ORDER
Madhumita Roy, Judicial Member.- The instant appeal filed by the Revenue and Cross Objection filed by the assessee are directed against the order passed by the Ld. CIT(A)-15, Delhi dated 21.08.2020 arising out of Assessment Order dated 28.12.2018 passed by the ACIT, Circle-43(1), under Section 143(3) r.w.s 147 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for Assessment Year 2011-12.
2. The case of the assessee was reopened with the approval of the PCIT, Delhi-50, on 29.03.2018 on the ground of deposit made by the assessee Rs.8,08,00,000/- as term deposit and Rs.46,05,504/- as interest received other than interest of securities resident. The income amounting to Rs.8,54,05,504/- as having been escaped assessment notice under Section 148 of the Act dated 30.03.2018 was issued. The re-assessment was finalized upon making addition of Rs.4,82,40,602/-under Section 143(3) r.w.s 147 of the Act which was deleted by the First Appellate Authority. Hence, the instant appeal before us.
3. At the time of hearing of the instant appeal the Ld. Counsel appeal for the assessee submitted before us that the reason recorded by the Ld. AO is on the pretext of deposit of cash of Rs.8,08,00,000/- as term deposit and Rs.46,05,504/- as interest received other than interest of securities to resident. It is the fact that the assessee out of the proceeds of disposal of long term investment in the immovable properties and claimed exemption amounting to Rs.4,82,40,602/- under Section 54 of the Act. The revenue is of the opinion that Section 54F is applicable only to individual and HUF and not to a trust. The assessee in rebuttal duly placed this particular legal aspect of the matter that the Form prescribed for filing the return by the private trust is ITR-5 which is applicable for firms. AOP’s and BOI’s schedule CG of ITR-5 deals with the calculation of capital gain and part (b) of schedule CG deals with LTCG. At point 1(d),3(d) & 4(d) state deduction under Section 54/54B/54D/54EC/54F/54G/54GA of the Act which itself demonstrate that these deductions are available to all the firms, BOI and AOI or at least to some of the AOI or BOI. Such clarification made by the assessee was not found to be acceptable and addition was made. Before the First Appellate Authority the assessee reiterated the same which was dealt with by the Ld. CIT(A)in the following manner:
“10. Before coming to the issue, it is important to consider the history of filing of return of the appellant. In this context, I find the following relevant:
| a. | | The trust was set up in 2005. For A.Y. 2006-07 to 2009-10 the return of the trust was filed on the PAN No. of the trust. These returns were filed manually. |
| b. | | For A.Y. 2010-11 the return of the trust was again filed manually. I. have noted from the acknowledgement of the return filed for the year 2010-11 that even though the PAN quoted therein is that of Shri Manoj Kumar, the name of the assessee is written as Merlina Foundation PAN No. AABTM5893L through trustee Shri Manoj Kumar. The gross total income for AY 2010-11 is R5.65,56,123/- |
| c. | | Return of the trust for assessment year 2011-12 and 2012-13 were filed electronically on the PAN of one of the trustee i.e. Shri Manoj Kumar. It is noteworthy that for these two years individual returns of Shri Manoj Kumar were not filed. |
| (i) | | For assessment year 2011-12 the return was filed electronically. The acknowledgment carries the name and PAN No. only of Shri Manoj Kumar. The return was filed on 30.09.2011 i.e. the last date of filing of return for auditable trust. Gross total income of Rs.6.41 crore is shown in the return of income and total tax of Rs. 1.45 crore was paid. |
| (ii) | | For assessment year 2012-13 the name of the return filer is shown as Merlina Foundation PAN No. AABTN5893L (through trustee Manoj Kumar). The PAN Number and the name in the acknowledgement is of Shri Manoj Kumar. Against gross total income of Rs. 12.28 crore taxes of Rs.2.6 crore have been paid. |
| d. | | Assessment year 2013-14 onwards the return of income of the trust is being filed electronically on the PAN of the trust. |
11. On query as to why the return of the appellant trust was filed on the PAN of the trustee for these two years, the counsel of the appellant has submitted that the online returns were not accepted by the system and therefore the appellant had no option but to file the return of income through representative assessee.
12. I find that the case was reopened because the system could not link the appellant’s transactions with the return filed through the representative assessee.
13. Even though no evidence has been furnished before me regarding the technical inability of the system for accepting or rejecting the returns of this nature, yet it appears credible that the online return filing system was not robust enough 10 year back to distinguish between a charitable trust and a discretionary trust.
14. With the above observation I am inclined to hold the return filed on 30.09.2011 valid for the following reasons:
| A. | | It is believable that there was a difficulty in filing of returns online at that time. |
| B. | | The appellant comes across as law abiding. The appellant was keen to somehow file the return of income despite facing technical difficulties, and therefore exercised the best available option at that point of time. |
| C. | | Appellant paid due taxes as applicable to the applicant trust. For A.Y. 2010-11, 2011-12 and 2012-13. |
| D. | | The return of income filed on 01.12.2018 in response to notice u/s 148 is a replica of the return filed on 30.09.2018. |
| E. | | The taxes paid for AY 2010-11, 2011-12 and 2012-13 were on the PAN of the trust. |
| F. | | If the returns of trust for AY 2010-11, 2011-12 and 2012-13 are held to be return of income of Shri Manoj Kumar, individual, because the relevant taxes were paid through the PAN of the trust, their credit will not be available to Shri Manoj Kumar against the demands arising in his individual cases. |
With the above observations, I am inclined to hold that while the action of the Assessing Officer in reopening the assessment proceedings of the trust are not invalid in law, the return of income of the appellant trust filed on 01.12.2018 being only a replica of the return filed on 30.09.2011, in view of the likelihood of technical difficulties in filing of the return on the PAN of the trust and subsequent corrective course of action adopted by the appellant, the return of income filed on 30.09.2011 be treated as valid return.
15. The second related issue is whether benefit of Section 54F will be available to the appellant’s trust.
16. The Assessing Officer’s contention is that as per the Act, Section 54F is available only to individuals or HUF and since the appellant’s trust is an AOP therefore benefit of Section 54F is not available to the appellant.
17. While not disrespecting the interpretation and conclusion drawn by the Assessing Officer on this issue I find that the issue is required to be examined after considering various other parameters including judicial pronouncements.
18. The appellant has heavily relied on the decision of Hon’ble ITAT, B Bench, Mumbai in ITA No. 5661/Mum/2016 in the case of Bal Gopal Trust. The question whether Section 54F benefit will be available to private trust has been decided by the Hon’ble Tribunal by recording as under:-
“7. Upon careful consideration we find that the issue before us is as to whether the assessee trust, which is for the sole benefit of an individual, will be entitled to deduction u/s. 54F or not, when its status is that of A.O.P. As per Section 54f the benefits of this section is available to individual or Hindu undivided family (HUF). Hon’ble jurisdictional High Court in the case of Mrs. Amy F. Cama (supra) has elaborately considered the same issue. The jurisdictional High Court was dealing with assessee trust’s claim for deduction for purchase price of the flat from capital gain as per Section 54 of the Act. The Hon’ble jurisdictional High Court has held that the assessee trust was entitled for the same. The Hon’ble Court had expounded that Section 161 of the I.T. Act, 1961, 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 persons other than the beneficial owner of the income. Whatever benefits the beneficiary will get in the said assessment must be made available to the trustee while assessing him under section 161.
8. We find that above decision of Hon’ble High Court squarely applies on the present case, when we are concerned with the issue of exemption/deduction u/s. 54F. Section 54 is also applicable to individuals and HUF. However Hon’ble jurisdictional High court had expounded that on per the mandate of Section 161, the I.T. Act doesn’t intend to charge tax upon persons other than the beneficial owner of the income. Whatever benefits the beneficiary will get in a particular assessment must be made available to the trustee while assessing him u/s 161. In the present case before us also the issue is benefit of investment made in purchase of flat for deduction u/s. 54F of the Act by the trustees and the sole beneficiary of the trust is the individual Ms. Vidushi Somani. Hence the ratio emanating from the above jurisdictional High court decision is squarely applicable on the facts of the case. The distinction referred by the Ld. D.R is devoid of cogency. Furthermore, Hon’ble Gujarat High court in the case of Niti Trust (supra) has similarly granted benefit of assessment of a trust in the capacity of a individual. For this proposition Hon’ble High Court had relied upon the decision of Hon’ble Gujarat High Court in the case of CIT v. Deepak Family Trust to 211 ITR 575 and Calcutta High Court decision in the case of CIT v. Shri Krishna Bandar Trust 201 ITR 989.
9. From the above case laws it is amply clear that by virtue of Section 161 of the I.T. Act the representative assessee is subject to the same duties, responsibilities and liabilities as if the income was received by him beneficiary, and whatever benefits the beneficiary will get in the said assessment must be made available to the trustee while assessing him u/s. 161 It is clear that it is only by virtue of u/s. 161 that the trust has been assessed for the income that is for benefit of sole beneficiary. According respectfully following the precedent we hold that the assessee is principally entitled to deduction u/s. 54F and it cannot be said that since it is a AOP and not a individual or HUF the said exemption/deduction should be denied.”
4. It is the fact that the assessee is a private trust and it was set up for some identified persons, the trust income is taxable in the event, it is the income of the beneficiary, it is not the case of the charitable trust. Further that a charitable trust is treated as AOP because of the reason that the beneficiary of the charitable trust are public at large. In fact, if the beneficiary of charitable trust is identified, the trust looses its character on being charitable. In this particular case the trust purchased certain land and sale of flat there on through collaboration, generated income from capital gains against which residential house was purchased and exemption under Section 54F was claimed. In the event, the assessee trust was not in existence that the same transaction would have been carried out in the name of beneficiaries therein and the benefit would certainly be given to those beneficiaries under Section 54 of the Act as claimed. Therefore, the order passed by the Ld. CIT(A) in granting relief under Section 54F of the Act as claimed by the assessee under the facts and circumstances is found to be just and proper so as not to warrant interference. The appeal filed by the Revenue is found to be devoid of any merit and thus, dismissed.
C.O. No.110/Del/2022 (AY: 2011-12)
5. As the revenue appeal being dismissed the Cross Objection preferred by the assessee become academic, in fact, infructuous. Thus, Cross Objection filed by the assessee is dismissed as infructuous.
6. The appeal preferred by the Revenue is dismissed and Cross Objection filed by the assessee is dismissed as infructuous.