2015 (6) TMI 604 - AT - Income Tax

Remittance from outside India - revenue v/s capital receipt - onus to prove - whether a sum received by the assessee from White Label Trust which was constituted under the laws of the Island of Jersey on 20.07.1993 by making ANZ Grindlays Trust Corporation (Jersey) Limited as Trustee? - Held that - The decisions of Kale Khan Mohammad Hanif vs - CIT (1963 (2) TMI 33 - SUPREME Court); CIT vs.- Devi Prasad Vishwanath Prasad (1968 (8) TMI 5 - SUPREME Court ) and Roshan Di Hatti vs.- CIT (1977 (3) TMI 3 - SUPREME Court) are clearly applicable to the facts of the case of assessee. The onus is on the assessee to prove that the amount credited in his books of account is not the income or was exempt from taxation. In the instant case, in our opinion, the assessee could not discharge his onus and could not prove that the money has come out of the capital fund of a Discretionary Trust situated out of India. Before concluding we may mention that the submission of the Ld. Senior Advocate that the onus is on the revenue that the assessee has received the income cannot be applied to a case where the amount credited by the assessee had been claimed by him from a source situated outside india such as Swizerland etc and to which country the assessisng officer does not have any jurisdiction as the Indian Income Tax Act is applicable to Indian Territory, it cannot be said that the onus is on the assessing officer to prove that the assessee has earned the income outside India. This in our opinion will be the mockery of the Indian Income Tax Act and every body just filing the documents which were out side the domain of the assessing officer can claim that the onus is on the assessing officer to prove that the assessee has received revenue receipts. We, accordingly, confirm the order of CIT(Appeals) and reject the claim of the assessee that the said amount is the capital receipt received as a beneficiary of a discretionary trust. - Decided against assessee.

Summary

Issues Involved:
1. Whether the sum of Rs. 4,55,78,880/- received by the assessee from White Label Trust is a capital receipt not chargeable to tax.
2. Whether the sum received can be considered income under section 5 of the Income Tax Act.
3. Validity of the levy of interest under section 234B.

Issue-Wise Detailed Analysis:

1. Capital Receipt vs. Revenue Receipt:
The primary issue revolves around whether the sum of Rs. 4,55,78,880/- received by the assessee from White Label Trust is a capital receipt, which is not chargeable to tax. The assessee claimed that the amount was a capital distribution from a trust established under the laws of the Island of Jersey. The Assessing Officer (AO) questioned the nature of the receipt and requested detailed information about the trust, including its nature, founders, beneficiaries, and financial statements. The assessee failed to provide complete information, citing secrecy laws. The AO concluded that the trust is a foreign discretionary trust, and any fund distributed to an Indian resident is chargeable to income tax in India. The AO added the sum to the income of the assessee, noting the absence of provisions to exempt such receipts under the Indian Income Tax Act or any applicable Double Tax Avoidance Agreement (DTAA).

The assessee contended before the Commissioner of Income Tax (Appeals) [CIT(A)] that the amount received was a capital distribution and relied on various judicial precedents to support their claim. The CIT(A) upheld the AO's decision, dismissing the appeal. Before the Tribunal, the assessee reiterated their arguments and presented additional documents, including the settlement deed and financial statements of the trust. The Tribunal scrutinized these documents and found inconsistencies, such as the lack of evidence regarding the appointment of the new trustee and the authenticity of the financial statements. The Tribunal concluded that the assessee failed to discharge the onus of proving that the amount received was a capital receipt and upheld the CIT(A)'s decision.

2. Income Under Section 5:
The AO and the Tribunal examined whether the amount received could be considered income under section 5 of the Income Tax Act, which defines the scope of total income. The AO argued that the amount received by the assessee from a foreign trust is income in the hands of the recipient, as there is no provision in the Indian Income Tax Act to exempt such receipts. The Tribunal agreed with this view, noting that the assessee failed to provide sufficient evidence to prove that the amount was a capital receipt. The Tribunal emphasized that the onus is on the assessee to prove the nature and source of the credit in their books of account. In the absence of such proof, the AO is entitled to treat it as taxable income.

3. Levy of Interest Under Section 234B:
The assessee also contested the levy of interest under section 234B of the Income Tax Act. The Tribunal did not specifically address this issue in detail, as the primary focus was on the nature of the receipt. However, given that the Tribunal upheld the addition of the amount to the assessee's income, the levy of interest under section 234B would logically follow, as it pertains to the payment of advance tax on the assessed income.

Conclusion:
The Tribunal dismissed the appeal filed by the assessee, confirming the CIT(A)'s order and rejecting the claim that the amount received was a capital receipt. The Tribunal emphasized that the assessee failed to discharge the onus of proving the nature and source of the receipt and upheld the AO's decision to treat it as taxable income under section 5 of the Income Tax Act.