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Income Tax Appellate Tribunal, DIVISION BENCH ‘A’, CHANDIGARH
Before: SHRI SANJAY GARG & SHRI B.R.R. KUMAR
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.
The Revenue has raised the following grounds of appeal :
The Ld. CIT(A) has erred in law and on facts by deleting the addition of Rs. 61,75,631/- made as per section 115U of I.T. Act, 1961.
The worthy CIT(A)-2, Ludhiana has erred in law and on facts in not appreciating the fact that 10.9433% of Rs. 5,64,32,988/- i.e. income in investment which are non qualifying investment as set out in section
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.
The present appeal is barred by the limitation of 34 days for
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.
Brief facts relating to the issue are that the AO noted that the
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-
He noticed that assessee being beneficiary was liable to be
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.
Being aggrieved by the said order the assessee preferred in appeal before the Ld. CIT(A).
ITA No.901/Chd/2016- Hero Cycles Ltd, Ludhiana 3
It was pleaded before the Ld. CIT(A) that since the said
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.
Being aggrieved by the above order of the CIT(A), the
Revenue has come up in appeal before us.
ITA No.901/Chd/2016- Hero Cycles Ltd, Ludhiana 4
At the outset, Smt. Chanderkanta, Ld. DR has invited our
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