TaxTMI 
TaxTMI 
2021 (9) TMI 971
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....009 and thus the trust had ceased to exist on the date of impugned order and therefore both the order of assessment dated 28.12.2018 u/s. 143(3) of the Act and even the impugned order dated 26.3.2021 u/s. 263 of the Act are without jurisdiction and deserves to be quashed as such. 2. That order dated 26.3.2021 u/s. 263 of the Act by learned Principal Commissioner of Income Tax, Ghaziabad has been made without satisfying the statutory preconditions contained in the Act and is therefore without jurisdiction and thus, deserves to be quashed as such. 2.1 That the learned Pr. Commissioner of Income Tax has failed to appreciate that once the learned Assessing Officer on examination of the facts on record and after making all possible enquiries had accepted claim of the appellant then such an order of assessment could not be regarded as erroneous in as much as prejudicial to the interest of revenue merely because the learned Commissioner of Income Tax had a different opinion and that too, without having established in any manner that, view adopted by the learned Assessing Officer was an impossible or unsustainable view. 2.2 That the learned Principal Commissioner....
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.... 65,24,465/- representing gain on sale of equity shares through recognized stock exchange and, erroneously held as alleged introduction of unaccounted money and unexplained income taxable under the head "income from other sources" by invoking section 69 of the Act read with section 115BBE of the Act. 3.1 That the learned Principal Commission of Income Tax has also erred both in law and, on facts in not directing to allow exemption of long term capital gain of Rs. 65,24,465/- in respect of sale of shares through recognized stock exchange u/s. 10(38) of the Act. 3.2 That while making the aforesaid addition and denying the exemption learned Principal Commission of Income Tax has failed to appreciate that, appellant was owner of equity shares of a listed company which had been held by it for a period exceeding 12 months and the same were sold on recognized stock exchange after payment of STT, resulting into a long term capital gain and therefore the long term capital gain accrued to the assessee on transfer of long term 'capital asset' was not includible in total income of the assessee in view of section 10(38) of the Act. 3.3 That the learned Princip....
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....granddaughter namely Varnika Gupta and in order to effectuate the said desire, the settler has settled fixed sum of Rs. 5000/- mentioned hereinafter in this indenture to be held as Trust property, for the fulfillment of the object and purpose stated in this indenture." 2. Further, the point No. 3 of the trust deed reads as follows: "that the total Trust funds along with all accretions thereto by way of income, contributions, gifts and/or otherwise shall be accumulated till attaining of the majority o f the beneficiary or 31.03.2015 and may be used for the purpose of higher education of the beneficiary, or to any other use she may later desire." 3. Herein please explain: (a) When the shares held in the name of the trust were transferred in the name of the trustee. As per the trust deed, the trust has liquidated on 31-03-2015. (b) Please explain why you had preferred to file a return in the name of trust instead in the name of trustee as w.e.f. 01-04-2015 i.e. Financial Year 2015-16, Assessment Year 2016-17. The year under reference, there is no trust in existence and the entire trust property has been transferred to the trustee. ....
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.... presently assessed to tax at PAN BWTPG7821F. Photocopy of her PAN card is enclosed herewith as Annexure 1 in support of her date of birth. Therefore, the observation of your good-self that the assessee trust stands liquidated on 31 March, 2015 is inconsistent with the terms of the trust deed. The term of the assessee trust has expired during the year under reference. This is also supported by the fact that the year under consideration is the last year for which the assessee trust filed its ITR. In response to the queries raised by your good-self at serial number 3 of the above referred notice we submit as under:- a) From the above, it is clear that the assessee trust did not expire on 31.03.2015 hence the shares held in the name of the trust were transferred to its beneficiary after 03.09.2015, i.e. after the sale of the shares on which LTCG was earned. The sale of shares was made during the months of May and June, 2015. b) The ITR for the relevant year has been filed in view of the fact that the assessee trust was continuing during the year in view of the clause 9 of the trust deed. c) Photocopies of the contract notes as issued to the assessee....
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.... along-with our reply dated 29 August, 2018, wherein the sale proceeds of the shares sold during the year were received. i) With reference to your good-selfs noting that there is a contradiction between the reply of the assessee given at serial number 4 of its letter dated 29 August, 2018 and the trial balance as filed before your good-self, we humbly submit that your good-self has not rightly considered the contents of the trial balance/Profit & loss A/c and computation of income on the basis of which tax is paid. The indirect expenses of Rs. 5,34,807.58, have been booked to the debit of the P & L account as placed on record only for the accounting purpose and mainly consists of advance tax, TDS and self assessment Tax to the tune of Rs. 5,40,082/- DMAT expenses of Rs. 5,725.58 and bank charges of Rs. 229/-. As per the accounting principles any expenditure with an allowable under the Income Tax Act, or not, is to be booked to the debit of the profit and loss account. The booking of expenditure to the debit of the P & L account does not necessarily mean that the same has been claimed by the assessee as allowable in its computation of income. Now we would ....
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....was very well in existence during the year under reference. The long term capital gain was earned by the trust during the months of May and June, 2015 and the beneficiary was entitled to the funds of the trust after 03.09.2015, hence the on the date of earning of the LTCG the ownership for the shares was with the assessee trust only. Hence the details as sought by your good-self are irrelevant for the present case and are not required to be filed. l) As submitted at various points hereinabove it is again submitted that the assessee trust was very well in existence during the year under reference and none of its assets/income were vested with its beneficiary hence the details as sought by your good-self are irrelevant for the present case and are not required to be filed. m) The assumption on the basis of which your good-self has raised the present query is inconsistent with the facts and the trust deed of the assessee trust hence is not relevant in the present case. Further, we would like to summit that the commodity trading was carried on by the assessee trust through its broker namely M/s. PK enterprises, and not by its beneficiary i.e. Ms. Varnika Gupta. Photoc....
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.... said sale transactions are enclosed hereinabove at Sl. No. c) as Annexure 2. From the above documents the source and nature of exempt income of Rs. 65,24,465/- stands explained and no adverse inference is called for on this issue. We hope that your good-self will find the above in order. We request your good-self to kindly take the above on record." 7. Thus, to conclude as per the Trust deed filed before the revenue authorities, all the trust property including accumulation in the form of yearly income and other conditions and accretions to the trust property shall vest with the sole beneficiaries namely, Varnika Gupta after her attaining 18 years of age or whichever is later and subject to Clause 11 mentioned. When the term of the trust expires, all the trust property including all accretions up to the date of expiry of the term shall become the sole property of the beneficiaries with all the rights of ownership, use, possession and dispossession (Clause 9 at page No. 6 of the trust deed). Since, the date of birth of Varnika Gupta is 03.09.1997, she completed the age of 18 years on 03.09.2015. Hence, the trust was in existence during the Assessment Year 2016-....
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....he Hindu Minority &Guardianship Act, 1956, as the remaindermen were minors at the material time. The requisite permission was accordingly obtained by the guardians of the minor remaindermen from the District Court, Indore. The ITO had no jurisdiction to decide as to whether the District Judge should or should not have granted such permission. The remainderman's interest in the trust property was thus validly transferred by the deed, dated 30-3-1974. In view of these two deeds, dated 18-12-1973 and 30-3-1974, it must be held that the beneficiary interest in the trust property of the assessee-trust was validly transferred to the educational trust and, in these circumstances, the fulfillment of the purpose of the assessee-trust, which was to pay the net residue of the rents, profits, interest and other income of the trust property to Smt. Usha Devi during her lifetime and on her death to transfer and hand over the trust property in the manner specified, to her children, became impossible. Section 77 of the Indian Trusts Act provides that a trust is extinguished when the fulfillment of its purpose becomes impossible by destruction of the trust property or otherwise. The expression ....