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TMI Blog2015 (2) TMI 1025X X X X Extracts X X X X X X X X Extracts X X X X ..... or and beneficiary are one and the same. This is a crucial factual aspect of the case and requires a proper verification by considering the relevant evidences as well as contentions of the assessee. Another crucial confusion as emerging from the records is regarding income arising from sale of shares by the assessee trust and distributed to the beneficiaries was offered to tax by IL & FS Financial Services Ltd. and assessed accordingly. Since these two factual aspects requires a clear and proper verification and examination as well as a clear finding, therefore in the facts and circumstances of the case we set aside this issue to the record of CIT(A) for deciding the same denovo after verification of the facts, consideration of the contentions as well as decisions relied upon by the assessee. Needless to say the assessee may be given appropriate opportunity of hearing before passing the fresh order. - Decided in favour of assessee for for statistical purposes. - ITA No. 7499/Mum/2014 - - - Dated:- 13-2-2015 - Vijay Pal Rao, JM And D. Karunakara Rao, AM,JJ. For the Appellant : Shri D V Lakhani For the Respondent : Shri R N D'souza - DR ORDER Per: Vijay Pal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant prays that the status of the trust should be treated as Individual and not as Association of Persons. The appellant prays that the Learned Commr. of Income Tax (A) has not adjudicated on this issue while passing the order. 6. On the facts circumstances of the case the Learned Commr. of Income Tax (Appeals) has ignored the fact that the sole contributor to the trust, being IL FS Financial Services Ltd., which is entitled to the income of the trust has already offered for tax the indexed capital gain of ₹ 27,38,484/- (book profit of ₹ 7,95,07,243/-) and interest income of ₹ 8,630/- and there is double taxation of the same income in the hands of the appellant. 7. On the facts circumstances of the case the Learned Commr. of Income Tax (Appeals) has erred in taxing the profit on sale of investments (book profit) of ₹ 7,95,07,243/- under the head Income from Business Profession in the hands of the appellant trust invoking the provisions of Section 164(1). The appellant prays that the long term capital gain of ₹ 27,38,484/- arising from the transaction with the book profit of ₹ 7,95,07,243/- is already taxed in the hands of the sole ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Financial Services Ltd. under the class P Unit holder, the assessee trust made investment of ₹ 89,35,88,387/- in the equity shares of Multi Commodity Exchange Ltd. (MCX) on 22/7/2008. During the year the assessee sold these shares of MCX on 20/8/2009 and earned the surplus of ₹ 7,95,07,243/- apart from the interest income of ₹ 8,630/- on fixed deposits in bank. The assessee filed its return of income on 20/07/2010 declaring nil income. The assessee claimed that the assessee earned long term capital gain of ₹ 7,95,07,243/- on sale of MCX shares which has been transferred to the beneficiaries alongwith interest income. The AO asked the assessee as to why the interest income and profit on sale of investment should not be taxed in the hand of the assessee trust/AOP in view of the CBDT Circular No.157 dated 26/12/1974. In reply the assessee contended before the AO that the assessee's case is covered under provisions of section 161 of the Act. It was further contended that the share of the beneficiaries was determinate in the private trust and the same is taxable in the hands of the beneficiaries as provided u/s. 161(1) of the Act. In sum and substance the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d from IL FS Financial Services Ltd. which was invested in the shares of MCX. The trust has not borrowed any money nor received any contribution from any other person. He has further submitted that for assessment year 2008-09 and 2009-10 the assessee trust filed return and department has accepted the status as trust. Even for the assessment year 2008-09 and 2009-10 it was made clear that the income is taxable in the hands of IL FS Financial Services being the sole contributor. For the assessment year 2009-10 the assessee trust earned interest income of ₹ 11,434/- and dividend income of ₹ 8,10,913/- which were both distributed to IL FS Financial Services Ltd. The dividend was exempt and interest income was offered for tax by IL FS Financial Services Ltd. The department has passed the order in case of IL FS Financial Services Ltd. for the assessment year 2009-10 and taxed the income received from the assessee trust. The ld. AR has submitted that the provisions of section 61 to section 63 are applicable on the facts of the case . M/s. IL FS Financial Services Ltd. being sole contributor is entitled for the income and has offered income for assessment year 2009- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iary has shown long term capital gain and also paid tax @ 20% on the same. He has further submitted that the assessee submitted detailed submission before the AO, however, the AO has not considered the submissions and assumed wrong facts that the Settlor and beneficiary are the same. The assessee is a irrevocable trust and therefore the provisions of section 161(1A) or section 164(1) are not applicable. In support of his contention he has relied upon the following decisions :- 1. Dp. CIT vs. M/s. India Advantage Fund-VII ITA No.178/Bang/2012; 2. CIT vs. Marshons Beneficiary Trust 188 ITR 224(Bom.); 3. L.R. Patel Family Trust vs. Income tax Officer And Ors. 262 ITR 520(Bom.); 4. CIT vs. Babulal Grandsons Family Trust 301 ITR pg.271 (Alld.); 5. CIT vs. Viners Industries 130 Taxmann pg.492 (Mad.); 6. CIT vs. Venu Suresh Sheela Trust 233 ITR 99(Mad.) and 7. CIT vs. Sinivali Trust 267 ITR 165 (Guj.) 3.1 The ld. AR has submitted that an identical issue has been considered by the Bangalore Benches of this Tribunal in the case of DCIT vs. M/s. India Advantage Fund-VII (supra), wherein the Tribunal has held that the status of the assessee cannot be treated as AOP. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance to Portfolio Companies (as defined below) and operating within the investment focus of the Trust and to achieve substantial long term capital appreciation, primarily through privately negotiated equity and equity-linked investments in these Portfolio Companies. 4.1 Thus, it is clear that the purpose of creating the trust was for making available financial assistance for portfolio companies and to achieve long term capital appreciation primarily through privately negotiated equity and equity-linked investment in portfolio companies. From the impugned orders of the authorities below it appears that there was a confusion of the Settlor, beneficiary and trustee because all these entities are having identical names to some extent. For the sake of convenience we refer the names of Settlor, trustee and beneficiaries as under :- I Settlor - Infrastructure Leasing Financial Services Ltd. II Trustee - IL FS Trust Co. Ltd. III Beneficiary - As per schedule A as under :- SCHEDULE A THE BENEFICIARIES Contributors / Beneficiaries Class A Beneficiaries Name ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the letter has stated that in the assessment order passed for A.Y. 2010-11 in its case, i.e. IL FS Financial Services Ltd, the AO has taxed the long term capital gain of ₹ 27,38,484/- received from the appellant Trust u/s 143(3) of the Act, and, when the income has already been taxed in the hands of the sole beneficiaries, the said income is once again taxed by the AO in the hands of the appellant's Trust. As discussed, the above income has been claimed exempt by the appellant u/s 10(38) of the Act, in the return of income filed in the case of IL FS Financial Services Ltd and the AO has also not taxed the above income in the assessment completed vide order dated 12.03.2013. As seen above, the claim made by the IL FS Financial Services Ltd. regarding the above income being exempt u/s. 10(38) of the Act, is not bonafide and if there was any mistake, the appellant never rectified it by filing revised return of income or pointing out the same to the AO during the course of assessment proceedings that the above amount is taxable in the hands of IL FS Financial Services Ltd. 4.3 To controvert the finding of the ld. CIT(A), the ld. AR referred to the P L Account o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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