9911796707
TMI Blog2024 (8) TMI 972X X X X Extracts X X X X X X X X Extracts X X X X ..... ecified in the WILL. Under this fact situation, section 164(1) read with clause (ii) to Explanation 1 to Section 164 will become relevant and shall come into play, and such relevant income shall be chargeable to tax at maximum marginal rate. As could be seen vide the terms of WILL, that the trustees have the absolute discretion to apply the income as well the corpus of the Trust. The beneficiaries no doubt under the WILL of Smt. Pashiben Shambhubahi Prajapati have an interest and right to be considered as a potential recipient of benefits under the Trust by Trustees , but that interest or right does not stretch to claiming a particular and specific share in the income and the corpus of the Trust in the absence of determinate and known share specified in the WILL, and thus, each beneficiary does not have specific enforceable right to claim any part of the income or the corpus of the trust , but rather it is a right to be considered by the Trustees, and hence it is merely an hope that the discretion shall be exercised by Trustee in his favour . But at the same time, it could not be said that the Trustees can use their discretion in an arbitrary manner , rather it has to be used by Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hall grant the same, after due verifications, if so warranted. Chargeability to income-tax and scope of income is defined under the 1961 Act by the provisions of Section 4 and 5 of the Act, and it is irrelevant as to any deficiency in the prescribed ITR Forms, as the mandate of the 1961 Act is to collect correct income-tax from the correct assessee for the correct assessment year, strictly in accordance with the provisions of the 1961 Act , and any lacuna/deficiency etc. in the prescribed form of return of income(Form-ITR) is irrelevant. There is no reasons and justification to punish the assessee s, if at all there was any deficiency in the prescribed ITR Forms, so long as the correct income as per mandate of the 1961 Act is brought to tax in the hands of the assessee. The appeal of the assessee is partly allowed - Shri Ramit Kochar, Accountant Member For the Assessee : Shri Rupesh R Shah, Advocate For the Revenue : Shri Sanjay Jain, Sr. D.R. ORDER This appeal in ITA No. 305/Ahd/2024 for assessment year 2021-22 is filed by the assessee with Income Tax Appellate Tribunal, Ahmedabad Bench, Ahmedabad , which has arisen from the appellate order dated 03-01-2024 passed by ld. CIT(A), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal income of Rs. 7,43,400/-. The AO/CPC did not give credit of TDS as per 26AS and taxed the assessee at the maximum marginal rate at 42.17%. The assessee filed rectification application which stood rejected by the AO/CPC by taxing the assessee at maximum marginal rate and TDS credit was also not given as per 26AS submitted by the assessee. 4. The assessee filed first appeal before Ld.CIT(A), and raised as many as five grounds of appeal. In the grounds of appeal and SOF filed by the assessee with ld. CIT(A), the assessee stated that the assessee trust being the only trust declared by Smt. Pashiben Shambhubhai Prajapati through her notorized WILL made on 21.07.2006 , which came into operation on her death on 02.10.2006. The assessee stated that this is the only Trust declared by the WILL of Smt. Pashiben Shambhubhai Prajapati for the benefit of her sons namely Shri Dhulabhai Shambhubhai Prajapati and Shri Ashokbhai Shambhu Prajapati, their wife , their children and his family. The assessee claimed that this is only trust declared by WILL and is covered by second proviso to Section 164(1) and also assessable as individual and eligible to claim deduction under Chapter VI-A for invest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nged and CONSOL, the appellant could not file the Return in ITR-2. Further, the trust was dissolved on 31.03.2021 and the entire corpus was distributed amongst the beneficiaries and therefore there was no income after 01.04.2021. Being the last year of the trust, TDS was also deducted on the interest income and the Return along with self-assessment challan was made. Subsequently, the appellant filed Return of income for the said AY in ITR-5 showing an income of Rs. 7,43,400/- showing a TDS credit of Rs. 68,042/- and penalty of Rs. 5000/- and interest of Rs. 1430/- was paid. But, in response to the ITR-5, the appellant was taxed at MMR without giving effect of deduction under Chapter-VIA. 4.5 It is the contention of the appellant that the appellant trust is eligible to pay tax as per the second proviso to section 161 of the Act and requested for allowing deductions falling under Chapter-VIA. 4.6 It has been noted from the above submissions that the appellant is a private trust having been created on the basis of the last Will of late Pashiben Shambhubhai Prajapati. Late Pashiben Shambhubhai Prajapati declared a notarised Will executed by her on 21.07.2006 and came into effect on her ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... port and maintenance, or (iv) the relevant income is receivable by the trustees on behalf of a provident fund, superannuation fund, gratuity fund, pension fund or any other fund created bona fide by a person carrying on a business or profession exclusively for the benefit of persons employed in such business or profession, tax shall be charged [on the relevant income or part of relevant income as if it were the total income of an association of persons): [Provided further that where any income in respect of which the person mentioned in clause (iv) of sub-section (1) of section 160 is liable as representative assessee consists of, or includes, profits and gains of business, the preceding proviso shall apply only if such profits and gains are receivable under a trust declared by any person by will exclusively for the benefit of any relative dependent on him for support and maintenance, and such trust is the only trust so declared by him.] [(2) In the case of relevant income which is derived from property held under trust wholly for charitable or religious purposes, or which is of the nature referred to in sub- clause (iia) of clause (24) of section 2.] [or which is of the nature ref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , as per the WILL submitted by the appellant. Accordingly, the 2nd provision of Sec. 164(1) r.w.s. Section 167(B)(2)(i) of the Income Tax Act is squarely applicable in the appellant's case. Hence, the decision of the AO by taxing the appellant at MMR is upheld. Accordingly, this ground of appeal is dismissed. 6.1 Further, the appellant contended the charging of interest u/s 234A, 234B and 234C of Rs. 9,531/-, Rs. 57,186/- and Rs. 87,761/- respectively. 6.2 Since the substantive ground of taxing at the MMR is dismissed, the consequential ground raised by the appellant on the ground of charging of interest u/s 234A, 234B and 234C is also dismissed 7. In the result, the appeal is dismissed. 5. Aggrieved, the assessee filed second appeal before the Tribunal. The Ld.Counsel for the assessee drew my attention to the paper book filed with the Tribunal carrying 27 pages. It was pointed by the Ld.Counsel for the assessee that Smt. Pashiben Shambhubhai Prajapati had executed a WILL on 21.07.2006 which was her last WILL , and son(s) of Smt. Pashiben Shambhubhai Prajapati were the beneficiaries and the share was determinate . My attention is also drawn to the WILL of Smt. Pashiben Shambhub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appeal filed by the assessee be dismissed. 6. I have considered the contentions of both the parties and perused the material on record . The brief facts of the case are that the assessee trust was declared by Smt. Pashiben Shambhubhai Prajapati through her notorized WILL made on 21.07.2006 which came into operation on her death on 02.10.2006. The WILL of Smt. Pashiben Shambhubhai Prajapati , dated 21.07.2006 is placed by the assessee in Paper Book at Page No. 6-16. The dispute has arisen between the parties, in the impugned assessment year, wherein Revenue has applied Maximum Marginal rate of taxes on the income declared by the assessee on the grounds that the trust is a private discretionary trust where the share of the beneficiaries are indeterminate or unknown. Further, deduction under Chapter VI-A were also denied to the assessee. The contentions of the assessee is that the trust is the only trust declared by WILL of Smt. Pashiben Shambhubhai Prajapati for the benefit of her sons Shri Dhulabhai Shambhubhai Prajapati and Shri Ashokbhai Shambhu Prajapati ,their wives, their children and his family, covered by second proviso to Section 164(1) and assessable as Individual and als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n (such income, such part of the income and such persons being hereafter in this section referred to as relevant income , part of the relevant income and beneficiaries , respectively, tax shall be charged on the relevant income or part of the relevant income at the maximum marginal rate: Provided that in a case where- (i) **** (ii) The relevant income or part of relevant income is receivable under a trust declared by any person by will and such trust is the only trust so declared by him; or (iii) to (iv)*** tax shall be charged on the relevant income or part of relevant income as if it were the total income of an association of person *** *** [Explanation 1. - For the purposes of this section,- (i) any income in respect of which the persons mentioned in clause (iii) and clause (iv) of sub-section (1) of section 160 are liable as representative assessee or any part thereof shall be deemed as being not specifically receivable on behalf or for the benefit of any one person unless the person on whose behalf or for whose benefit such income or such part thereof is receivable during the previous year is expressly stated in the order of the Court or the instrument of trust or wakf deed, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mary of relevant clauses of the aforesaid WILL :- Smt. Pashiben Shambhubhai Prajapati, Hindu, Adult Aged 80 years, Residing at .. I, hereby declare this to be my last will and Testes merit (sic. Testament), for the purpose of distribution of my property and management thereof according to my wish desire after my death. I am happy and quite fortunate that I could get great love and very respectful devotional services from my sons SHRI DHULABHAI SHAMBHUBHAI PRAJAPATI SHRI ASHOKBHAI SHAMBHUBHAI PRAJAPATI , THEIR WIFE , THEIR CHILDREN AND HIS FAMILY. I hereby appoint my son SHRI DHULABHAI SHAMBHUBHAI PRAJAPATI SHRI ASHOKBHAI SHAMBHUBHAI PRAJAPATI to be the executor and Trustee of-My this will Thus, as could be seen that the trust is for the benefit of SHRI DHULABHAI SHAMBHUBHAI PRAJAPATI SHRI ASHOKBHAI SHAMBHUBHAI PRAJAPATI , THEIR WIFE , THEIR CHILDREN AND HIS FAMILY, which was declared by Smt. Pashiben Shambhubhai Prajapati who was mother of SHRI DHULABHAI SHAMBHUBHAI PRAJAPATI SHRI ASHOKBHAI SHAMBHUBHAI PRAJAPATI. The Will was declared on 21.07.2006, and came into operation on her death on 02.10.2006. There are certain properties, shares and ornaments , which got bequeathed on her d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d or an applied as aforesaid of the residue of such annual or other income and all such accumulation shall fall into , be treated as and from part of the original Trust Fund. The Trustees may in their absolute discretion also have recourses to and utilize the corpus of the Trust Fund or any other portion thereof at anytime and from time to time to provide any benefit to any of the aforesaid beneficiaries. It further states that the trustees may dissolve the trust, at any time before the vesting day, by an unanimous decision in writing after transferring the assets, of the Trust Fund to the beneficiaries (or to their legal representative) according to their absolute discretion. It is observed by me that the aforesaid WILL is not happily worded , and there are many mistakes while drafting/typing of this WILL. Be it that may be , proceeding further, it will be relevant to gather intention of Mrs. Pashiben Shambhubhai Prajapati, author of the WILL. She was an old lady of 80 years at the time of writing the aforesaid WILL on 21.07.2006. She died on 02.10.2006 , and the WILL become operative on her death. While writing the WILL , she had stated that she is writing this WILL to distribute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Trust, with the limitation that it has to be for benefit of beneficiaries but the specific share of each beneficiary on whose behalf income is received by the Trustees are indetermined and unknown, as the same is not specified in the WILL. Under this fact situation , section 164(1) read with clause (ii) to Explanation 1 to Section 164 will become relevant and shall come into play, and such relevant income shall be chargeable to tax at maximum marginal rate. However, in certain circumstances as is provided in the clauses (i) to (iv) to first proviso to Section 164(1), the such relevant income shall not be assessable at the maximum marginal rate but at the rate applicable to it as if the relevant income were the total income of the association of person(AOP). In the impugned appeal, it will be suffice to refer to clause(ii) to first proviso to Section 164(1) , which stipulates that the relevant income or part of the relevant income is receivable under a trust declared by any person by WILL and such trust is only trust declared by him. The assessee herein is contending that the Trust herein is declared by WILL by Smt. Pashiben Shambhubhai Prajapati on 21.07.2006 and the said Trust bei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ata are not applicable to Income-tax proceedings. Further, all the beneficiaries under the Trust are individuals, and it is by virtue of deeming fiction created u/s 164(1) read with clause(ii) of the first proviso to Section 164(1), that the tax will be charged on the relevant income, in the instant case, as if it were the total income of an association of person(AOP), but that deeming fiction cannot be extended to denial of deduction u/s 80C and 80TTA of the 1961 Act, as the trust per-se is not a person defined u/s 2(31) and the trustees in the instant case are to taxed as representative assessee u/s 160(1)(iv) of the 1961 Act, and the beneficiaries of the Trust in the instant case being all individuals, in my considered view, deduction u/s 80C cannot be denied to the assessee albeit by deeming fiction u/s 164(1) read with clause (ii) of first proviso , the tax shall be charged on the relevant income as if it were total income of an AOP, but that deeming fiction cannot extend to an extent of denial of deduction u/s 80C and 80TTA which is otherwise available to individuals , as all the beneficiaries under the instant Trust being individuals. Reference is drawn to judgment and order ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
