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Income Tax Appellate Tribunal, “J” BENCH, MUMBAI
This appeal by the Revenue is arising out of the order of CIT (A)-7, Mumbai in appeal No. CIT (A)-7/IT.02/Rg.16(3)/2014-15 dated 28-01-2015. The Assessment was framed by ACIT Circle-16(3), Mumbai for the A.Y. 2007-08 vide order dated 18- 03-2013 u/s 143(3) read with section of the Income Tax Act, 1961 (hereinafter ‘the Act’).
2. The only issue in this appeal of Revenue is against the order of CIT(A) in deleting the addition made by AO on account of the receipts on dissolution of trusts under section 56(2)(vi) of the Act as income from other sources. For this Revenue has raised following three grounds: - “1. Whether on the facts and in circumstances of the case and in law, the Ld. CIT(A) was justifying in holding that addition made by the AO amounting to Rs.1,35,90,740/- on account of receipts from dissolution of Sant Trust cannot be taxed as income from other sources under section 56(2)(vi) of the Act and consequently giving relief of Rs.1,35,90,740/- to the assessee.
Mrs. Sandhya A. Pratap (2007-08) (In )
Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justifying in hlding that the amount of Rs.1,35,90,740/- received by the assessee from M/s. Sant Trust was not without consideration.
3. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justifying in holing that the provisions of section56(2)(vi) cannot be applicable to the case of the assessee as M/s. Sant Trust was taxed at the maximum marginal rate.
At the outset the assessee filed copy of Tribunal’s order in assessee’s husband case wherein exactly identical facts are discussed. The issue was considered by the AO and AO has noted the following facts: - “A) Additions on proceeds arising due to dissolutions of Sant Trust:-
1.1 In this case, a private Trust —Sant Trust was settled by Mrs. Vinodini C Pratap, mother of the assessee, by Indenture of Trust dated 20th January, 1978. This Trust is not registered as a Trust u/s 12AA - a fact confirmed for the period 1978 to 1980 by O/o. the DIT(E), Mumbai. The trustees of this Trust were (1) the assessee, Mrs. Sandhya Ashok Pratap, (2) Mr. Ashok C Pratap, while the beneficiaries were (i) Natasha & (ii) Tanya - the grandchildren of Mrs. Vinodini C Pratap.
1.2 By letter dated 15/1/2011 the beneficiaries of the Trust Ms. Natasha & Tanya Pratap added the names of the assessee, Mrs. Sandhya A Pratap and her husband Ashok C Pratap as the additional beneficiaries of Sant Trust.
1.3 On 30/3/2011, Natasha Pratap & Tanya Pratap signed document for release of Sant Trust whereby they relinquished all rights, title, interest, share and benefits in and from the property and assets of Sant Trust.
1.4 The said trust was dissolved as per the Deed of Dissolution dated 27/2/2007 and the assets were distributed in favour of two remaining
Mrs. Sandhya A. Pratap (2007-08) (In ) beneficiaries, Mr. Sandhya A Pratap, the assessee and Mr. Ashok C Pratap, husband of the assessee.
1.5 During the course of assessment proceedings, the assessee was required to show cause as to why the receipts amounting to Rs 1,35,90,740/- received from Sant Trust should not be brought to tax in its hand as income from other sources.”
And CIT(A) also considered the Tribunals order in assessee’s husband case in the case of Ashok C. Pratap. We find that the Tribunal in for assessment year 2007-08 vide order dated 18-07-2012 decided the issue which read as follows: - “16. The aforementioned provisions will describe that the income of every kind which is not to be excluded from the total income under the Income Tax Act, 1961, shall be chargeable to income tax under the head “Income From Other Sources”, if it is not chargeable to income tax under any of the heads specified in section 14, items (a) to (e). Sub– section (2) describes that, in particular and without prejudice to the generality of sub–section (1), the income described in various clauses, inter–alia, including clause (vi) which has been reproduced above, the income shall be chargeable to income tax under the head “Income From Other Sources”. Clause (vi) of s/section (2) of: section 56 of the Act will describe that in a case where any sum of money, the aggregate of which exceeds Rs. 50,000, is received without consideration by an individual or HUF in any previous year from any person or persons and / or after 1st April 2006 (but before 1st October 2009), the whole of aggregate value of such sum shall be liable to be assessed under the head “Income From Other Sources”. Ingredients for application of clause (vi) will be – (i) that there should be a sum of money; (ii) that its aggregate value exceeds ` 50,000; (iii) that it should be received “without consideration” by an individual or HUF; and (iv) in any previous year, from any person, between the period 1st April 2006 and 1st October 2009. The said clause will not be applicable to the persons described in clauses (a) to (g), as mentioned in the proviso to clause (vi), which is reproduced Page 3 of 5
Mrs. Sandhya A. Pratap (2007-08) (In ) above; The word “Relative” has been defined in Explanation which is also reproduced above. Unless all the aforementioned ingredients are fulfilled, the provisions of clause (vi) of s/section (2) of section 56 of the Act could not be applied. It is the main case of learned Counsel for the assessee that the amount has not been received by the assessee without consideration and that part of the condition cannot be said to have been fulfilled, therefore, it will be material to see that as to whether this amount can be said to have been received without consideration. If it is held that the said amount is not received by the assessee without consideration, then clause (vi), s/section (2) of section 56 of the Act will not be applicable. The facts are not in dispute. The assessee has received this amount on dissolution of trust in the capacity of beneficiaries. The status of beneficiary has already been accepted by the learned Commissioner (Appeals) when she has held that “in the background of the provisions of Indian Trust Act and the dissolution of the trust, appellant did not receive the sum of ` 1,36,595, in his capacity as a trustee i.e., representative assessee for the purpose of trust”. The fact that the assessee has received the amount in the capacity of beneficiaries has also not been controverted, therefore, the amount received by the trust is in pursuance of dissolution of trust. The amount received in pursuance of dissolution of trust cannot be termed to be an amount received by the beneficiaries “without consideration”. The fact that the trust had borne the tax at maximum marginal rate on its income has also not been controverted. Therefore, in our considered opinion, the addition cannot be upheld on the applicability of clause (vi) of sub– section (2) of section 56 of the Act, as the money received by the assessee is not “without consideration”.
In view of our aforementioned findings, we do not consider it necessary to go into the other submissions of the learned Sr. Advocate, which, inter–alia, includes the arguments that this amount cannot be assessed for the reasons that it will tantamount to taxing the income twice and also the argument that, in any case, as the trust was created by mother of the assessee, its exclusion will also fall within the purview Page 4 of 5
Mrs. Sandhya A. Pratap (2007-08) (In ) of clause (vi) of the Explanation described in clause (vi) of the Explanation where the word “Relative” has been defined as “lineal ascendant or descendant of the spouse of the individual”, etc.”
When a query was put to the learned Sr. DR, he could not distinguish the facts rather, the facts and circumstances are exactly identical in assessee’s husband case. Respectfully following and taking consistent view as taken by coordinate Bench in assessee’s husband Shri Ashok C Pratap case (supra), we confirm the order of CIT(A) deleting the addition.
In the result, the appeal of Revenue is dismissed. Order pronounced in the open court on 15-02-2017.