TaxTMI 
TaxTMI 
2020 (10) TMI 665
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....2009-10 736/2018 I.T.A.No.2444/Chny/2017 'C' Bench 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 ....
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....the income derived out of investment in Non Venture Capital undertaking is not exempt in the hands of the Venture Capital Fund like the assessee." 5. T.C.A.Nos.569 & 570 of 2019 were admitted 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....
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.... make available Venture Capital Assistance to investee companies so as to achieve long-term capital appreciation for contributors/beneficiaries under the respective schemes. The Assessing Officer held that the prime activity of the assessee 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% ....
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....e assessee does not satisfy the condition of Explanation 1(ii) to Section 164 of the Act in order to become eligible to be treated as determinate Trust. 12.3. The Tribunal erred in law in not considering the fact in the case of Venture Capital 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....
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....tely hearing the learned counsels for the parties and carefully perusing the materials placed on record, we are of the considered view that the appeals filed by the Revenue are to be decided against them and we support such conclusion with the following reasons. 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....
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....ll as the line of judgments referred to above clearly state that though Section 5 referred to total income of the person whose income is being assessed and the charge on income tax under Section 4 of the Act is on the total income, what could be taxed in the hands of the representative assessee is 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 S....
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.... of the shares of the beneficiary and is not dependent upon the date on which the trust deed was executed if one is to connect the same with the quantum. The real test is whether shares are determinable even when even or after the Trust is formed or may be in future when the Trust is in existence. In the facts of the present case, even the assessing 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 ....