2024 (8) TMI 499 - AT - Income Tax

Income and the tax has to be assessed in the hands of the Appellant in its capacity as Representative Assessee - no similar credit for prepaid taxes is availed by the beneficiaries - JCIT(A) directing the AO to verify the claim of prepaid taxes (advance tax and tax deducted at source) in the hands of each beneficiary of the Appellant - interest u/s 234B and interest u/s 234C levied - Return of income filed by the assessee in the capacity of representative assessee - tax position for onshore funds setup as AIF - assessee is registered as an Alternative Investment Fund (AIF) under Securities and Exchange Control board of India (Alternative Investment Funds) Regulations, 2012 and as per Section 160(1)(iv) of the Act, the assessee is a representative of the beneficiaries of the funds - CPC has not considered the advance tax paid by the trustee of the assessee trust. HELD THAT - The assessee furnished a statement of income to each of the beneficiaries indicating share of income under each head of income and share of taxes paid by the trustee of the assessee in the representative capacity. The trustee has also paid the tax on the share of income of each beneficiary under the respective PANs of the beneficiaries and gave a declaration as required under Rule 37BA(2) of the Rules. Thus, for the first quarter for the year under consideration, TDS was made by the investee companies under the PAN of the beneficiaries and advance tax was paid by the assessee. Subsequently, the assessee withdrew the declaration following the CBDT Circular No. 13/2014 dated 28/07/2014 which applies to the later quarter of the FY 2014-15. The circular is extracted at page 7 8 of the order of the ld. CIT(A) and we find that this circular has been issued with an intention to clarify the tax position for onshore funds setup as AIF. Facts on record show that the assessee fulfills both the conditions to be eligible for passing through taxation. Since the corresponding income has been offered by the assessee in the capacity of the representative assessee within the meaning of Section 160(1)(iv) r.w.s. 164(1) of the Act, the assessee deserves to be allowed the credit of TDS and advance tax as claimed by it under return of income. Thus, no error or infirmity in the above mentioned findings of the ld. CIT(A) and uphold the same. Appeal of the assessee is dismissed.

Issues:
1. Validity of the order passed by the Additional / Joint Commissioner of Income-tax (Appeal)
2. Assessment of income and tax in the hands of the Appellant as Representative Assessee
3. Verification of claim of prepaid taxes in the hands of each beneficiary
4. Deletion of interest under section 234B of the Income-tax Act, 1961
5. Deletion of interest under section 234C of the Income-tax Act, 1961

Analysis:

1. Validity of the Order:
The appeal was filed against the order of the CIT(A)- Mysore, pertaining to AY 2015-16. The grievance of the assessee challenged the validity of the order passed by the Additional / Joint Commissioner of Income-tax (Appeal) on various grounds. The Tribunal carefully considered the arguments presented by both parties and reviewed the documentary evidence in accordance with the ITAT Rules, 1963.

2. Assessment as Representative Assessee:
The assessee, a Trust established under the Indian Trusts Act, 1882, acted as a representative assessee of the beneficiaries of the funds. The trustee of the fund computed the taxable income and paid taxes in this capacity. The issue arose regarding the treatment of prepaid taxes and TDS, with the assessee claiming credit for these payments. The Tribunal noted that the return of income was filed in the capacity of a representative assessee, and the trustee had paid taxes on behalf of each beneficiary. The Tribunal upheld the findings of the CIT(A) regarding the eligibility of the assessee for the claimed credits.

3. Verification of Prepaid Taxes for Beneficiaries:
The CIT(A) directed the Assessing Officer to verify the claim of prepaid taxes in the hands of each beneficiary and ensure no duplicate credits were availed. The Tribunal agreed with this direction, emphasizing that the credits for prepaid taxes should be allowed to the assessee as a representative assessee. The Tribunal also instructed the AO to charge correct interest under sections 234B and 234C of the Income-tax Act.

4. Deletion of Interest under Section 234B:
The assessee raised a specific issue regarding the deletion of interest under section 234B of the Income-tax Act. The CIT(A) did not direct the AO to delete this interest, and the Tribunal found no error in this decision, considering it consequential in nature.

5. Deletion of Interest under Section 234C:
Similarly, the issue of deleting interest under section 234C of the Income-tax Act was raised by the assessee. The CIT(A) did not direct the deletion of this interest, and the Tribunal upheld this decision, directing the AO to charge the correct interest under sections 234B and 234C after considering the order.

In conclusion, the Tribunal dismissed the appeal of the assessee after thorough consideration of all issues raised and upheld the findings of the CIT(A) regarding the treatment of prepaid taxes, interest under sections 234B and 234C, and the assessment as a representative assessee.

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