneficiary in the view of fact that there was no change in the nature of business and the status of the assessee remained as in earlier years. The assessee has brought the following documents which are as follows:
The Ld. Counsel of the assessee has filed the written submission in which he has clearly stated that the trust was created vide instrument dated 20.01.1958 by Late Shri Haripada Dutta. Shri Haripada Dutta had five sons viz. Shri Tarapada Dutta, Shri Biswanath Dutta, Shri Pranab Kumar Dutta, Shri Prasanta Kumar Dutta and Shri Purnendu Dutta whom he made trustees and also beneficiaries. As we have already stated that the return of income of the assessee with computation of acknowledgment has been filed by the assessee and as per audited accounts of the assessee for the year & 563/Kol/2024 Assessment Years: 2011-12 & 2016-17 The George Telegraph Training Institute ended on 31.03.2011. The assessee had made net profit of Rs. 43,47,480/-. After making necessary adjustment for deprecation and disallowable expenditure, total income was arrived at Rs. 48,41,065/- without offering any tax in view of the fact that such total income was apportioned to the individual shares of beneficiary who offered the same to tax while filing their individual return of income following the provision of Section 161 & 166 of the Act. The assessee has filed a tabular chart of all the beneficiaries which are as follows:
The assessee has further filed the return of beneficiaries and the tabular chart of the beneficiary are as follows:
Going over the above discussion, the following points have been emerged: a) that the assessee is a family trust, created by deed of trust on 20.1.58. b) that the trust was created by one Sri Haripada Dutta, having 5 sons. c) that the sons were made trustees & beneficiaries having equal share.
& 563/Kol/2024 Assessment Years: 2011-12 & 2016-17 The George Telegraph Training Institute d) that the status of the aforesaid assessee, is Association of Persons with definite and determinate share of the beneficiaries i.e. 20% each. e) that such status was described in all the IT returns read with the deed of trust for all the previous years. f) that the same was accepted by the IT department all along. g) that following the same, in all the preceding years, the assessee was assessed for NIL tax and the beneficiaries were taxed on their respective shares. h) that for the instant AY 2011-12, there is no change in the status of the assessee-trust & the distribution of surplus among the beneficiaries having definite & determinate share. i) That the beenficiaries cum trustees had considered the share of trust income while filing their respective returns for the AY 2011-12 and paid due tax thereon. j) that under such circumstances, the status of the assessee cannot be changed and while processing return u/s 143(1) of the Act, the AO cannot impose tax on the assessee. k) That when the beneficiaries had paid tax on the trust income, demanding tax again from the trust, amounts to double taxation, which is no permissible under the scheme of income tax. l) that for the above, the order passed u/s 143(1) of the Act dated 01.10.2012 ultra vires and hence bad in law and should be reversed. m) That changing the status of an asse, which was consistently followed by the assessee and also accepted by the IT Department, cannot be done while sending intimation u/s 143(1) of the Act.
On the above discussion made, we find substance in the argument of the ld. Counsel of the assessee that the matter of calculation is to be verified by the AO afresh.
& 563/Kol/2024 Assessment Years: 2011-12 & 2016-17 The George Telegraph Training Institute 13. Accordingly, we remanded back the case to the file of AO with this direction to verify the claim of the assessee and thereafter pass afresh order after hearing the assessee.
In the result, both the appeals filed by the assessee are allowed for statistical purposes.
Order is pronounced in the open court on January, 2025 (Rajesh Kumar/राजेश कुमार) (Pradip Kumar Choubey /�द�प कुमार चौबे) Accountant Member/लेखा सद�य Judicial Member/�या�यक सद�य Dated: January, 2025 SM, Sr. PS Copy of the order forwarded to: 1. Appellant- The George Telegraph Training Institute, 31A, Shanti Apartment, S. P. Mukherjee Road, Bhawanipur-700025 2. Respondent – DCIT, Circle-29(1), Kolkata 3. Ld. CIT(A)-Addl./JCIT(A)-2, Chandigarh 4. Ld. Pr. CIT- , Kolkata 5. DR, Kolkata Benches, Kolkata (sent through e-mail)