TaxTMI 
TaxTMI 
2017 (4) TMI 1581
X X X X Extracts X X X X
X X X X Extracts X X X X
.... him. (2) On the facts and in the circumstances of the case and in law, the Learned CIT(A) erred in not appreciating the facts that for the earlier assessment year i.e. A.Y. 2007-08 in the assessee's own case, the claim of exemption with respect to the similar income was rejected by Ld. CIT(A). (3) On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in accepting the assessee's contention that it had not claimed exemption u/s. 10(23FB) and holding that assessee is entitled for exemption u/s. 61 to 63 without appreciating the fact that at the time of assessment proceedings the appellant had made elaborate submission supporting its claim of exemption u/s. 10(23FB) of the Income Tax Act repeatedly on several occasions vide letters dated 02.08.2010, 15.11.2010 and 13.12.2010 which shows that claim of exemption u/s. 10(23FB) of the Income Tax Act was consciously made by the assessee and not mistakenly or inadvertently, which was subsequently found to be inadmissible. (4) On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in holding that the assessee 's contention regarding not cl....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... J. K. Holdings 182 CTR 243 (BOM), after arriving at a finding in Para 9.25 of his order that the appellant is a "Trust", and overlooking the fact that the assessee had shown the income of Rs. 32,83,77,906/- as business income as per Part A (Profit & Loss A/c.) of the e-filed return of income filed on 26.09.2008. (8)(a) On the facts and in the circumstances of the case and in law, the learned CIT(A) grossly erred in holding that the appellant Trust compiles with the definition of "revocable transfer" as given under Sec. 61 to 63 of the Income Tax Act and thus income arising to the trust is taxable in the hands of the contributors and not the appellant, completely disregarding the fact that the right to re- transfer or reassume was nullified by the provisions of clause 15.1 of the Trust Deed as reproduced in the impugned order (Para 9.5) which bars the revocation to take effect unless consent of contributors holding units of the Scheme representing not less than 75% of the total contribution to that Scheme has been obtained which debars any individual contributor from revoking the transfer. (8)(b) On the facts and in the circumstances of the case and in law, the le....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t Reality Pvt. Ltd. 3,50,97,300 4.11% 3. M/s. Apex Reality Pvt. Ltd. 10,63,00,000 12.46% The AO was of a view that the assessee has invested Rs. 20.93 crores in M/s. Supreme Reality Pvt. Ltd. on 31.03.2008 out of total fund of Rs. 85.3 crores. The AO has given show cause notice that why the amount should not be disallowed as assessee has invested more than 25% of corpus in one venture capital fund. The assessee contended that assessee has not made 25% of corpus in one venture capital and factually it is not right. Factually assessee's fund has mobilized total corpus fund of Rs. 101.03 crores and thereafter applying clause 12(b) the maximum investable cap of 25% corpus of fund worked out to be Rs. 25.26 crores in one venture capital. Accordingly, on 01.11.2007 an investment of Rs. 24.95 crores made in OFCD of One VCU i.e. M/s. Supreme Realty Pvt. Ltd. Therefore, the limit of 25% corpus of fund stipulated in clause 12(b) of the said regulation is not violated. Moreover, the assessee's last date of fund has not been taken on 31.03.2008. The fact that quarterly return for quarter October 2007 to December 2007 filed with SEBI which states that on 31.03.2008 divestme....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssessing the appellant as a "trust" in the past. 9.26 Next issue raised by the AO, relates to appellant being considered as an AOP. In respect of the same, I find that the judicial precedent rendered by Hon'ble Bombay High Court in the case of CIT versus Marsons Beneficiary Trust and others (188 ITR 224) is squarely applicable. The facts of the said case are found to be similar to the present case of the appellant. In the said case, the setllor had appointed trustee to oversee business for the benefit of group of beneficiaries. The department proceeded to tax the group as an AOP. However, the Bombay High Court has proceeded to state in unambiguous terms that the beneficiaries are merely receivers of the income and they have neither set up the trust nor authorized the trustee to carry on the business. Further, even if it is accepted that the appellant is an AOP, one has to consider the applicability of section 61-63. The AR has rightly submitted that even if appellant is treated to be AOP, provisions of section 61 to 63 are applicable. Hence the contention of AO for A.Y.2009-10 that the appellant is an AOP and provisions of section 61 to 63 are not applicable to the appella....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ctions 61 and 63 unambiguously clarify that the when a transferor can unilaterally resume the power over assets, the income is to be taxed in its hands only as if the transfer never happened. It is to be noted that the "revocable transfer" necessarily imply power to assume control over the asset and hereby it is amply clear that no contributor will part with their money if the same is not subjected to their ultimate control. As pointed out by the ARs, clause 15.1 of the trust deed clearly mandate that the contributors shall be entitled to revoke the contributions at any time during the term of scheme. On the basis of above discussion, I am of the view that the appellant trust complies with the definition of "revocable transfer" as given under section 61 to 63 and thus the income arising to the trust is taxable in the hands of the contributors and not in the hands of the appellant. 9.29 As regards the applicability of section 61, the AO primarily states that the contributors have practically no control over the capital contributions and therefore the provisions of sections 61 and 63 are not applicable. Further, the AO states that the appellant had shown the sum as its incom....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the contributors are being taxed on the income distributed out of the appellant trust. 9.33 Herein It is pertinent to note the provisions of section 160 and section 161 of the Income Tax Act, which are enabling sections that provide an option to the AO to tax either the representative assessee or the beneficiary of the income. The corollary of the said provisions as arises is that when the share of income received by contributors from the Fund has been included in the total income of the contributors and offered to tax by the contributors then the department cannot proceed to tax the same income again in the hands of Fund. Moreover, when the facts of the issue are quite clear that appellant trust receives fund vide revocable transfer, the income cannot be taxed twice i.e. by rejecting the claim of applicability of section 61 in the hands of the appellant trust and again in the hands of the beneficiaries. Accordingly, I find that in the instant case, the beneficiaries have offered the income to tax and in conjunction with my finding in the preceding pares regarding "revocable transfer", I hold that the income arising is taxable in the hands of the beneficiaries alone and no....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f the funds is an ascertained income. Therefore, sections 61 & 63 are not applicable. The assessee has taken the plea at assessment stage that income distributed to various contributors has been taxed in their hands and withdrawing the exemption under section 10(23FB) will be taxing the same amount twice is totally baseless. The assessee has committed fraud and collected the funds from the public and thereafter created a false impression that SEBI guidelines are followed in a right manner. The said exemption under section 10(23FB) is only allowable when the requisite SEBI guidelines are strictly followed. The 25% of investment is to prevent money laundering. The assessee has received the money illegally and tried to show that he has followed the SEBI guidelines, therefore claiming the exemption under section 10(23FB) is not allowable. Ld. A.R. submitted that as per the decision of Hon'ble Supreme Court in the case of CIT vs. Kanpur Coal Syndicate, the Tribunal has power to set aside an assessment made on association of persons and direct the Income Tax Officer to assess the members individually or to direct amendment of the assessment already made on the members. The Ld. A.R. su....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... unit holders have right to retransfer either wholly or any part of income. Moreover, by reading the trust deed and contribution agreement it is a revocable trust and as per section 61 to 63 of the Act it can not be taxed in the hand of trust. The Ld. A.R. has submitted that Hon'ble Karnataka High Court in the case of Gadi Cheluvaraya Chetty vs. CIT 150 ITR 60 wherein it is held that a transfer is deemed revocable under section 63 if it contains any provision for retransfer of whole or any part of income or asset to the transferor. As per section 160/161 of the Act it is relating to the liability of representative assessee and as per this section the trustee of a trust may be treated as representative assessee on behalf of the beneficiary under a trust and the taxes can be recovered from trustee in the manner similar to taxing the beneficiary, but the said provisions are precautionary measure to collect taxes from trustee, if it is not taxed in the hands of beneficiaries. The Ld. A.R. has relied upon the decision of Hon'ble Karnataka High Court in the following cases: 1. CIT vs. India Advantage Fund in ITA No.191/2015 2. CIT vs. ICICI Emerging Sectors Fund in ITA ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hat the assessee trust is a revocable trust. We reproduce the said agreement which shows the sample of contribution agreement which reads as under: "Distribution of Distributable Proceeds" "The manner of Distribution shall be as follows: (a) First, 100% to all holders of Class A Units in proportion to their Contribution until the cumulative amount distributed pursuant to this clause (a) is equal to their respective Contribution. (b) Second, 100% to all holders of Class B Units in proportion to their Contribution until the cumulative amount distributed pursuant to this clause (b) is equal respective Contribution. (c) Third, 100% to all holders of class A Units in proportion to their Contribution until the cumulative amount distributed pursuant to this Clause (c) is equal to preferred return on amount included in Clause (a) above at the Preferred Rate of Return. (d) Forth, 100% to all holders of Class B Units in proportion to their Contribution until the cumulative amount distributed pursuant to this Clause (d) is equal to a preferred return on amounts included in Clause (b) above at the Preferred Rate of Return. (e) Fift....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o such revocation shall take effect unless the consent of contributors holding units of that scheme representing not less than 75% of the total contributions to that scheme, has been obtained, in this behalf pursuant to the other scheme document of that scheme read with this trust deed. The clauses of the trust deed and distribution of distributable proceeds as stated in the above agreement, we are of the view contributors/investors shall be entitled to revoke their contribution to the scheme at any time during the term of the scheme and also entitled to determine distribution in accordance with the clause of the contribution agreement. The contributory trust, though the trustees hold the assets for the benefit of the beneficiaries, the contributions to trust constitute a revocable transfer of assets by contributors to the trust as per the section 61 & 63 of the Income Tax Act. We find that contributory trust in law by investing in the units of the trust, each unit holder becomes beneficiary of the trust entitled to distribution from the trust. As we have held that assessee trust is revocable trust, the contribution made by investor in terms of trust deed and contribution agreement....
X X X X Extracts X X X X
X X X X Extracts X X X X
....le Karnataka High Court has considered the applicability of section 164(1) of the Income Tax Act and held that section 164(1) applies 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 as the case may be and is identifiable as such order, instrument or deed. The individual shares of the persons on whose behalf or for whose benefit such income received shall be deemed to be indeterminate unless the individual shares of the persons on whose behalf or for whose benefit such income stated in the order of the court. Section 161(1) applies in the case of the trust received the income from representative assessee and the High Court has gone to the extent that real test is whether shares are determinable even when after the trust is formed or may be in future when the trust is in existence. Therefore, in this case the beneficiaries' agreement has been made and trust deed has been executed in the shares are determined. Therefore, ass....