DCIT, LUDHIANA vs. M/S HERO CYCLES LTD., LUDHIANA

PER SANJAY GARG, J.M.

The present appeal has been filed by the Revenue against the order of the Ld. CIT(A)-2, Ludhiana dt. 04/04/2016.

ITA No.901/Chd/2016- Hero Cycles Ltd, Ludhiana 2

10(23FB), being a Revocable Trust and contribution from beneficiaries being revocable, as per provisions of section 61/63 of Income Tax Act, 1961 income is taxable in the hands of transfer or being beneficiary of KMRF/KIREF-1.

which the Department had submitted an application 20.3.2017

giving the reasons for delay in filing the appeal. In view of the

reasons furnished by the Department and considering the shortness

of the period of delay, the same is hereby condoned.

assessee company had made investment in Kotak India Real Estate

Fund which was set up as a unit scheme of Kotal Mahindra Realty

Fund. He further noted that the assessee was beneficiary to the

extent of 10.9433% in the income from the said fund. He further

noticed that the said Kotak Mahindra Realty Fund was in receipt of

interest income of Rs. 5,64,32,988/- during the relevant A.Y. 2009-

taxed in respect of the interest income accrued / received by the

assessee as per its share. He therefore applying the provisions of

Section 115U calculated share of the assessee in the said interest

income at Rs. 61,75,631/- and added the same to the income of the

assessee.

ITA No.901/Chd/2016- Hero Cycles Ltd, Ludhiana 3

interest received by ‘Kotak Mahindra Realty Funds’ was also taxed

in the hands of the said ‘Kotak Mahindra Realty Funds’, hence, the

same could not be taxed twice. The Ld. CIT(A) considering the

above submissions of the assessee held that though as per the

provisions of section 115U read with section 10(23FB) of the

Income-tax Act, the assessee was liable to be taxed on the share of

income received from ‘Kotak Mahindra Reality Funds’. However,

since the entire interest income had already been assessed in the

hands of the ‘Kotak Mahindra Reality Funds’, therefore, no

addition was called for in the hands of the assessee as the same

would result into double taxation on the same income. He,

therefore, deleted the additions so made by the Assessing officer in

the hands of the assessee. The Ld. CIT(A) further found force in

the contention of the assessee that the interest income already

reflected by the assessee in the returned income, should be reduced

to ‘nil’. He, therefore, accepted the contention of the assessee that

since the entire interest income was already assessed in the hands

of the trust / AOP, hence, the same interest income should be

assessed of the hands of assessee. He, accordingly, directed the

Assessing officer not to tax the interest income in the hands of the

assessee though offered in the return of income.

Revenue has come up in appeal before us.

ITA No.901/Chd/2016- Hero Cycles Ltd, Ludhiana 4

attention to the assessment order passed in the case of ‘Kotak

Mahindra Reality Funds’ and stated that the addition on account of

interest income has been made in the hands of the ‘Kotak Mahindra

Reality Funds’ on protective basis and not on substantive basis

with the observation that substantive addition be considered in the

hands of the beneficiaries. The Ld. Counsel for the assessee could

not rebut the above factual aspect of the matter. He, however, has

submitted that the assessee has already offered for taxation the

interest income received by the assessee from the ‘Kotak Mahindra

Reality Funds’. The Ld. DR, at this stage, pointed out to the

relevant provisions of section 115U to state that entire interest

income i.e the amount actually received or accruing or arising to is

liable to be taxed in the hands of the beneficiaries. However, we

find that the words ‘accruing’ or ‘arising to’ have been substituted

/ inserted vide amendment made by Finance Act, 2012 w.e.f.

1.4.2013. The assessment order is assessment year 2009-10 and we

find that prior to the amendment brought by Finance Act 2012, the

word mentioned in the provisions was ‘income received’. In view

of this, we do not find any merit in the above contention of the Ld.

DR. Since the assessee has already offered the interest income in

its return of income, hence, no further additions are warranted. In

view of our findings, we hold that the interest income actually

received by the assessee from the ‘‘Kotak Mahindra Reality Funds’

is liable to be taxed and not the entire interest accrued to the

ITA No.901/Chd/2016- Hero Cycles Ltd, Ludhiana 5

assessee. The action of the CIT(A) in reducing the income on this

issue to ‘nil’ is, however, set aside. The appeal of the Revenue is

thus partly allowed.

Order pronounced in the Open Court on 03/05/2018

Sd/- Sd/- (B.R.R. KUMAR) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated : 03.05.2018 AG/Rkk

Copy to: The Appellant, The Respondent, The CIT, The CIT(A), The DR