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TMI Blog2020 (10) TMI 665X X X X Extracts X X X X X X X X Extracts X X X X ..... 28.02.2018 2010-11 890/2018 I.T.A.No.981/Mds/2016 'C' Bench 07.06.2017 2009-10 916/2018 I.T.A.No.982/Mds/2016 'C' Bench 07.06.2017 2010-11 473/2019 I.T.A.No.347/Chny/2018 'B' Bench 15.11.2018 2014-15 474/2019 I.T.A.No.344/Chny/2018 'B' Bench 15.11.2018 2011-12 480/2019 I.T.A.No.345/Chny/2018 'B' Bench 15.11.2018 2012-13 481/2019 I.T.A.No.346/Chny/2018 'B' Bench 15.11.2018 2013-14 569/2019 M.P.No.310/Chny/2017 in I.T.A.No.981/Mds/2016 'C' Bench 04.04.2018 2009-10 570/2019 M.P.No.311/Chny/2017 in I.T.A.No.982/Mds/2016 'C' Bench 04.04.2018 2010-11 2. T.C.A.Nos.735 and 736 of 2018 were admitted on 03.09.2020, on the following substantial questions of law:- "1. Whether the Tribunal was right in deleting the penalty levied under Section 271(1)(c) treating the assessee as a determinative Trust and allowing pass through status under Section 161(1) of the Act on the interest income earned by the assessee from the fixed deposit which is a non venture capital undertaking activity and as per the provision of Section 10(23fb) read with Section 115U do not allow the same with effect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 09.08.2019, on the following substantial questions of law:- "1. Whether the Tribunal was right in deciding the miscellaneous petition in favour of the assessee when it had already remitted the said issues back to the file of the Assessing Officer in the main order passed earlier especially when it had no power of review by re-adjudicating the said issues? 2. Whether the Tribunal has powers under Section 254(2) to reappraise the evidence on record and readjudicate the same issues and give a totally different finding to the one earlier given, which it had already decided on merits? 3. Whether the Tribunal was right in holding that the assessee is a determinate trust as per Section 161(1) assessable in the capacity of representative assessee, especially when the shares of the beneficiary are not incorporated in the deed of trust and had only been shown in the contribution agreement entered subsequently, which is in violation of the provisions of Explanation (1)(ii) to Section 164 of the Income Tax Act, 1961? and 4. Is not the reasoning and finding of the Tribunal perverse and bad by holding that the assessee is a determinate trust, allowing it to pass through status under S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee is to earn profit and the assessee had incurred expenses towards Investment Manager Fees, One Time Set Up Organisational Fee, Establishment Expenses and Administrative Expenses and these were incurred at regular intervals and in a consistent manner. Therefore, the Assessing Officer came to the conclusion that these clearly indicate that the aim of the assessee was to earn profit. Accordingly, the Assessing Officer held that the income arising out of the activities of the assessee has to be assessed as 'income from business' and therefore, the same is liable to be taxed at maximum marginal rate. 11. It is stated that the assessee is a SEBI registered fund and has the resources to make investment decisions and therefore, the Assessing Officer held that it is hard to believe that the assessee has paid exorbitant figures to the investment manager M/s.TVS Capital Funds Ltd., and this was found to be on the higher side and accordingly, 50% of it was disallowed and the assessee was assessed under Section 37 of the Act. Other deductions were made and ultimately, the assessment was completed under Section 143(3) of the Act, vide order dated 31.12.2011. Aggrieved by such ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal Fund through a special enactment in the statute dealing under Section 10(23FB) of the Act and the assessee must confirm to the parameters laid down under the above Section and therefore, would be eligible to pass through status but the same would be restricted to the extent of the income derived from VCUs and not the income which is derived from investments in bank deposits. 12.4. The Tribunal failed to note that as per Form 64, which is a document created by a statute wherein the statement of income paid or credited by the Venture Capital Fund to its beneficiary as required under Section 115U read with Rule 12C, it has been clearly signified that the other income such as interest from investment in Venture Capital Undertaking has only to be passed on to the beneficiary. 13. The learned Senior Standing Counsel further submitted that in respect of the assessee, M/s.TVS Investments I Fund, identical issue was considered by the Tribunal and in I.T.A.No.3339/Mds/2016 for the assessment year 2009-10 by order dated 19.04.2017, the Tribunal dismissed the appeal filed by the assessee. Thus, it is the submission of the learned Senior Standing Counsel that apart from the grounds raised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... easons. 18. The broad issues which would fall for consideration are whether the assessee Trust is a determinate Trust or indeterminate Trust. The Assessing Officer came to the conclusion that it is an indeterminate Trust, as the list of beneficiaries has not been specifically set out in the Deed of Trust. The other issue would be whether if in case, the beneficiaries are assessed for the income arising from the Trust and whether it is determinate or indeterminate can the trust be assessed once over again. The third issue would be whether merely because the names of the beneficiaries are not mentioned in the Trust Deed, but shown as beneficiaries and are identifiable and having been assessed whether the Trust can be assessed again. In fact, the Tribunal ought to have followed the decision of the Division Bench of this Court in the case of P.Sekhar Trust (supra). However, the same has been distinguished by the Tribunal in the case of TVS Investments I Fund by observing that the said judgment is not applicable to the facts of the case because in it, the beneficiaries are incorporated on the day of the institution of the Trust Deed and moreover, they did not receive any income in that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s only the income which the beneficiaries could be said to have received or to be deemed to have received in India or in whose favour the income has accrued or arises or is deemed to accrue or arise to him in India; or accrues or arises to him outside India during the relevant year. Though the Trust may receive the income, the extent to which the same can be taxed is to the extent to which tax would leviable and recoverable from the beneficiaries. Section 161 of the Act specifically provides that the tax to be levied on the representative assessee and to be recovered from him is to be 'in the like manner and to the same extent as it would be leviable upon and recoverable from the person represented by him.' (emphasis supplied) 17. Section 164 of the Act gets attracts only when the shares of the beneficiaries are unknown, which is manifest from the marginal heading of that Section itself, viz., Charge of tax where the share of the beneficiaries unknown. That Section comes into play only where any income or any part thereof is not specifically receivable on behalf of or for the benefit of any one person or where the individual shares of the persons on whose behalf or for wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing authority found that the beneficiaries are to share the benefit as per their investment made or to say in other words, in proportion to the investment made. Once the benefits are to be shared by the beneficiaries in proportion to the investment made, any person with reasonable prudence would reach to the conclusion that the shares are determinable. Once the shares are determinable amongst the beneficiaries, it would meet with the requirement of the law, to come out from the applicability of Section 164 of the Act. 11. Under the circumstances, we cannot accept the contention of the Revenue that the shares were non-determinable or the view taken by the Tribunal is perverse. On the contrary, we do find that the view taken by the Tribunal is correct and would not call for interference so far as determinability of the shares of the beneficiaries are concerned. 12. Once the shares of the beneficiaries are found to be determinable, the income is to be taxed of that respective sharer or the beneficiaries in the hands of the beneficiary and not in the hands of the Trustees which has already been shown in the present case. 13. Under the circumstances, in any case, it cannot be sai ..... X X X X Extracts X X X X X X X X Extracts X X X X
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