Common Judgment v. The Commisisoenr Of Income Tax

IN THE HIGH COURT OF JUDICATURE AT MADRASDated : 08.07.2013CoramThe Honourable Mrs.Justice CHITRA VENKATARAMANandThe Honourable Ms.Justice K.B.K.VASUKI Tax Case (Appeal) Nos.302 to 304 of 2010--- M/s.A.K.K.Specific Family TrustAmmapatty PostVia PethappampattiUdumalpet Taluk ... Appellant in the above TC(A)s-vs- The Commissioner of Income TaxCoimbatore ... Respondent in theabove TC(A)s Tax Case Appeals filed under Section 260A of the Income Tax Act, 1961 against the order of theIncome Tax Appellate Tribunal, Chennai 'A' Bench dated 29.12.2008 passed inITA.No.156/Mds/2008. For appellant : Mr.R.Janakiraman For respondent : Mr.N.V.BalajiStanding Counsel forIncome Tax Department. COMMON JUDGMENT (The Judgment of the Court was made byCHITRA VENKATARAMAN, J.)The assessee filed the above Tax Case Appeals as against the common order of the Income TaxAppellate Tribunal relating to the assessment year 1998-99, 1999-2000 and 2000-2001 raising thefollowing questions of law :- "1. Whether on the facts and circumstances of the case, the Tribunal was right in holding that thebeneficiaries under the appellant trust were unknown or their shares indeterminate and thereforethe trust income was taxable under Section 164(1) of the Income Tax Act, 1961 ?2. Whether on the facts and circumstances of the case, the Tribunal was right in holding that theratio of the judgment of Calcutta High Court in CIT Vs. Trustees of Keshav Mohta Family Trust, 232ITR 875 was applicable to the facts of the case, especially in the light of the jurisdictional HighCourt's judgment in the case of CIT Vs. M.K.Kannan Marriage Benefit Trust and Others (240 ITR785) ?" 2. A reading of the order of assessment reveals that the claim of the assessee that it be assessed as aTrust was rejected on the ground that the entire arrangement of Trust was sham one. Even though,it mentioned about the shares of the beneficiaries, who are twenty three in number, which includedBig HUF, Small HUF and Individual, who were identifiable and their shares were determined, thefact revealed that the very enquiry of the beneficiaries showed that they were not aware of theshares and some of them were not aware of the existence of the Trust. In the circumstances, theTrust was assessed under Section 167B of the Income Tax Act, 1961. 3. Aggrieved by this, the assessee went on appeal before the Commissioner of Income Tax (Appeals)contending that there is specific Trust in the name of M/s.A.K.K.Trust; the return was filed in thecircumstances of representative of assessee and all the beneficiaries are identifiable and theirshares are determinable and therefore the trust is assessable u/s.161(4) read with Section 161(1) ofthe Income Tax Act, 1961; however, the assessment was made under AOP (Association of Persons).One of the grounds before the Commissioner of Income Tax (Appeals) was the Assessing Officererred in treating the trust as sham and colourable device. The Commissioner of Income Tax(Appeals) dismissed the appeal and confirmed the findings of the Assessing Officer. 4. Aggrieved by this, the assessee went on further appeal before the Income Tax Appellate Tribunal,wherein, in Ground No.7, the assessee questioned the order of the Commissioner of Income Tax. 4. Aggrieved by this, the assessee went on further appeal before the Income Tax Appellate Tribunal,wherein, in Ground No.7, the assessee questioned the order of the Commissioner of Income Tax. 5. We find that the ground raised as regards the genuineness of the Trust was not considered at allby the Income Tax Appellate Tribunal. On the other hand, the Tribunal held that as per the terms ofthe trust deed, 'would be spouse' and 'would be children' would also become beneficiaries witheffect from the year of their marriage and from the year of the birth of the child. Thus it could not beheld that the shareS of some of the beneficiaries listed were determinable on the date of creation ofthe trust; the share of the beneficiaries were subject to change depending on their marriage andnumber of children born to them. Thus following the decision of this Court in the case of CIT Vs.Muthukrishnan reported in 260 ITR 526 (Mad), the Tribunal rejected the assessee's appeal holdingthat the very fact that shares of some of the beneficiaries were determined on the date of thecreation of the Trust would not be a good ground for granting relief to the assessee. Thus, the claimof the assessee was rejected. 6. Aggrieved by this, the assessee filed the present Tax Case Appeal. 7. On 17.06.2013, after hearing both sides, we passed the order accepting the case of the assesseethat mere reference to 'would be spouse' or 'future child' by itself would not result in rejecting theclaim of the assessee and assessing it as a Trust. In that order, we followed the decision of this Courtin the case of Commissioner of Income Tax Vs. P.Sekar Trust reported in (2010) 321 ITR 305 as wellas in the case of CIT Vs. Chandrakanth (M.K.) reported in (1997) 225 ITR 101. However, beforesigning the order, we found that the question in fact to be decided by the Tribunal was as regardsthe genuineness of the Trust. Thus, even though the questions were answered in favour of theassessee, we later on cancelled the said order by order dated 24.06.2013 and directed that thematter be listed for fresh hearing. 8. After going through the records and after hearing learned counsel on either side, we found thatwithout giving a finding on the genuineness of the Trust, the relief claimed in the Tax Case Appealcould not be granted to the assessee following the decision of this Court in the case of Commissionerof Income Tax Vs. P.Sekar Trust reported in (2010) 321 ITR 305 as well as in the case of CIT Vs.Chandrakanth (M.K.) reported in (1997) 225 ITR 101. 9. In the circumstances, when the Income Tax Appellate Tribunal had not considered the specificissue raised in Grounds No.7, the proper course herein is to set aside the order of the Income TaxAppellate Tribunal and to remand the same to the files of ITAT for passing orders afresh afterconsidering Ground No.7 with regard to the genuineness of the Trust. 10. In the result, the Tax Case Appeals are disposed of with the above direction. No costs. Index:Yes (C.V.,J) (K.B.K.V.,J) Internet:Yes 08.07.2013 nvsri To 1.Commissioner of Income Tax, Ward-I(1), Pollachi, Coimbatore 2.The Commissioner of Income Tax (Appeals) II, Coimbatore 3. The Income Tax Appellate Tribunal, Chennai Bench 'A'CHITRA VENKATARAMAN, J.andK.B.K.VASUKI, J. nvsri Tax Case (Appeal) No.302 of 2010