2022 (4) TMI 838 - AT - Income Tax

Validity of Reassessment proceedings - Status of a private discretionary trust - AOP OR Individual - AO levied FBT in respect of the fringe benefit provided by the assessee to its employees - HELD THAT - CIT(A) has given a detail findings for each of the grounds of appeal raised by the assessee. The Ld. CIT(A) relied on the decision of Rajesh Jhaveri Stock Broker Pvt. Ltd. 2007 (5) TMI 197 - SUPREME COURT wherein it was held that process u/s 115WE(1) of the Act will not amount to application of mind and the consequent reopening u/s 115WG cannot be said to be change of opinion. The Ld. CIT(A) also justified the AO s view that during earlier proceedings also the charging of FBT was raised by the erstwhile AO and was decided to consider this issue separately and the same was not concluded. Therefore, we are of the considered view that the justification of the Ld. CIT(A) in holding the re-assessment as valid is not disputed. Treating the assessee as AOP as against the status of a private discretionary trust as individual CIT(A) has rightly decided the issue in the light of various judicial decisions. The Ld. CIT(A) has interpreted the meaning of AOP on a comparison with the Hon ble Supreme Court decision in the case of CIT vs. Indira Balkrishna 1960 (4) TMI 7 - SUPREME COURT with that of the subsequent amendment by explanation to section 2(31) wherein the AOP can be formed without the common objective of deriving income, profits or gains, thus concluding that private discretionary trust will come under the purview of AOP. In addition to this, the proviso to section 164(1) also states that under the circumstance provided therein, the income of the discretionary trust shall be assessed to tax as AOP. The Ld. CIT(A) has also rejected the submission of assessee that the departmental circular referring to the discretionary trust as individual is also not very relevant in view of the explanation provided to section 2(31) of the Act and the said circular merely refers to the difficulty in accepting the return by existing e-filing software if the status of private discretionary trust is shown as individual is also not disputed. AR has submitted a copy of the latest judgment of Madras High Court in CIT, Chennai vs. Shriram Ownership Trust, Chennai 2020 (12) TMI 736 - MADRAS HIGH COURT where the facts of the case are not identical with the present appeal before us and the said decision does not hold good for this case. Apart from this, there is no other material on record to take any other view than that of Ld. CIT(A) s findings. - Decided against assessee.

Summary

Issues:
1. Status of the appellant as AOP vs. Individual.
2. Treatment of certain expenses as fringe benefits.
3. Validity of re-assessment proceedings based on audit objection.
4. Consideration of clarification, nature of expenses, and evidence produced.
5. Proceedings under section 115WE(1) and the filing of Return of Fringe Benefit.
6. Status of private discretionary trust as AOP or Individual.

Analysis:

Issue 1: Status of the appellant as AOP vs. Individual
The appellant contended that the trust should be regarded as an individual and not AOP. The AO determined the status as AOP based on business activities and levied FBT. The CIT(A) upheld the AO's decision, citing various judicial decisions and the definition of AOP under the Income Tax Act. The CIT(A) concluded that the private discretionary trust falls under the purview of AOP due to the explanation to section 2(31) and proviso to section 164(1). The AR submitted a judgment from the Madras High Court, but it was deemed irrelevant. The Tribunal declined to interfere with the CIT(A)'s findings, ultimately dismissing the appeal.

Issue 2: Treatment of certain expenses as fringe benefits
The AO treated specific expenses as fringe benefits, leading to the dispute over the applicability of FBT. The appellant challenged this treatment, arguing that the expenses were outside the scope of Fringe Benefit as specified in section 115WB of the IT Act. However, the CIT(A) upheld the AO's decision, resulting in the imposition of FBT on the assessed fringe benefits.

Issue 3: Validity of re-assessment proceedings based on audit objection
The appellant contested the re-assessment proceedings, claiming it was a change of opinion solely based on an audit objection. The AO insisted on the re-assessment and levied FBT. The CIT(A) justified the re-assessment, stating that the issue of FBT was raised earlier and not conclusively decided. The Tribunal agreed with the CIT(A)'s reasoning, upholding the validity of the re-assessment.

Issue 4: Consideration of clarification, nature of expenses, and evidence produced
The appellant argued that certain clarifications, nature of expenses, and evidence were not considered during the assessment proceedings. However, the CIT(A) found that these were not produced before the AO, leading to the rejection of the appellant's contentions.

Issue 5: Proceedings under section 115WE(1) and the filing of Return of Fringe Benefit
The appellant raised concerns regarding the proceedings under section 115WE(1) and the filing of Return of Fringe Benefit. The AO required the appellant to file the return, leading to disputes over the timing and validity of the re-assessment. The Tribunal upheld the AO's decision, emphasizing the necessity of compliance with the provisions related to FBT.

Issue 6: Status of private discretionary trust as AOP or Individual
The primary contention revolved around the status of the private discretionary trust as AOP or Individual. The appellant argued for individual status, citing various references and circulars. However, the AO and CIT(A) determined the trust to be an AOP, leading to the imposition of FBT. The Tribunal supported the CIT(A)'s decision, emphasizing the legal interpretation of AOP and the relevant provisions under the Income Tax Act.

In conclusion, the Tribunal dismissed the appeal, upholding the decisions of the CIT(A) regarding the status of the appellant, treatment of expenses as fringe benefits, validity of re-assessment proceedings, consideration of evidence, compliance with FBT provisions, and classification of the private discretionary trust as an AOP.