Income Tax Appellate Tribunal - Mumbai
Income Tax Officer, Kautilya Bhawan vs Petroleum Trust, Mumbai on 2 August, 2024
| आयकर अपीलीय अिधकरण ायपीठ, मुंबई |
IN THE INCOME TAX APPELLATE TRIBUNAL
"C" BENCH, MUMBAI
BEFORE SHRI NARENDRA KUMAR BILLAIYA, HON'BLE ACCOUNTANT MEMBER
&
SHRI RAJ KUMAR CHAUHAN, HON'BLE JUDICIAL MEMBER
I.T.A. No. 2694/Mum/2024
Assessment Year: 2021-22
Income Tax Officer, Ward- Petroleum Trust, Mumbai
25(3)(1), Mumbai Vs Room No. 118, 1st Floor
G-Block, Kautilya Bhawan
Maharashtra - 400051
[PAN: AABTP6035H]
अपीलाथ / (Appellant) यथ / (Respondent)
C.O. No. 133/Mum/2024
Assessment Year: 2021-22
Petroleum Trust, Mumbai Income Tax Officer, Ward-
Room No. 118, 1st Floor Vs 25(3)(1), Mumbai
G-Block, Kautilya Bhawan
Maharashtra - 400051
[PAN: AABTP6035H]
अपीलाथ / (Appellant) यथ / (Respondent)
Assessee by : Shri Madhur Agarwal & Shri Nimesh Vora, A/Rs
Revenue by : Ms. Madhu Malati Ghosh, CIT, D/R
सुनवाई की तारीख/ Date of Hearing : 25/07/2024
घोषणा की तारीख / Date of Pronouncement: 02/08/2024
आदे श/O R D E R
PER NARENDRA KUMAR BILLAIYA, AM:
I.T.A. No. 2694/Mum/2024 & C.O. No. 133/Mum/2024, are appeal by the revenue and cross-objection by the assessee preferred against the order of the ld. CIT(A)/Addl./JCIT(A), Kochi dated 20/03/2024, pertaining to AY 2021-22.
2. The grievance of the revenue reads as under:-
I.T.A. No. 2694/Mum/2024 C.O. No. 133/Mum/2024 2 "1. "Whether on the facts and circumstances of the case and in law, the Ld. JCIT(A) was justified in holding that the income of the assessee is taxable u/s 115BAA of the Act, without appreciating that the provisions of Section 115BAA of the Act are only applicable to certain domestic companies and the assessee being a trust is not eligible for taxation u/s 115BAA of the I.T. Act?
2. "Whether on the facts and circumstances of the case and in law, the Ld. JCIT(A) was justified in holding that the income of the assessee as per the provisions of Section 161(1) of the Act is taxable in the like manner and to the same extent as it would be taxable in the hands its sole beneficiary M/s Reliance Industrial Investments and Holdings Limited, without appreciating that the provisions of Section 161 of the Act are only applicable to 'Representative Assessee' as defined in Section 160 of the Act and the assessee being a trust does not fall within the meaning of 'Representative Assessee'?"
3. The appellant craves leave to amend or alter or add a new ground which may be necessary."
3. Briefly stated the facts of the case are that the assessee is a Discretionary Trust, which holds investments mainly for its beneficiary, i.e. M/s. Reliance Industrial Investments and Holdings Limited (hereinafter referred to as "RIIHL"). The assessee filed its return of income on 30/12/2021 declaring income of Rs. 3,19,93,08,730/-. Since RIIHL being a limited company opted to be taxed under the new tax regime u/s 115BAA of the Act by filing Form 10-IC claiming to be taxed @ 22% + applicable surcharge of CESS. The assessee being a representative assessee, claimed to be taxed at same rate applicable to its beneficiary. This claim was dismissed as the assessee was not treated as a representative assessee.
4. When the matter was agitated before the ld. CIT(A), the ld. CIT(A) accepted the status of the assessee as a representative assessee and held that since the assessee is a determinate trust with RIIHL as its sole and 100% beneficiary and settler and as RIIHL has opted to be taxed under I.T.A. No. 2694/Mum/2024 C.O. No. 133/Mum/2024 3 the new tax regime @22% being a representative assessee u/s 161 of the Act, the assessee is also liable to be taxed at the same rate i.e., @22% + applicable surcharge and CESS. Before us, the ld. D/R strongly supported the findings of the CPC and vehemently contended that the assessee is not a representative assessee within the meaning of Section 161 of the Act and, therefore, cannot take the benefit of lower rate of tax.
Per contra, the ld. Counsel for the assessee reiterated what has been stated before the lower authorities.
5. We have carefully perused the orders of the authorities below.
"Representative assessee" has been considered u/s 160 of the Act and the same reads as under:-
"Representative assessee.
160. (1) For the purposes of this Act, "representative assessee" means--
(i) in respect of the income of a non-resident specified in [***] sub-section (1) of section 9, the agent of the non-resident, including a person who is treated as an agent under section 163;
(ii) in respect of the income of a minor, lunatic or idiot, the guardian or manager who is entitled to receive or is in receipt of such income on behalf of such minor, lunatic or idiot;
(iii) in respect of income which the Court of Wards, the Administrator-
General, the Official Trustee or any receiver or manager (including any person, whatever his designation, who in fact manages property on behalf of another) appointed by or under any order of a court, receives or is entitled to receive, on behalf or for the benefit of any person, such Court of Wards, Administrator-General, Official Trustee, receiver or manager;
(iv) in respect of income which a trustee appointed under a trust declared by a duly executed instrument in writing whether testamentary or otherwise [including any wakf deed which is valid under the Mussalman Wakf Validating Act, 1913 (6 of 1913),] receives or is entitled to receive on behalf or for the benefit of any person, such trustee or trustees;
I.T.A. No. 2694/Mum/2024 C.O. No. 133/Mum/2024 4 [(v) in respect of income which a trustee appointed under an oral trust receives or is entitled to receive on behalf or for the benefit of any person, such trustee or trustees."
[emphasis supplied] 5.1. The relevant clause is clause (iv) for reason.
6. Section 161 of the Act defines the liability of representative assessee and the same reads as under:-
"Liability of representative assessee.
161. (1) Every representative assessee, as regards the income in respect of which he is a representative assessee, shall be subject to the same 24duties, responsibilities and liabilities as if the income were income received by or accruing to or in favour of him beneficially, and shall be liable to assessment in his own name in respect of that income; but any such assessment shall be deemed to be made upon him in his representative capacity only, and the tax shall, subject to the other provisions contained in this Chapter, be levied upon and recovered from him in like manner and to the same extent as it would be leviable upon and recoverable from the person represented by him.
25[(1A) Notwithstanding anything contained in sub-section (1), where any income in respect of which the person mentioned in clause (iv) of sub-section (1) of section 160 is liable as representative assessee consists of, or includes, profits and gains of business, tax shall be charged on the 24whole of the income in respect of which such person is so liable at the maximum marginal rate :
Provided that the provisions of this sub-section shall not apply where such profits and gains are receivable under a trust declared by any person by will exclusively for the benefit of any relative dependent on him for support and maintenance, and such trust is the only trust so declared by him.
26[***] (2) Where any person is, in respect of any income, assessable under this Chapter in the capacity of a representative assessee, he shall not, in respect of that income, be assessed under any other provision of this Act."
[emphasis supplied]
7. Sub-Section (1) is the relevant sub-Section. It can be seen that the tax shall be levied upon and recovered from a representative assessee in like manner and to the same extent as it would be leviable upon and recoverable from the person represented by him which means that the I.T.A. No. 2694/Mum/2024 C.O. No. 133/Mum/2024 5 trust will be subject to same rate of tax as applicable to the person represented by it i.e., RIIHL which was taxed u/s 115BAA of the Act.
8. At this stage it would be pertinent to refer to the decision of the Hon'ble Jurisdictional High Court of Bombay in the case of Mrs. Amy F. Cama vs. CIT reported in [1999] 237 ITR 82 (Bombay), wherein the Hon'ble High Court considered the following facts:-
" FACTS The assessee was the sole trustee and beneficiary of the testamentary trust created by her husband who died on 27-7-1955 leaving behind him the estate which included an immovable property. She was given the right to deal with the property in the manner she may deem fit. A life interest was created in her favour and after her death all the properties were to go to the children of the testator in specified shares.
On 29-11-1961 the assessee sold the said immovable property for approximately Rs. 7 lakhs and purchased a flat for residence from the sale proceeds newly of the immovable property. The said immovable property was used by the assessee for her residence along with her children and after the sale of the said property assessee along with her children used the namely acquired flat for their residence. The assessee claimed purchase price of the flat should be deducted from the capital gain arising out of the sale of the said immovable property, under section 54. The ITO negatived the assessees claim on the ground that the trust who was the owner was not residing in the said flat and the beneficiaries who resided therein were not the owners and, therefore, the assessee did not fulfil the conditions laid down in section 54. On appeal, the AAC also negatives the claim of the assessee. On second appeal, the Tribunal, dismissed of assessee's claim on the ground that the excess amount realised by the trustee would be income in her hands and the said income could not be said to be income receivable on behalf of the beneficiary. The Tribunal came to the conclusion that the question of applicability of section 161 did not arise in the instant case. On reference :
8.1. On considering the aforementioned facts, the Hon'ble Court held as under:-
HELD "By reason of section 160, the trustee appointed under a trust deed or will is a representative assessee in respect of income which is received by the trustee, or which the trustee is entitled to receive. Under section 161 every representative assessee, as regards the income in respect of which he is a representative assessee is subject to the same duties, responsibilities and liabilities, as if the income were income received by I.T.A. No. 2694/Mum/2024 C.O. No. 133/Mum/2024 6 or accruing to or in favour of the beneficiary, and shall be liable to assessment in his own name in respect of that income but such assessment is in a representative capacity only. Such assessment is deemed to be made upon the trustee only in his representative capacity and the tax can be levied upon and recovered from the trustee in the like manner and to the same extend as it would be leviable upon and recoverable from the person represented by the trustee. This provision would apply in the case of a trustee who receives or is entitled to receive income for the benefit of any person. Where income in respect of which the trustee is liable as a representative assessee is not specifically receivable on behalf of or for the benefit of any one person, or where the individual shares of the persons on whose behalf or for whose benefit such income or such part thereof is receivable are indeterminate or unknown, tax has to be charged as if that income was the total income of an AOP Section 164 is an enabling section similar to section 161(1) and nothing more or less could be read therein. In the cases covered by section 161(1) an option could be exercised on the strength of the trust deed itself since the income in such cases is receivable by the trustee on behalf of or for the benefit of a single beneficiary or where there are more beneficiaries than one, the individual shares of the beneficiaries are determinate and known. The Act did not intend to levy tax except in relation to the person who received income beneficially. Sections 160 to 166 are enacted to take care of a situation, where the recipient of the income was not the person entitled to the beneficial enjoyment thereof and they created the concept of a "representative assessee" as also the fiction that he received the income beneficially. At the same time, a representative assessee's liability did not extend beyond the limit of the direct assessee, implicitly recognising the liability of the direct assessee to be assessed. Section 161 makes a representative assessee subject to the same duties, responsibilities and liabilities as if the income was received by him beneficially. The fiction is created as it was never the object or intention of the Act to charge tax upon others than the beneficial owner of the income. Thus it is implicit that the tax could be leviable upon and recoverable from the persons represented by the representative assessee. The trustee, therefore, can be assessed in respect of the income of the trust and tax can be recovered from him only under and in the manner provided by sections 160 to 166. The Act also gives an option to the authorities to either directly levy tax on the beneficiaries or to levy tax upon the trustee in a representative capacity.
Thus under the Act, the Revenue has discretion either to assess the trustee or the beneficiary directly; that the trustee is to be assessed for and on behalf of the beneficiary, the trustee being a representative assessee is subject to the same duties, responsibilities and liabilities as if the income was received by him beneficially and whatever benefits the beneficiary will get in the said assessment must be made available to the trustee while assessing him under section 161. In the instant case the husband of the assessee by a will created a trust and appointed the assessee as executrix and sole trustee of the trust. She was also the beneficiary and was given the right to deal with the property in the manner she may deem fit. A life interest was created in her favour and after her death all the properties were to go to the children of the testator in specified shares. The property which was sold and the flat which was acquired from the said sale proceeds were both used by the assessee and her children for their residence. Thus assessee in her dual capacity as the trustee I.T.A. No. 2694/Mum/2024 C.O. No. 133/Mum/2024 7 and as a beneficiary having life interest was residing in the property which was sold and used the newly acquired flat for residence. Similarly, the other beneficiaries, i.e., children of the testator were residing in the property which was sold and resided in a flat which was acquired. Thus, the beneficiaries were using the property for their residence and continued to reside in the new flat which was acquired. In law, the trustee, i.e., the assessee, must be assessed for and on behalf of the beneficiaries, In view of the said legal position. The AAC was not right in holding that the trust which was the owner of the property was not residing in the said property and the beneficiaries were residing in the said property not as the owner, therefore, section 54 was not attracted.
In law, the beneficiaries are the real owners and the trustee holds the properties for and on behalf of the beneficiaries. The trustee has to be assessed under the Act as a representative assessee for and on behalf of the beneficiaries and tax can be levied and recovered from the trustee in the like manner and to the same extent as it would be leviable upon and recoverable from the person represented by the trustee. In the instant case thus the Revenue can levy tax in the like manner and to the same extent as would be leviable upon the beneficiaries. The said levy can be made upon the trustee as a representative assessee. Thus in the instant case on the facts found by the authorities as assessee and the children of the testator were residing in the property sold and continued to reside in the property acquired, they were entitled for the benefit of section 54. Thus, the assessee's claim for deduction of purchase price of a flat from capital gains, as per section 54, was legal and proper."
9. The most relevant finding of the Hon'ble Court, reads as under:-
"The reasons assigned by the Income-tax Tribunal in holding that the provisions of section 161 of the Act are not applicable and the assessee is not entitled for benefit of section 54 of the Act for exemption in the capital gains cannot be upheld. In law, the beneficiaries are the real owners and the trustee holds the properties for and on behalf of the beneficiaries. The trustee has to be assessed under the Act as a representative assessee for and on behalf of the beneficiaries and tax can be levied and recovered from the trustee in the like manner and to the same extent as it would be leviable upon and recoverable from the person represented by the trustee. In the present case thus the Revenue can levy tax in the like manner and to the same extent as would be leviable upon the beneficiaries. The said levy can be made upon the trustee as a representative assessee. Thus in the present case on the facts found by the authorities as Mrs. Tehmina and the children of the testator were residing in the property sold and continued to reside in the property acquired, they are entitled for the benefit of section 54 of the Act. Thus the assessee's claim for deduction of purchase price of a flat from capital gain as per section 54 of the Act was legal and proper."
I.T.A. No. 2694/Mum/2024 C.O. No. 133/Mum/2024 8
10. Considering the facts of the case in hand, in light of the decision of the Hon'ble Jurisdictional High Court (supra), we do not find any reason to interfere with the finding of the ld. CIT(A). Accordingly, appeal of the revenue is dismissed.
11. The cross-objection filed by the assessee is only in support of the order of the ld. CIT(A), therefore, needs no separate adjudication.
12. In the result, appeal of the revenue is dismissed.
Order pronounced in the Court on 2nd August, 2024 at Mumbai.
Sd/- Sd/- (RAJ KUMAR CHAUHAN) (NARENDRA KUMAR BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, Dated 02/08/2024 *SC SrPs आदे श की ितिलिप अ ेिषत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. थ / The Respondent 3. संबंिधत आयकर आयु ! / Concerned Pr. CIT 4. आयकर आयु ! (अपील)/ The CIT(A)-
5. िवभागीय ितिनिध ,आयकर अपीलीय अिधकरण, मुंबई /DR,ITAT, Mumbai,
6. गाड% फाई/ Guard file.
आदे शानुसार/ BY ORDER, TRUE COPY Assistant Registrar आयकर अपीलीय अिधकरण ITAT, Mumbai