ITAT upholds decision on exclusion of beneficial interest income from family trust

The ITAT dismissed the revenue's appeals against the Commissioner of Income-tax (Appeals) order for assessment years 1992-93 to 1994-95 and 1996-97. The issue revolved around the exclusion of beneficial interest incomes by the assessee, received from a family trust. The ITAT upheld the Commissioner's decision, stating that since the trustee had already been assessed under section 161(1) of the Act, no additional assessment was necessary in the hands of the beneficiary, in line with CBDT Circular No. 157.

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Issues:
Appeals by revenue against Commissioner of Income-tax(Appeals) order for assessment years 1992-93 to 1994-95 and 1996-97.

Analysis:
The appeals were made by the revenue against the Commissioner of Income-tax(Appeals) order for various assessment years. The common issue in all these appeals was the exclusion of beneficial interest incomes by the assessee. The Assessing Officer issued a notice under section 148, alleging that the assessee did not include the beneficial interest incomes received from M/s. A.S.K. Brothers Family Trust in the return of income. The assessee argued that since the trustee was already assessed under section 161(1) of the Act, no further assessment was required for the same income in the hands of the beneficiary. The Assessing Officer disagreed and added the beneficial interest in the assessee's hands for each year.

The Commissioner of Income-tax (Appeals) reviewed the case and found the explanation of the assessee satisfactory. It was held that since the trustee had already been assessed under section 161(1) of the Act, no additional assessment could be made in the hands of the beneficiary. The ITAT Bangalore examined the case and noted that the assessee had disclosed the beneficial interest in the return of income, stating that the trustee had already been assessed. Referring to CBDT Circular No. 157, the ITAT emphasized that once the department chooses to tax either the trustee or the beneficiary, income should only be assessed once. The ITAT agreed with the Commissioner's decision, especially highlighting a similar case where the Assessing Officer allowed the interest from the trust to be assessed in the hands of the trustee under section 161 of the Act.

In conclusion, the ITAT dismissed the appeals, affirming the decision of the Commissioner of Income-tax (Appeals) regarding the non-requirement of further assessment in the hands of the beneficiary due to the trustee already being assessed.

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