BALGOPAL TRUST,MUMBAI vs. ACIT 18(1), MUMBAI

Upon assessee’s appeal Ld. CIT-A confirmed the action of the A.O as regard holding that assessee being a AOP cannot be granted benefit of section 54F. She distinguished the decision relied upon by the assessee’s counsel. She placed reliance upon the order of Hon’ble Punjab & Haryana High Court in the case of Raghunath Dass 3

Ld. Counsel of the assessee submitted that the issue is squarely covered in favour of the assessee by the decision of Hon’ble jurisdictional High Court in the case of Mrs. Amy F. Cama vs. CIT 237 ITR 82. He further submitted that decision by other High Courts also support the assessee’s case. For this proposition Ld. Counsel placed reliance upon the decision of Hon’ble Gujarat High Court in the case of Niti Trust And Ors. vs. CIT 221 ITR 435. Ld. Counsel further reliance upon CBDT direction dated 01.08.2012

Per contra Ld. D.R submitted that these cases are not applicable. He submitted that these case laws are with reference to the applicability of Section 161 of the Income Tax Act. However the issue before us is regarding special provisions relating to Section 54F of the I.T Act. He submitted that it is clearly prescribed in the Act that Section 54F exemption will be applicable to individual or HUF. Assessee being AOP is not entitled to the said exemption. As Balgopal trust ITA no.5661/Mum./2016 regards the CBDT circular referred by the Ld. Counsel of the assessee he submitted that firstly CBDT circulars are not binding on ITAT and secondly the said circular is mere direction of accepting of returns. He submitted that the same cannot be treated as direction to make assessment in a particular manner.

Upon careful consideration we find that the issue before us is as to whether the assessee trust, which is for the sole benefit of an individual, will be entitled to deduction u/s. 54F or not, when its status is that of A.O.P. As per Section 54F the benefits of this section is available to individual or Hindu undivided family (HUF). Hon’ble jurisdictional High Court in the case of Mrs. Amy F. Cama (Supra) has elaborately considered the same issue. The jurisdictional High Court was dealing with assessee trust’s claim for deduction for purchase price of the flat from capital gain as per Section 54 of the Act. The Hon’ble jurisdictional High Court has held that the assessee trust was entitled for the same. The Hon’ble Court had expounded that Section 161 of the I.T Act, 1961, makes a representative assessee subject to the same duties, responsibilities and liabilities as if the income was received by him beneficially. The fiction is created as it was never the object or intention of the Act to charge tax upon persons other than the beneficial owner of the income. Whatever benefits the beneficiary will get in the said 5

We find that above decision of Hon’ble High Court squarely applies on the present case, when we are concerned with the issue of exemption/deduction u/s. 54F. Section 54 is also applicable to individuals and HUF. However Hon’ble jurisdictional High court had expounded that on per the mandate of Section 161, the I.T. Act doesn’t intend to charge tax upon persons other than the beneficial owner of the income. Whatever benefits the beneficiary will get in a particular assessment must be made available to the trustee while assessing him u/s. 161. In the present case before us also the issue is benefit of investment made in purchase of flat for deduction u/s. 54F of the Act by the trustees and the sole beneficiary of the trust is the individual Ms. Vidushi Somani. Hence the ratio emanating from the above jurisdictional High court decision is squarely applicable on the facts of the case. The distinction referred by the Ld. D.R is devoid of cogency. Furthermore, Hon’ble Gujarat High court in the case of Niti Trust (Supra) has similarly granted benefit of assessment of a trust in the capacity of a individual. For this proposition Hon’ble High Court had relied upon the decision of Hon’ble Gujarat High Court in the case of CIT vs. Deepak Family

From the above case laws it is amply clear that by virtue of Section 161 of the I.T. Act the representative assessee is subject to the same duties, responsibilities and liabilities as if the income was received by him beneficiary, and whatever benefits the beneficiary will get in the said assessment must be made available to the trustee while assessing him u/s. 161. It is clear that it is only by virtue of u/s. 161 that the trust has been assessed for the income that is for benefit of sole beneficiary. According respectfully following the precedent we hold that the assessee is principally entitled to deduction u/s. 54F and it cannot be said that since it is a AOP and not a individual or HUF the said exemption/deduction should be denied.

Now we come to the merits of claim of deduction u/s. 54F. This has been denied by the A.O. However the Ld. CIT-A has not adjudicated the same since she has held that assessee being an AOP is not entitled to benefit u/s. 54F. Since we have already held in the earlier part of this order that assessee is legally entitled to claim deduction u/s. 54F, the issue of allowance of deduction u/s. 54F on merits needs adjudication by the CIT-A. Accordingly, we