Indian Kanoon - Search engine for Indian Law

2. The Tribunal allowed the Appeals of the Assessee holding that the Trust created by the Settlor, State of Tamil Nadu under the Trust Deed dated 29.11.1996 which was to create Urban Infrastructure Fund for the development of the infrastructure within the State of Tamil Nadu through Local Bodies and contributions to the said fund were made under the Contribution Agreement dated 18.11.1996 by the three Companies viz., HDFC, ICICI and IL&FS.

4. Mr.T.Ravikumar, learned Senior Standing Counsel appearing for the Revenue, drawing our attention to clause 29 of the Trust Deed submitted that the Trust in question was irrevocable by the Settlor i.e., the Government of Tamil Nadu and the Assessing Authority was justified in applying the maximum marginal rate of tax applicable to Associate of Persons (AOP) invoking section 164 of the Act and the learned Tribunal erred in holding that the income in question was taxable in the hands of the transferor/beneficiaries (the 3 Companies, who contributed the funds in the said Trust) under the Contribution Agreement dated 18.11.1996).

5. On the other hand, Mrs.Pushya Sitaraman, learned Senior Counsel appearing for the Assessee, relying upon the basic documents in question, which were on record of the Revenue viz., Contribution Agreement dated 18.11.1996 and Trust Deed dated 29.11.1996, submitted that even though the Trust was irrevocable by the Settlor i.e., the Government of Tamil Nadu, but, section 61 and 62 in Chapter V of the Income Tax Act, talks about the 'Transfer' of assets. Section 61 of the Act deals with revocable transfer of assets and Section 62 of the Act deals with Transfer Irrevocable for a specified period. She has urged that the contributions of the 3 Companies viz., HDFC, ICICI and IL&FS are not revocable only for a fixed period of three years, whereafter, they can revoke the transfer and recall the said http://www.judis.nic.in contributions from the said Trust fund. Therefore, as per proviso (2) of Section 62(2) of the Act income arising to any person (Trust) by virtue of such transfer shall be chargeable to income tax as the income of the transferor (3 Companies) as and when the power to revoke the transfer arises and shall then be included in his (beneficiaries) total income. She further submitted that factually also, the income distributed by the Trustee in question to its beneficiaries who are duly identified and units purchased by them were also specified. Therefore, the income already taxed in the hands of the beneficiaries cannot be again taxed in the hands of the Assessee Trust itself. No double taxation is permitted in the Scheme of the Act, she urged.

9. In view of the clear Scheme of the Act and the provisions quoted above, we find little force in the submission made by the learned counsel for the Revenue. Section 62(2) clearly stands attracted to the present case. The funds and transferred by the beneficiaries viz., the 3 Companies to the Trust created by the Settlor viz., State of Tamil Nadu were revocable after the specified period of three years. But, besides being Settlor, also a contributor of funds to the Trust in question, since the Units were revocable after a period of 3 years, at any point of time, irrespective of the fact whether they have been actually revoked or not or contributions have been actually http://www.judis.nic.in recalled or not, Section 62(2) stands attracted and the said provisions clearly provide that the income in question would be taxed in the hands of the transferors which has, in fact, been taxed so far and that fact has not been disputed by the learned counsel appearing for the Revenue at all.