9911796707
TMI Blog2012 (7) TMI 701X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 2[24][iva] read with provisions of Section 56[1] and 56[2][vi] of the Income Tax Act, 1961. 1.4 Without prejudice, the Learned Commissioner of Income Tax [Appeals] failed to appreciate that the Author, Trustees and Beneficiaries of the Trust are related to each other and if the Appellant has received money from them the same cannot constitute income u/s 56 [2][vi], as it is covered by the exemption clause. 2. The Learned Commissioner of Income Tax [Appeals] has erred in treating a sum of Rs. 10,417, on account of expenditure on legal and Technical books, as capital expenditure instead of treating it as a revenue expenditure. 3. The Learned Additional Commissioner of Income Tax [Appeals] has erred in disallowing expenses of Rs. 3,52,493 u/s 14A, without appreciation that no expenditure was incurred by the Appellant for earning exempt income. 2. The assessee, in the present case, is a Barrister and practices law. He is a proprietor of Ashok Pratap & Co., Barristers and Advocates, and has filed his return of income at Rs. 3,92,04,185, which has been assessed at an income of Rs. 5,31,87,920, by assessment order dated 30th December 2009, passed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roperty and assets of the said trust. Therefore, the said trust was dissolved as per the deed of dissolution dated 27th February 2007, and the assets were equally distributed between the two remaining beneficiaries i.e., the assessee and his wife Mrs. Sandhya A. Pratap. 10. It is the case of the Assessing Officer that though the amount has been received by the assessee being beneficiaries at the time of dissolution of the trust but still that amount retains the character of income, as envisaged in section 2(24)(iva) of the Act, because the assessee cannot act in dual capacity. According to the Assessing Officer, if the assessee claims to be a trustee, his status will remain always as of trustee and if the assessee claims to be one of the beneficiaries, he has no right to dissolve the trust. The Assessing Officer also noticed that the trust of the assessee was never registered under section 12AA of the Act. 11. On the aforementioned facts, the Assessing Officer applied the provisions of section 77(b) of the Indian Trust Act, and added a sum of Rs. 1,36,00,595, to the total income of the assessee. 12. The aforementioned action of the Assessing Officer was challenged before the lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer was wrong in observing that the assessee cannot act in dual capacity, as, according to the provisions of the Indian Trust Act, the assessee could act in dual capacity. She also noticed that, according to the details furnished in the shape of return of income filed by the said trust, it has paid maximum marginal rate of tax being a discretionary trust. The dissolution proceeds received by the assessee as beneficiaries are shown by the assessee in his individual capacity and the said trust has filed its return of income for the period ending 31st March 2007 separately. She held that the assessee did not receive the said sum of Rs. 1,36,00,595, in his capacity as "Trustee" i.e., representative assessee for the purpose of the trust. Having recorded these conclusions, the learned Commissioner (Appeals) has further referred to the provisions of section 56(2)(vi). According to her, the said trust does not fall within the ambit of the word "Relative", described in the provisions of section 56(2)(vi), therefore, the exemption from the applicability of the provisions of section 56(2)(vi) is not available to the assessee as the said sum of money, the aggregate of which exceeds Rs. 50,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned Commissioner (Appeals), it is the case of the assessee that addition has wrongly been sustained by the learned Commissioner (Appeals) and the same is required to be deleted. 14. On the other hand, the learned Departmental Representative, relying on the orders passed by the authorities below, submitted before us that the addition has rightly been sustained by the learned Commissioner (Appeals) and her order should be upheld. 15. We have carefully considered the rival contentions in the light of the material placed before us. Since the findings of the Assessing Officer that the trust is illegal and its terms could not be modified, have been reversed by the learned Commissioner (Appeals) and the Revenue has not preferred any appeal against those findings, we proceed to decide the present issue only in the light of the provisions of section 56(2)(vi) by application of which the learned Commissioner (Appeals) has sustained the addition. It will be appropriate to quote relevant portion of section 56(2)(vi) of the Act, which reads as follows:- F.-Income from other sources Income from other sources. 56. (1) Income of every kind which is not to be excluded from the total i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income described in various clauses, inter-alia, including clause (vi) which has been reproduced above, the income shall be chargeable to income tax under the head "Income From Other Sources". Clause (vi) of s/section (2) of section 56 of the Act will describe that in a case where any sum of money, the aggregate of which exceeds Rs. 50,000, is received without consideration by an individual or HUF in any previous year from any person or persons and/or after 1st April 2006 (but before 1st October 2009), the whole of aggregate value of such sum shall be liable to be assessed under the head "Income From Other Sources". Ingredients for application of clause (vi) will be - (i) that there should be a sum of money; (ii) that its aggregate value exceeds Rs. 50,000; (iii) that it should be received "without consideration" by an individual or HUF; and (iv) in any previous year, from any person, between the period 1st April 2006 and 1st October 2009. The said clause will not be applicable to the persons described in clauses (a) to (g), as mentioned in the proviso to clause (vi), which is reproduced above; The word "Relative" has been defined in Explanation which is also reproduced above. Unl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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