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1 - 10 of 17 (0.28 seconds)Mithilesh Kumari & Anr vs Prem Behari Khare on 14 February, 1989
20. The Central Board of Direct Taxes circular is found extracted in [1985] 152 ITR (St.) 1. He drew my attention to paragraphs 16.1 to 16.5 of the said circular found printed at pages 10 and 11 of [1985] 152 ITR (St.) 1. The learned Departmental Representative argued that a debt should be allowed in the hands of the trust only after the claim is made, which is possible only after April 1, 1984. He stated that the learned Judicial Member in para. 10 (page 11) of his order had followed the Supreme Court decision in Mithilesh Kumari v. Prem Behari Khare [1989] 177 ITR 97.
Section 40A in The Income Tax Act, 1961 [Entire Act]
The Benami Transactions (Prohibition) Act, 1988
The Wealth-Tax Act, 1957
Section 2 in The Wealth-Tax Act, 1957 [Entire Act]
Income-Tax Officer vs Tube Investments Of India Ltd. on 26 October, 1989
This provision would clearly show that from the date when the power to revoke arose to the donor the unutilised amount, which is repayable to it, should be considered to be part of its assets liable to wealth-tax under section 4(5) of the Wealth-tax Act. If the unutilised amount should be regarded as part of the taxable assets held by the donor-company, correspondingly, it should form part of the debt due from the assessee-trust, since it is common knowledge that a single "asset." cannot constitute wealth both in the hands of the donor as well as in the hands of the donee especially in the face of the clear wording of section 40A(11) in that regard. I have already examined this position in ITO v. Tube Investment of India Ltd. [1990] 32 ITD 172 (Mad) from which I have already quoted. Therefore, when the unutilised amount and the accretions thereto in the share, interest and dividends therefrom can be regarded only as an asset held by the donor-company and when the liability to repay the unutilised amount was cast on the assessee-trust (donee-trust), it is clear that the unutilised amount would become a liability or a debt payable by the donee-trust (or assessee-trust) to the donor-company. Therefore, when the unutilised amount of Rs. 19 lakhs or Rs. 14 lakhs, as the case may be, can be considered officially as an asset in the donor-company's hands from April 1, 1980. The said retrospective effect of the provisions of section 40A(11) will certainly affect the wealth-tax liability of the assessee-trust (donee-trust) inasmuch as, the unutilised amount which otherwise would have been part of its assets from April 1, 1980, would become its liability since the said amount is liable to be returned to the donor-company. In view of this finding, the conclusions listed out by the learned Accountant Member, in my humble opinion, are not correctly reached by applying the correct law or by appreciating the true or plain meaning of the provisions of section 40A(11) of the Income-tax Act. The first conclusion that on the relevant dates, viz., June 30, 1982, June 30, 1983 and June 30, 1984, the assessee-trust was possessed of the funds as a matter of right in law and as a matter of fact cannot be accepted as correct. It may be holding possession of the funds but with an obligation attached to repay the same to the donor-company. When Parliament states that this unutilised amount can be claimed as a matter of right by the donor-company, it is not very clear how it can be considered to be a contingent asset includible in the net wealth of the donee-trust. Further, it is not also comprehensible as to how the unutilised amount out of the contributed funds to the donee-trust can be termed as contingent liability which arose to the assessee after April 1, 1980. Another conclusion of the learned Accountant Member that section 40A(11) is only an enabling measure and does not automatically divest a trust of the funds handed over to it, is simply unacceptable and represents an erroneous view of law or the meaning of section 40A(11). No discussion was there in the order of the learned Accountant Member in support of this conclusion. The difference as well as the discussion in relation to the Benami Transactions (Prohibition) Act, 1988, by both the learned Members, in my opinion, is not directly relevant for disposal of the case and the sixth conclusion of the learned Accountant Member, that the legal fiction created under section 40A(11) has only a limited application and the fiction is not applicable to the facts and circumstances of the case is again, in my view, erroneous and does not stand on the anvil of correct legal scrutiny. Therefore, I agree with the conclusion reached by the learned Judicial Member and allow the amount of Rs. 19 lakhs or Rs. 14 lakhs, as the case may be, as a liability in the hands of the donee-trust for all the three assessment years under consideration.
R.Rajagopal Reddy vs Padmini Chandrasekharan on 31 January, 1995
He brought to my notice that this decision was subsequently partly overruled by the Supreme Court itself in the case of R. Rajagopal Reddy v. Padmini Chandrasekharan [1995] 213 ITR 340, 342.