The Commissioner of Income Tax vs. M/s.Dhana Reddy AND Co
What did the High Court hold?
The Tribunal held that the Revenue failed to provide evidence that the trusts were sham. It confirmed the CIT(A)'s order, finding no infirmity or illegality.
What were the facts?
The assessee created two trusts and entered into a lease arrangement with them. The Revenue argued that this was a sham transaction to avoid tax.
What were the issues?
Whether the creation of trusts and lease arrangement by the assessee was a sham transaction or a colorable device to avoid taxation.
AI-generated summary — verify with the full judgment below
HON'BLE SRI JUSTICE C.V.NAGARJUNA REDDY
AND
HON’BLE SRI JUSTICE CHALLA KODANDA RAM
ITTA No.458 of 2011
Date:02.11.2017
Between: The Commissioner of Income Tax, Central Circle, Hyderabad. ..... Appellant And: M/s Dhana Reddy & Co., Visakhapatnam. ....Respondent Counsel for the appellant: Mr. J.V.Prasad Senior Standing Counsel for IT Department
The Court made the following:
CVNR, J & CKR, J ITTA.No.458 of 2011 Dated:02.11.2017
2 JUDGMENT: (per Hon’ble Sri Justice Challa Kodanda Ram)
This appeal is filed against the common order, dated 12.4.2005, to the extent it pertains to I.T.A.No.255/Vizag/2001 on the file of the Income Tax Appellate Tribunal, Visakhapatnam Bench, Visakhapatnam. The question of law raised in this appeal is as under: “Whether on the facts and in the circumstances of the case, the Tribunal is correct in law in holding that creation of two trusts and lease arrangement by the assessee with the Trusts is not a sham transaction, and not a colourable device to avoid taxation?”
In paragraph-21 of the impugned order, the Tribunal recorded its findings, which are as under: “The Revenue could not bring any cogent evidence or material on record, which may prove that the two Trusts were sham and were created for the purpose of reducing the income tax liability of the assessee. There is no dispute that the two Trusts were chargeable to maximum tax rate on the income earned by both the Trusts without availing of the basic exemption. Thus, we are of the view that no interference is called for in the order of the CIT (A) for both the assessment years, as in our opinion, the order passed by the CIT (A) does not have any infirmity or illegality and the order represent the correct interpretation of the Income Tax Law. We, therefore, confirm the order of the CIT (A) and dismiss the appeals of the Revenue.”
CVNR, J & CKR, J ITTA.No.458 of 2011 Dated:02.11.2017
3 There is no dispute that trusts are chargeable to maximum tax rate on the income earned by them without availing of the basic exemption. In the light of the above finding of fact recorded by the Tribunal and there being no material which is brought before this Court to show that the aforesaid finding of the Tribunal is perverse, the substantial question of law as raised in the grounds of appeal does not arise from the impugned order of the Tribunal. In those circumstances, the appeal is dismissed.
__________________________
JUSTICE C.V.NAGARJUNA REDDY
__________________________
JUSTICE CHALLA KODANDA RAM 02nd November 2017 DR
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