2017 (2) TMI 1013 - AT - Income Tax

Addition on account of the receipts on dissolution of trusts under section 56(2)(vi) as income from other sources - Held that - 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 (2012 (7) TMI 701 - ITAT MUMBAI) wherein held The assessee has received this amount on dissolution of trust in the capacity of beneficiaries as already been accepted by the Commissioner (Appeals),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 the addition cannot be upheld on the applicability of clause (vi) of sub-section (2) of section 56 as the money received by the assessee is not without consideration , we confirm the order of CIT(A) deleting the addition. - Decided against revenue

Summary

Issues:
Appeal against CIT(A)'s order deleting addition on receipts from dissolution of trust under section 56(2)(vi) of the Income Tax Act, 1961.

Analysis:
The Revenue appealed against the CIT(A)'s decision to delete the addition made by the Assessing Officer (AO) on the receipts from the dissolution of a trust under section 56(2)(vi) of the Act as income from other sources. The main contention revolved around whether the amount received from the trust should be taxed as income from other sources. The Tribunal referred to the AO's findings regarding the dissolution of the trust, where it was noted that the trust was dissolved, and the assets were distributed among the beneficiaries. The Tribunal also considered a similar case involving the assessee's husband, where it was established that the amount received on the dissolution of the trust was not without consideration. The Tribunal analyzed the provisions of section 56(2)(vi) of the Act, which outline the conditions for taxing sums of money received without consideration. It was highlighted that for the clause to apply, the sum must be received without consideration by an individual or Hindu Undivided Family (HUF) between specific periods. The Tribunal emphasized that in this case, the amount received on the dissolution of the trust was not without consideration as the beneficiaries received it in their capacity as beneficiaries, and the trust had already borne tax at the maximum marginal rate on its income.

The Tribunal's decision was based on the fact that the amount received on the dissolution of the trust cannot be considered as received without consideration, as it was distributed among the beneficiaries in accordance with the trust deed. The Tribunal relied on the findings in the husband's case to confirm that the addition made by the AO was not justified. The Tribunal noted that the facts and circumstances in both cases were identical, leading to the consistent view that the addition should be deleted. Therefore, the Tribunal dismissed the Revenue's appeal and upheld the CIT(A)'s decision to delete the addition made by the AO.

In conclusion, the Tribunal's detailed analysis of the provisions of section 56(2)(vi) of the Act, along with the specific circumstances of the case regarding the dissolution of the trust and distribution of assets among the beneficiaries, led to the decision to dismiss the Revenue's appeal and confirm the deletion of the addition made by the AO. The Tribunal's reliance on a similar case involving the assessee's husband further supported the decision to uphold the CIT(A)'s order.