2014 (1) TMI 696 - AT - Income Tax

Validity of re-opening of assessment u/s 147 of the Act Exemption of Interest on income on RBI relief Bonds u/s 10(15) of the Act - Allowability of exemption of interest income u/s 10(15) of the Act Held that - Following Director Of Income-Tax (Exemptions) Versus Shardaben Bhagubhai Mafatlal Public Charitable Trust 2000 (9) TMI 45 - BOMBAY High Court - a discretionary trust in which shares of the beneficiaries were not ascertainable was not a HUF or association of person - the term individual did not mean single human being and that it included a body of individuals constituting a unit for the purpose of the Act. The assessment of income in the hands of the trust had therefore to be made in the same manner and to the same extent as it would have been made in the hands of beneficiaries - The beneficiaries were merely recipients of income from trust and had not come together for common purpose for earning income thus, beneficiaries could not be considered as association of persons or body of individuals - assessee trust has to be assessed as an individual who will be entitled for exemption under section 10(15) of the Act Decided in favour of Assessee.

Summary

Issues Involved:
1. Legal validity of re-opening of assessment under section 147 of the Act.
2. Exemption of interest income on RBI relief Bonds under section 10(15) of the Income tax Act.

Analysis:

Issue 1: Legal validity of re-opening of assessment under section 147 of the Act:
The appeal raised concerns about the legal validity of re-opening the assessment under section 147 of the Act. During the hearing, the appellant did not press the ground challenging the re-opening, leading to its dismissal as not pressed.

Issue 2: Exemption of interest income on RBI relief Bonds under section 10(15) of the Income tax Act:
The dispute revolved around the allowability of exemption for interest income of Rs.7.00 lacs received by the assessee from RBI relief bonds under section 10(15) of the Act. The Assessing Officer contended that the trust, as the recipient of the interest income, was not an individual or HUF and thus not entitled to the exemption. The CIT(A) upheld this view, stating that both the investment and income belonged to the trust, which was neither an individual nor HUF.

In the appellant's argument, it was highlighted that the trust had only one beneficiary and one trustee. Referring to relevant judgments, the appellant contended that the trust should be assessed as an individual and, therefore, entitled to the exemption under section 10(15) of the Act. The tribunal examined previous judgments, notably the High Court's decision in the case of Shardaben Bhagubhai Mafatlal Public Charitable Trust, which held that a trust could be assessed as an individual for certain deductions. The tribunal concluded that the trust should be treated as an individual for the purpose of exemption under section 10(15) and allowed the appellant's claim for exemption.

In conclusion, the tribunal allowed the appeal of the assessee, setting aside the CIT(A)'s order and granting the claim for exemption under section 10(15) of the Act.