TaxTMI 
TaxTMI 
TaxTMI 
2017 (8) TMI 231
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....ionary trust without considering the discussion made by the AO in the assessment order in point no. I of sub para 3.1 which makes it clear that the trust is a specific or determinate trust and not a discretionary trust since all the beneficiaries of the trust are specially known and determinate and the trust deed no where mentioned that the income of the trust was to be distributed on the complete discretion of the trustees; (iii) not considering the fact that the amount of Rs. 1,50,00,0007- is taxable in the hands of the assessee as (a) in the relevant computation of income, the trust has declared income in the Income & Expenditure account post distribution to the beneficiaries and hence this is not a case of double taxation or double assessment, (b) the assessee is the right person to be taxed for the said amount since his share is determinate & (c) the said income of the assessee falls within the scope of section 5 of the Act and chargeable to tax u/s 4 of the IT Act, 1961. 2. Brief facts of the case are as under: Assessee is a salaried employee and had filed return of income on 31.07.2007, declaring total income of Rs. 1,14,929/-. Subsequently revised return was filed on ....
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....ust is enclosed. Ld. AR submitted that on reading of income and expenditure account of trust, excess of income over expenditure for the year under consideration amount to Rs. 1,146,122,353/-. He submitted that distribution to beneficiaries was Rs. 616,337,183/- and employee welfare expenses was Rs. 2,728,876/- during the year. He submitted in computation at page 35, trust included these expenses for the purposes of computing income as per income and expenditure account. He thus submitted that observations of Ld. AO regarding, no tax being paid on money distributed is incorrect. 9. Ld. AR placed his reliance upon decision of Hon'ble Delhi High Court in the case of Smt. Alpana Kirloskar vs. ACIT reported in (2014) 46 Taxmann.com 336. 10. We have perused submissions advanced by both sides in the light of records placed before us and decisions relied upon by Ld. AR. 11. The fact that distribution is not denied by Ld. DR or authorities below. Also from computation of income and returns filed by the trust placed in the paper book, it eminates clear that trust has already been assessed to tax, in terms of section 161 to 166 of the Act. Assessee's stand is correct that as per scheme of ....
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....er in the hands of representative assessees representing the trust OR in the hands of the beneficiaries who receive the distribution of profits or relevant income, u/s 164(l)(iv) in this case. The trust is a separate entity in the Income Tax Act. The trust is represented by trustees for the management and control of activities of the trust. The AO finds that the sum received by the assessee constitutes part of the special distribution to IL&FS employees and senior personnel in the group pursuant to the sale of equity shares of Indian Leasing & Financial Services Ltd.(ILFS) held by the Employee Welfare Trust to Abu Dhabi investment Authority, the AO's observation in para no. X at page 9 is as under:- "The facts remains that the assessee is an employee of the settler company. Ordinarily under the Act, any such benefit from the employer to the employee would clearly have been chargeable to tax as salary. Further, had the assessee directly invested in the investment securities /instruments, he would have been chargeable to tax on the income earned out of such investment. Instead, through the device of formation of the Trust by the employer company, exemption has been claimed ....
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....uch tax shall be charged when the income is not distributed and when the income is distributed. It does appear, therefore, that section 164 cannot be read as being a code in itself applicable to the taxation of the income of a discretionary trust. Consequently, it cannot be held that the beneficiary of a discretionary trust, even if he has receive4 its income in the accounting year, cannot be taxed thereon because section 164 does not provide for such contingency. The principal contention raised by Mr. Salve on behalf of the asses-see must, accordingly, be rejected. Why, then, should the beneficiary of a discretionary trust stand on a footing different from that of the beneficiary of a specific trust? It is true that the language of section 166 does not avail the Revenue because it states that sections 160 to 165 do not prevent "either the direct assessment of the person on whose behalf or for whose benefit income therein referred to is receivable or the recovery from such person of the tax payable in respect of such income". The section is clearly clarificatory. It does not empower any assessment or recovery by itself. It only makes it clear that sections 160 to 165 do not bar ....