The Commissioner Of Income Tax,Chennai v. Shriram Ownership Trust

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 08.12.2020 CORAM THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAMandTHE HONOURABLE MRS.JUSTICE V.BHAVANI SUBBAROYAN Judgment Reserved On Judgment Pronounced On 10.11.202008.12.2020 T.C.A.No.242 of 2018 The Commissioner of Income tax,Chennai. ..Appellant -vs- Shriram Ownership Trust,No.4, Shriram House, 1[st] Floor, Burkit Road, T.Nagar, Chennai-600 017.PAN No. ..Respondent Appeal under Section 260-A of the Income Tax Act, 1961against the order dated 05.07.2017 made in I.T.A.No.407/Mds/2017on the file of the Income Tax Appellate Tribunal 'C' Bench,Chennai for the assessment year 2014-15. Against the order of the Commissioner of Income Tax(Appeals)-2, Chennai made in ITA No.194 & 160/CIT(A)-2/2015-16and 2016-2017 order dated 06.02.2017 against the order of theDeputy Commissioner of Income Tax Non-corporate circle-2,Chennai made in PAN/GIR No. , order dated 27.09.2016for the Assessment year 2014-15. This tax case appeal filed by the Revenue under Section 260-A of the Income Tax Act, 1961 (hereinafter referred to as “theAct”) is directed against the order dated 05.07.2017 made inI.T.A.No.407/Mds/2017 passed by the Income Tax AppellateTribunal 'C' Bench, Chennai (for brevity “the Tribunal”) for theassessment year 2014-15. https://hcservices.ecourts.gov.in/hcservices/ 2.The following substantial questions of law have beenframed for consideration of this Court:-“1.Whether the Tribunal was correct inholding that the investment which yielded noexempt income was to be excluded while computingdeduction u/s.14A when the Act as well as Rulesframed do not provide for any such exception,and further such investment shall always remainin tax free territory? 2.Whether the Tribunal was right in deletingthe additions made u/s.56(2)(vii) when theassessee in its representative capacity is to beassessed as individual, since it represents theindividual only and further various courts haveheld that Private Discretionary Trust is to beassessed as an individual? 3.Whether the Tribunal was justified inexcluding the assessee from the purview oftaxation u/s.56(2)(vii) after concluding thatthe individual must be a natural living personwhen such a condition cannot be enforced on arepresentative assessee and has to be perceivedin the context of beneficiaries?” 3.The respondent/assessee is a private discretionary Trustwhich filed its return of income for the assessment year underconsideration, AY 2014-15 electronically on 28.09.2014,disclosing a total income of Rs.107,72,76,893/-. The return wasprocessed under Section 143(1) of the Act. Subsequently, thecase was selected for scrutiny and notice under Section 143(2)of the Act dated 01.06.2016, was served on the assessee alongwith a questionnaire. Among other things, the principal issuewas with regard to the amount of Rs.25 Crores credited to thebalance sheet under the nomenclature “addition to corpus”. Onthis issue, the Joint Commissioner of Income Tax, Non CorporateRange-2, Chennai (JCIT), passed an order dated 24.08.2016, underSection 144A of the Act directing the Assessing Officer to treatthe receipt of Rs.25 Crores as “income from other sources” andtax the same accordingly. Pursuant to such direction issued bythe JCIT, the assessee was given an opportunity, who placedtheir written submission dated 09.09.2016, contending that theassessee is a discretionary Trust and the direction issued bythe JCIT invoking Section 56(2)(vii) of the Act is erroneous, asthe said provision applies only to individuals and HUFs. TheAssessing Officer noted that the submissions, which were made bythe assessee, were in fact the same submissions made before theJCIT, who heard the assessee before issuing the direction dated 24.08.2016 under Section 144A of the Act and accordingly,rejected the contention and treated the sum of Rs.25 Crorescredited directly to the balance sheet as 'income from othersource' and the assessee was taxed on the same. Apart fromthat, there was also a disallowance made under Section 14A ofthe Act. Aggrieved by the same, the assessee preferred appealto the Commissioner of Income Tax (Appeals)-2, Chennai (CIT(A))contending that Section 56(2)(vii) of the Act applies only toindividuals and HUFs and the Assessing Officer ought to havetaken note of the decision of the Hon'ble Supreme Court in CITvs. Smt.Sodra Devi [(1957) 32 ITR 615 (SC)]; Section 56(2)(vii)applies only to what is actually received by the individuals andHUFs. That the Assessing Officer erroneously applied Section 2(24)(iva) to bring to tax voluntary corpus donations of sums ofmoney received by the assessee Trust ignoring the settledinterpretation of the expression value of any benefit orperquisite, whether convertible into money or not. The assesseealso raised several grounds contesting the disallowance underSection 14A of the Act. 4.From the grounds raised by the assessee before the CIT(A),as extracted in the order passed by the CIT(A), it is seen thatthe assessee did not specifically question the power of the JCITto issue directions under Section 144A of the Act, but contendedthat the Assessing Officer could not have proceeded to implementthe direction of the JCIT without considering their objections.The CIT(A) by order dated 06.02.2017, partly allowed the appeal,but however, the issue with regard to taxability of the sum ofRs.25 Crores was decided against the assessee. The CIT(A) firsttook up for consideration as to the procedure adopted by theJCIT before issuing the directions under Section 144A of the Actand found that the JCIT had afforded sufficient opportunity tothe assessee and followed the procedure under Section 144A. TheCIT(A) found that the objections, which were raised by theassessee before the Assessing Officer in their writtensubmissions dated 09.09.2018, were in fact the same submissionswhich the assessee had raised before the JCIT, when they weregranted an opportunity to place their objections to the proposalto issue direction under Section 144A and after noting thefactual position, held that there is no procedural infirmity inthe assessment order dated 27.09.2016 passed under Section 143(3) read with Section 144A of the Act and accordingly, rejectedthe said contention raised by the assessee. 5.Next, the CIT(A) took up for consideration with regard tothe taxability of the sum of Rs.25 Crores which was credited tothe balance sheet under the head “addition to corpus”. The CIT(A) pointed out that during the financial year 2013-14, relevantto the assessment year 2014-15, the assessee received a sum ofRs.25 Crores from six companies of Shriram Group. The CIT(A) pointed out that none of the six firms has claimed thecontribution as expenditure deductible from the incomechargeable to tax. The question, which was framed forconsideration was whether “voluntary contributions received bythe assessee are in the nature of income chargeable to tax”. 5.Next, the CIT(A) took up for consideration with regard tothe taxability of the sum of Rs.25 Crores which was credited tothe balance sheet under the head “addition to corpus”. The CIT(A) pointed out that during the financial year 2013-14, relevantto the assessment year 2014-15, the assessee received a sum ofRs.25 Crores from six companies of Shriram Group. The CIT(A) pointed out that none of the six firms has claimed thecontribution as expenditure deductible from the incomechargeable to tax. The question, which was framed forconsideration was whether “voluntary contributions received bythe assessee are in the nature of income chargeable to tax”. 6.The assessee contended that they are an Association ofPerson (AoP), that is, a person within the meaning ofExplanation to Section 2(31) of the Act. The assessee furthercontended that this is so because they had filed their return inForm No.ITR-5 specifically relating to Trust and therefore, theassessee cannot be treated as an individual. Further, theassessee contended that reading of Section 56(2)(vii) as well asproviso thereunder would clearly indicate that the individualsreferred to therein are living persons. To support suchcontention, reliance was placed on the decision in the case ofSmt.Sodra Devi. The CIT(A) did not agree with the assessee byobserving that the Hon'ble Supreme Court in CIT vs. IndiraBalkrishna [(1960) 39 ITR 546], has held that the word“association” means 'to join in any purpose' or 'to join in anaction' and therefore, the term AoP as found in Section 2(31),would mean an association in which two or more persons cometogether for a common purpose or a common action. It furtherheld that the settler has created the Trust and nominatedtrustees to maintain and operate the Trust for the benefit ofcertain identified beneficiaries who are individuals. It furtherheld that the beneficiaries have not come together for a commonpurpose and they do not have any role in the operation andmaintenance of the Trust. 7.The assessee contended that after the insertion of theexplanation below Section 2(31) by Finance Act, 2002, witheffect from 01.04.2002, reliance cannot be placed on thedecision in Indira Balkrishna. This plea was also rejected bythe CIT(A) holding that the insertion of the explanation was tocover the vacuum and bring charitable and religious Trust intothe ambit of taxation in an event of those institutions losingthe benefit or exemption under Section 10, 11 or 12 of the Act,and accordingly, held that the decision in Indira Balkrishnacontinues to hold good. 8.With regard to the form of return, viz., ITR-5, which washeavily relied on by the assessee to state that they should betreated as an AoP, the CIT(A) rejected the same holding that theassessee, being a private discretionary Trust, had takenadvantage of the press release issued by the Central Board ofDirect Taxes (CBDT) dated 31.07.2012 permitting privatediscretionary Trust to have the status of 'individual' only andtherefore, rejected the contention of the assessee that theyfall within the meaning of explanation inserted below Section 2(31) with effect from 01.04.2002. https://hcservices.ecourts.gov.in/hcservices/ 8.With regard to the form of return, viz., ITR-5, which washeavily relied on by the assessee to state that they should betreated as an AoP, the CIT(A) rejected the same holding that theassessee, being a private discretionary Trust, had takenadvantage of the press release issued by the Central Board ofDirect Taxes (CBDT) dated 31.07.2012 permitting privatediscretionary Trust to have the status of 'individual' only andtherefore, rejected the contention of the assessee that theyfall within the meaning of explanation inserted below Section 2(31) with effect from 01.04.2002. https://hcservices.ecourts.gov.in/hcservices/ 9.With regard to the contention of the assessee that thevoluntary contribution received from six concerns of the ShriramGroup towards corpus of the assessee Trust does not constituteincome in the hands of the assessee three decisions were reliedon by the assessee. The CIT(A) in paragraphs 4.4.2 to 4.4.4distinguished those decisions by assigning certain reasons andpointed out that the core issue would be whether the assessee, aprivate discretionary Trust, which received a corpus donation inits status as a representative assessee, representing theindividual beneficiaries, is an individual for the purpose ofthe Act and such income is taxable or otherwise. It was pointedout that in none of the decisions, the status of the assesseewas adjudicated and all the case laws are silent on the statusof the assessee, which is governed by the provisions of Section161(1) of the Act. 10.The assessee contended that the corpus donation is not abenefit or perquisite to become income under Section 2(24)(iva)read with Section 56(1) and relied on the decision in the caseof CIT vs. G.Venkatraman [(1978) 111 ITR 444 (Madras)]. The CIT(A) pointed out that in the said decision, it was held that theword “obtained” occurring under the 1922 Act corresponds todeemed dividend and held that appropriating of benefit is takenby the Director from the company and not 'obtained' from thecompany. In this regard, reference was made to the decision inthe case of CIT vs. Adaikappa Chettiar [(1973) 91 ITR 90(Madras)] to distinguish the meaning between the words“obtained” and “taken”. Therefore, the assessee argued thatunless a benefit or perquisite in money or money's worth isobtained, the same cannot be treated as income. 11.The CIT(A) agreed with the contention of the assessee bytaking note of the decision in the case of G.Venkatraman andheld that corpus donation is not income as defined under Section2(24)(iva) of the Act, however proceeded to hold that the saidreceipt will fall within the ambit of Section 2(24)(xv) readwith Section 56(2)(vii) inserted with effect from 01.10.2009.Thus, the CIT(A) zeroed in on the core issue with regard to thestatus of the assessee. The CIT(A) held that the Trust has beencreated by a settler declared by a duly executed instrument inwriting, which empowered the trustees to receive the propertyunder Trust and maintain it for the benefit of the beneficiariesidentified by the Trust and therefore, held that the assessee isa representative assessee as per Section 160 of the Act, sinceit receives income on behalf of and for the benefit of thebeneficiaries; the assessee is only a representative of thebeneficiaries who are in substance and form, the real owners. 12.Referring to Section 161(1), it was held that theassessee being a representative assessee, has to be taxed in thelike manner and to the same extent as it would be in respect ofthe beneficiaries and the status of the assessee is to bedetermined with reference to the status of the beneficiaries andthe beneficiaries being individuals, the assessee's status isalso that of an individual. The CIT(A) approved the finding ofthe JCIT that the status of the Trust is to be determined fromthe status of the beneficiaries by placing reliance on thedecision in the case of CIT vs. SEA Head Office Monthly PaidEmployees Welfare Trust [(2004) 141 Taxman 364 (Delhi)].Further, the CIT(A) affirmed the finding of the JCIT refusing totreat the assessee as an AoP under Section 2(31) by referring tothe decision in CIT vs. Marsons Beneficiary Trust [(1990) 52Taxman 454 (Bombay)]. Accordingly, the CIT(A) held that theassessee, a private discretionary Trust, is in the status of anindividual, since all its beneficiaries are individuals and theycannot be treated as an AoP under Section 2(31) of the Act. 13.The assessee contended that the term “individual”occurring in Section 56(2)(vii) has to be interpreted withreference to the context in which it is used in the saidprovision. In other words, it was contended that in the proviso,there is a reference to relatives of individual, occasions likemarriage etc., and therefore, the term “individual” occurring inSection 56(2)(vii) shall mean only living persons. This issuewas discussed by the CIT(A) firstly by noting Section 5(1) ofthe Act, which deals with “scope of total income” to include allincome from whatever source derived, which is received or isdeemed to be received in India. It was held that the assessee inthe status of a representative assessee, has received income onbehalf of individuals and the reference to relatives, occasionof marriage of individual, etc., in the said provision does notapply to a representative assessee. Noting the factualposition, the CIT(A) pointed out that the income received by theassessee is on behalf of the individuals and therefore, theargument that the assessee being not a living person would falloutside the scope of Section 56(2)(vii) was to be rejected. 14.With regard to the plea that there was no income to fallwithin the mischief of Section 2(24)(iva), the CIT(A) held thatthe assessee having been held to be an individual as per theprovisions of Section 2(24)(xv) read with Section 56(2)(vii),the contribution received without any reciprocation hasnecessarily to be treated as income of the Trust under the head“income from other sources”. 15.The assessee referred to the insertion of clause (x) toSection 56(2) with effect from 01.04.2017 and contended that thepersons classified under the status of individual or HUF and https://hcservices.ecourts.gov.in/hcservices/ placing a restriction on the gift received was only prospectiveand the donations received by the assessee was during thefinancial year 2013-14 and therefore, cannot be brought to tax.This contention was rejected holding that it has beensubstantiated that the assessee is a representative assessee andnot an AoP and therefore, would get categorised as an individualand the provisions of Section 56(2)(vii) is applicable andaccordingly, the order of the Assessing Officer bringing to taxthe said amount of Rs.25 Crores was confirmed. 15.The assessee referred to the insertion of clause (x) toSection 56(2) with effect from 01.04.2017 and contended that thepersons classified under the status of individual or HUF and https://hcservices.ecourts.gov.in/hcservices/ placing a restriction on the gift received was only prospectiveand the donations received by the assessee was during thefinancial year 2013-14 and therefore, cannot be brought to tax.This contention was rejected holding that it has beensubstantiated that the assessee is a representative assessee andnot an AoP and therefore, would get categorised as an individualand the provisions of Section 56(2)(vii) is applicable andaccordingly, the order of the Assessing Officer bringing to taxthe said amount of Rs.25 Crores was confirmed. 16.With regard to the disallowance under Section 14A, theCIT(A) held that the Assessing Officer was justified in makingthe disallowance under Section 14A read with Rule 8D(2)(iii).Though the finding was against the assessee, in our opinion, inits entirety, in the penultimate paragraph of the order dated06.02.2017, the CIT(A) states that the appeal is partly allowedpresumably for the reason that the CIT(A) agreed with theassessee that the corpus donation is not an income as definedunder Section 2(24)(iva), but brought the assessee within theambit of Section 2(24)(xv) read with Section 56(2)(vii). Thus, acareful reading of the order passed by the CIT(A) will clearlyshow that the decision was fully against the assessee. Theassessee carried the matter by way of appeal to the Tribunal. 17.Before the Tribunal, the assessee firstly focused uponthe status of the assessee, which being a Trust and, thegrounds, which were raised before the CIT(A) which we havereferred above, were raised before the Tribunal, viz., filing ofthe return in the prescribed form etc. Another submission wasmade by the assessee stating that the JCIT had no jurisdictionto invoke his power under Section 144A when there was noassessment pending. This submission was based on the fact thatthe scrutiny which was ordered was only a limited scrutiny, butnot a complete scrutiny and a limited scrutiny is not comparableto a regular scrutiny, as it is only for a limited purpose andin this regard, relied upon the CBDT Circular dated 14.07.2016in Circular No.5 of 2016. Further, it was contended that thedecision for taking up complete scrutiny was made only on06.09.2016 and by then, the JCIT had issued directions dated24.08.2016. Further, it was contended that the JCIT could haveissued only a guideline to the Assessing Officer, who isrequired to independently apply his mind and therefore,contended that the assessment order was erroneous. 18.With regard to the merits of the matter, it was arguedthat the assessee cannot be treated as an individual andvoluntary contributions to the corpus of the Trust could not beconsidered as income, a private discretionary Trust could not beequated to an individual, the contributions received was onlygratuitous payment and cannot be considered as income underSection 56(2)(vii) of the Act. 18.With regard to the merits of the matter, it was arguedthat the assessee cannot be treated as an individual andvoluntary contributions to the corpus of the Trust could not beconsidered as income, a private discretionary Trust could not beequated to an individual, the contributions received was onlygratuitous payment and cannot be considered as income underSection 56(2)(vii) of the Act. 19.The Revenue contended that the order passed by the JCITunder Section 144A was after affording due opportunity to theassessee to raise all contentions both on facts and on law,which were considered by the JCIT by passing a detailed order.Further, it was submitted that when the JCIT invoked the powerunder Section 144A of the Act, the assessment was already takenup for scrutiny by issuing notice under Section 143(2) on01.06.2016 and it is no matter whether it is limited scrutiny orcomplete scrutiny when admittedly, the assessment was pending.Further, regard to the merits of addition, the Departmentcontended that there is no dispute to the fact that the assesseereceived the amount as a capital inflow. It was argued that theaddition was not made considering the sum as value of a benefitor perquisite under Section 2(24)(iva) or it was considered asan income under Section 2(24)(iia), but the same was consideredas income falling under Section 2(24)(xv) read with Section 56(2)(vii) of the Act. Further, with regard to the form ofreturn, it was contended that the status shown by the assesseein its form of return is irrelevant and it cannot whittle downthe provisions of the Act. 20.Reliance was placed on the decisions in the case of CITvs. Venu Suresh Sheela Trust [(1998) 233 ITR 99 (Madras)], CITvs. Arihant Trust [(1995) 214 ITR 306 (Madras)] and CIT vs.T.S.K.Enterprises [(2005) 274 ITR 41 (Madras)] to support theircontention that the assessee has to be treated as an individualand not an AoP. With regard to the insertion of clause (x) toSection 56(2) by Finance Act, 2017, the Department argued thatit has no relevance because the insertion of the said clause wasto bring within the fold of taxation, money received by firmsand companies without consideration. The Tribunal rejected thecontention raised by the assessee with regard to the correctnessof the order and direction issued by the JCIT under Section 144Aof the Act and the effect of such direction on the AssessingOfficer and held them to be within the frame work of Section144A. With regard to the merits of the matter, the Tribunalheld that the amount of Rs.25 Crores will not fall withinSection 2(24)(iia), since the assessee was not a Trust createdfor a religious or charitable purpose and accordingly, approvedthe finding of the CIT(A) that it cannot be an amount receivedas a benefit or perquisite under Section 2(24)(iva). 21.The Tribunal next moved on to consider the correctness ofthe finding of the CIT(A), who confirmed the addition byapplying Section 2(24)(xv) read with Section 56(2)(vii) of theAct. While considering the merits, the contentions advanced bythe assessee based upon the form of return was rejected and heldagainst them to the effect that the manner in which the assesseedescribes itself in the return of income may not be determinative of its status under the Income Tax Act, as it is amatter of law and not of choice. Therefore, the Tribunalrejected the contentions raised by the assessee with regard tothe correctness of the direction issued by JCIT under Section144A; rejected the contentions of the assessee with regard tothe binding effect of such direction on the Assessing Officer;approved the finding of the CIT(A) that the contributionreceived will not fall within “income” as defined under Section2(24)(iia); and the assessee cannot rely upon the statusmentioned by them in their return of income for determining asto who they are. To be noted as against all these findings, theassessee is not on appeal before us. determinative of its status under the Income Tax Act, as it is amatter of law and not of choice. Therefore, the Tribunalrejected the contentions raised by the assessee with regard tothe correctness of the direction issued by JCIT under Section144A; rejected the contentions of the assessee with regard tothe binding effect of such direction on the Assessing Officer;approved the finding of the CIT(A) that the contributionreceived will not fall within “income” as defined under Section2(24)(iia); and the assessee cannot rely upon the statusmentioned by them in their return of income for determining asto who they are. To be noted as against all these findings, theassessee is not on appeal before us. 22.The Tribunal while considering the status of the assesseequa the applicability of Section 56(2)(vii) of the Act, referredto the decision in CIT vs. Kamalini Khatau [(1994) 209 ITR 101]and held that a private discretionary Trust cannot be treated asan individual for all purposes of the Act especially when, theterm “individual” is not defined under the Act. The Tribunalnoted the decision in CIT vs. Shri Krishna Bandar Trust [(1993)201 ITR 0989 (Cal.)] wherein it was held that a group ofindividuals may as well come in for treatment in the status ofan individual, if the context so required. The Tribunal pointedout that in the said decision, the Court had referred to thedecision in Indira Balkrishna and Andhra Pradesh State RoadTransport Corporation vs. ITO [(1964) 52 ITR 524 (SC)]. TheTribunal held that a contextual meaning has to be given to theterm “individual” and merely because a private discretionaryTrust has been treated as an individual for the purpose oftaxation under Section 80L or Section 194A or Section 54F wouldnot be a reason to treat it so under Section 56(2)(vii) of theAct. The Tribunal observed that it is alive of the decision inVenu Suresh Sheela Trust and Arihant Trust, however, held thatthe said decisions cannot be applied to the assessee's case, asin those decisions, the interpretation was relating toprovisions which granted relief to the assessee and not chargingprovisions. In other words, it held that Section 56(2) of theAct is a charging provision unlike Section 80L or Section 54Fwhich are provisions which give relief to the assessee andrequired to be liberally interpreted. The Tribunal referred tothe definition “relative” and observed that the term“individual” implies only a natural person for the purposes ofSection 56(2)(vii) of the Act. The decisions, which werereferred to by the Department, were held to be rendered in adifferent context dealing with other provisions of the Act,which in the opinion of the Tribunal, are provisions which giverelief to the assessee. 23.The Tribunal referred to the decision of its Delhi Benchin Mridu Hari Dalmia Parivar Trust vs. AO [(2016) 68 taxmann.com https://hcservices.ecourts.gov.in/hcservices/ 376 (Delhi-Trib.)] and held that though the decision concernedan assessment under Section 56(2)(vi), it being a precursor toSection 56(2vii), the decision will apply to the assessee'scase. The Tribunal also took note of the insertion of clause(x) in Section 56(2) of the Act with effect from 01.04.2017 and,the Explanatory note to Finance Bill, 2017 indicates thatprovisions as it stood prior to the introduction of clause (x)covered only individuals and HUFs and the legislature wanted toinclude in its fold other entries also, which were receivinggratuitous payments and such provisions were applicable onlyfrom 01.04.2017. With the above findings, the Tribunal held thethe amount of Rs.25 Crores received by the assessee cannot beconsidered as “income from other source” under Section 56(2)(vii) read with Section 2(24)(xv) of the Act and accordingly,deleted the addition. 24.Mrs.R.Hemalatha, learned Senior Standing Counsel whilereiterating the stand taken by the Department before the CIT(A)and the Tribunal, submitted that the status of the Trust is tobe determined by the status of the beneficiary by virtue of thedeeming provision by Section 161 of the Act. The assessee Trustis a representative assessee, representing the beneficiaries,who are individuals and therefore, the status of the assessee isan individual. The assessee's case will clearly fall within thescope of Section 56(2)(vii)(a) of the Act. 25.Referring to Section 161(1) of the Act, it is submittedthat the trustees are the representative of the beneficiariesand he represents the beneficiaries who are in substance, thereal owners and the income is to be taxed in the like manner andto the same extent, as it would be in respect of beneficiaries.Referring to the decision in Marsons Beneficiary Trust, it issubmitted that even when trustees of a private Trust are engagedin business, they cannot be assessed as an AoP. 26.It is further submitted that after the e-filing of returnof income was introduced, certain hardship was faced by theassessee which necessitated CBDT to issue a press release dated31.07.2012 facilitating manual filing of return of income ofprivate Trusts, since the existing e-filing software did notaccept return of income of a private discretionary Trust in thestatus of an individual. Reliance was placed on the decision inVenu Suresh Sheela Trust, Arihant Trust, T.S.K.Enterprises andNiti Trust vs. CIT [(1996) 221 ITR 435 (Guj.)] to support thecontention that the status of such a private discretionary Trustwould be that of an individual. Reference was also made to thebudget speech of the Hon'ble Finance Minister introducingFinancing (No.2) Act, 2004. Reference was made to the factualdetails with regard to the purpose for which the assessee Trustwas created, the persons, who are individual as beneficiaries, method of determining the beneficiaries etc., and it issubmitted that in Annexure-V of the Deed of Trust dated11.09.2006, thirteen persons have been identified, who formedpart of the beneficiaries list in the owner's group, 23 personsbeing beneficiaries under Senior Leader Group and each one ofthem occupied senior position in the companies comprised in theShriram Group. Further, the learned Senior Standing Counselreferred to the contributors of Rs.25 Crores by six concerns,viz., (i) Shriram Business Finance – AAAFS2592K – Rs.2 Crores; (ii) Shriram Credit Syndicate – AAAFS1437K – Rs.5 Crores; (iii) Shri SR E-Commerce Finance – AAXFS7828M – Rs.5 Crores; (iv) Shriram Two Wheeler Finance – AAWFS9761N – Rs.3 Crores;(v) Shriram Domestic Finance – AAAFS2600Q – Rs.8 Crores; and (vi) Shriram Professional Finance – AAAFS1440A – Rs.2 Croresand, submitted that all of them are located in the same addressin Chennai and the gratis given to the assessee Trust in whichthe beneficiaries are people occupying high position in ShriramGroup, is obviously an amount received on behalf of thebeneficiaries. 27.It is further contended that the assessee is arepresentative assessee as defined under Section 160(1)(iv) ofthe Act and the benefit or perquisite is derived by the assesseeTrust on behalf of its beneficiaries and therefore, Section 56(1) of the Act will come into play and income of every kindwhich is not included from the total income under the Act are tobe charged to income tax under the head “income from othersources”. 28.With regard to the finding of the Tribunal thatindividual should mean a living person, it is submitted that thegifts are actually received by the individuals and the assesseeTrust has acted as a conduit and the Act does not provide forsuch tax evasion. Further, relying upon the proviso underSection 56(2)(vii) it was argued that the proviso is merely usedto act as an optional addendum to the enactment providing anexception. 28.With regard to the finding of the Tribunal thatindividual should mean a living person, it is submitted that thegifts are actually received by the individuals and the assesseeTrust has acted as a conduit and the Act does not provide forsuch tax evasion. Further, relying upon the proviso underSection 56(2)(vii) it was argued that the proviso is merely usedto act as an optional addendum to the enactment providing anexception. 29.With regard to the insertion of clause (x) to Section 56(2), it is submitted that the argument that the said provisionwas inserted with prospective effect cannot come to the rescueof the assessee, since the Revenue has been subjected toestablish that the assessee is a representative assessee and notan AoP and would get categorised as an individual assessee andthe provision of Section 56(2)(vii) is required to be enforcedon the assessee. It is further submitted that the Department isfully right in invoking the proviso to Sections 4 and 5 of theAct to bring the income to tax. Further, it is submitted thatthe assessee cannot raise any contentions with regard to the https://hcservices.ecourts.gov.in/hcservices/ finding of the Tribunal over which the assessee has not filed anappeal and in this regard, referred to Section 260A of the Act,Section 10 of the Code of Civil Procedure and Order 42 Rule 11of the Code of Criminal Procedure. 30.With regard to the attempt of the assessee to canvasscertain issues before this Court stating that they aresubstantial questions of law, to be decided in this appeal,Mr.T.Ravi Kumar, learned Senior Standing Counsel by referring tothe following decisions, submitted that such a prayer cannot beentertained:- (i) Helios AMD Metheson Information Technology Ltd. vs. ACTI[(2011) 332 ITR 4303 (Madras)]; (ii) Indian Additives Ltd. vs. DCIT [(2012) 67 DTR 0389]; (iii) CIT vs. Indo Gulp Fertilizers Ltd., [(2013) 355 ITR0437]; (iv) Phool Pata vs. Vishwanath Singh [(2005) 197 CTR 0598 (SC); and (v) CIT vs. Mastek Ltd. [(2013) 358 ITR 0252 (SC)]. 31.To substantiate the argument that the assessee has to becategorised as an individual, reliance was placed on thedecision in Kerala Financial Corporation vs. Wealth-Tax Officer[(1971) 82 ITR 477 (FB) Kerala]; Assam Financial Corporation vs.Commissioner of Wealth-Tax [(1974) 94 ITR 404]; Banarsi Dass &Ors. vs. Wealth Tax Officer, Spl. Circle, Meerut & Ors. [(1965)56 ITR 224]; Commissioner of Welath Tax vs. Hyderabad Race Club[(1978) 115 ITR 453]; Royal Calcutta Turf Club vs. Wealth TaxOfficer [(1984) 184 ITR 790] and Coimbatore Club vs. Wealth-TaxOfficer [(1985) 153 ITR 172]. Reliance was also placed on thedecisions in the case of Ramanlal Kamdar vs. CIT [(1977) 108 ITR73] and P.R.Narahari Rao vs. CIT [(2008) 299 ITR 400]. 32.Mr.R.Sivaraman, learned counsel appearing for therespondent assessee submitted that the Trust was established on11.09.2006 for distribution of retirement benefit to the ownersand senior leaders chosen from Shriram entities when they attainsixty years of age. It is submitted that the entire income ofthe Trust is not straight away paid, but a committee determinesthe Net Worth Available for Apportionment (NWAA) and apercentage of it alone be distributed at the end of duration ofthe Trust in which 1/3[rd] of the corpus and accumulated incomeremaining shall be given for charitable purposes and 2/3[rd] shallbe distributed among the beneficiaries. It is submitted thatthe return of income filed by the assessee was in the status ofTrust. The Trust received voluntary/gratuitous payment from sixentities to the tune of Rs.25 Crores as contribution to corpusfund and it was directly credited to the capital account of theTrust. This corpus amount did not form part of income distributed to the beneficiaries. So, the contributions werenot income received or receivable on behalf of thebeneficiaries. The return filed by the assessee for theassessment year under consideration was in form ITR-5. It wasfiled in the status of a Trust, the assessment was made bytreating the assessee as a Trust. 33.It is submitted that the JCIT did not have jurisdictionto issue directions on an issue which is not subject matter ofpending assessment, as the scrutiny was only a limited scrutiny.In this regard, the CBDT circular dated 14.07.2016 was referredto. Further, it is submitted that the assessee Trust filed itsreturn as per Rule 12 of the Income Tax Rules (for brevity “theRules”) prescribed by the CBDT in the status of Trust and thiswas accepted and an intimation under Section 143(1) was issuedand subsequently, notice under Section 142(1) was issueddescribing the assessee's status as a Trust. The assessment wasmade in the status of Trust and not in the status ofrepresentative assessee under Section 161(1) of the Act.Therefore, the Assessing Officer could not have applied theprovisions dealing with individuals and HUFs. Further, theRevenue cannot place reliance on Section 161 of the Act, as theprovision will apply only when the income is specificallyreceivable on behalf of or for the benefit of any one person whoare known or whose shares are determinate. In the assessee'scase, the beneficiaries are indeterminate and the individualshares in the income are also indeterminate. Furthermore, thevoluntary contributions received by the Trust were taken intocorpus and did not form part of any income distributed to thebeneficiaries. Therefore, the contributions were not incomereceivable on behalf of the beneficiaries and therefore, Section164 of the Act alone can be applied. 34.With regard to the interpretation of the term“individual” occurring in Section 56(2), it is submitted that itrefers to a natural human being only, as there is a reference to“relatives of the individual” and “occasions like marriage ofindividual” which shall prove that the term “individual” inSection 56(2)(vii) means living human being. In this regard,reference was made to the decision in Smt.Sodra Devi and MriduHari Dalmia Parivar Trust. Further, it is submitted thatSection 56(2)(v) or 56(2)(vi) or 56(2)(vii)(a) would beattracted only when individuals or HUFs receive any sum ofmoney. The emphasis is on the receipt by the individual himselfand not by some one else on their behalf. The word “receive” inthe context of the above mentioned means receipt of a sum ofmoney over which the recipient gets absolute control like rightsof enjoyment etc. In the assessee's case, the beneficiariesunder the scheme of the Trust did not have rights to receive theincome periodically. It vests only on their retirement. Further, it is submitted that Section 56(2)(vii)(a) which is acharging section is differently worded from Section 5(1)(a).Under Section 5(1)(a) income of a person includes all incomewhich is received or deemed to be received by or on behalf ofsuch person whereas Section 56(2)(vii)(a) states that theindividual receives a sum of money, it does not include sumsreceived by some one else on his behalf and therefore, thisprovision is individual/HUF centric, as it imposes theartificial liability. Further, it is submitted that Section 56(2)(vii)(a) which is acharging section is differently worded from Section 5(1)(a).Under Section 5(1)(a) income of a person includes all incomewhich is received or deemed to be received by or on behalf ofsuch person whereas Section 56(2)(vii)(a) states that theindividual receives a sum of money, it does not include sumsreceived by some one else on his behalf and therefore, thisprovision is individual/HUF centric, as it imposes theartificial liability. 35.With regard to the decisions relied on by the Revenue,viz., in Venu Suresh Sheela Trust, Arihant Trust,T.S.K.Enterprises, SEA Head Office, Niti Trust, and MarsonsBeneficiary Trust, it is submitted that those decisions were allrendered in different context and cannot be applied to theassessee's case. All the aforementioned decisions havereferred to and relied upon the decision in Indira Balkrishnawherein the Court added a word of caution about the test fordetermining an association of person and this word of cautionshould be borne in mind while considering the facts of the case. 36.Further, it is submitted that the amendment to Section 2(31) by insertion of explanation by Finance Act, 2002 witheffect from 01.04.2002 has to be read bearing in mind the wordsof caution as spelt out by the Hon'ble Supreme Court in IndiraBalkrishna and all those decisions were rendered prior to theamendment by Finance Act 2002. Furthermore, on facts in allthose decisions, either the beneficiaries are known or theindividual shares are known and therefore, Section 161 wasinvoked and in some of those cases, the assessee themselves havefiled return in the status of “individual” unlike the case onhand, where Section 161 cannot be invoked. It is furthersubmitted that the decisions in Banarsi Dass, Kerala FinancialCorporation, Assam Financial Corporation, Hyderabad Race Club,Royal Calcutta Turf Club and Coimbatore Club relied on by theRevenue support the case of the assessee, wherein it was heldthat individual should be interpreted in the context in which itis used and all the judgments relate to assessment years priorto the amendment in Section 2(31) by Finance Act, 2002. 37.Further, the learned counsel sought to sustain thefinding of the Tribunal qua the insertion of clause (x) inSection 56(2) of the Act. Thus, it is submitted that theassessee has to be treated as an AoP and not an individual, inthe light of the legislative change by way of its insertion ofexplanation below Section 2(31) inserted with effect from01.04.2002 as also the fact that the return of income was filedin accordance with Rule 12A of the Rules in the prescribed formITR-5 which form is applicable to private discretionary Trusts.Further, it is submitted that even assuming the assessee has to be treated as an individual, the provisions of Section 56(2)(vii)(a) cannot be applied, as the term “individual” in thatSection has the words denoting 'relatives' mentioning aboutoccasions like marriage etc., and this needs to be interpretedfollowing the ratio in the case of Smt.Sodra Devi to mean thatindividual should denote a living person and not a Trust. 38.Heard Ms.R.Hemalatha, learned Senior Standing Counselappearing for the appellant/Revenue and Mr.R.Sivaraman, learnedcounsel appearing for the respondent/assessee. be treated as an individual, the provisions of Section 56(2)(vii)(a) cannot be applied, as the term “individual” in thatSection has the words denoting 'relatives' mentioning aboutoccasions like marriage etc., and this needs to be interpretedfollowing the ratio in the case of Smt.Sodra Devi to mean thatindividual should denote a living person and not a Trust. 38.Heard Ms.R.Hemalatha, learned Senior Standing Counselappearing for the appellant/Revenue and Mr.R.Sivaraman, learnedcounsel appearing for the respondent/assessee. 39.The first substantial question of law raised by therevenue in this appeal is whether the Tribunal was right inholding that the investment which yielded no exempt income wasto be excluded while computing deduction under Section 14A whenthe Act as well as the Rules do not provide for any suchexception. An identical question was raised by the revenue inthe assessee's own case in T.C.A.No.241 of 2018 for theassessment year 2013-14. When the said tax case appeal washeard, we noted that the substantial question of law has to beanswered in favour of the assessee in the light of the decisionof the Hon'ble Division Bench in the case of M/s.Marg Limitedvs. CIT, Chennai [T.C.A.Nos.41 to 43 and 220 of 2017 dated30.09.2020]. However, the appeal filed by the revenue wasdismissed on 08.07.2020 owing to low tax effect. The revenuecannot dispute the fact that the above substantial question oflaw was decided in favour of the assessee. In the case ofM/s.Marg Limited, in which the decision of the High Court ofKarnataka in Pragathi Krishna Gramin Bank vs. JCIT [(2018) 95Taxman.com 41(Kar.)] was followed. Further, the Delhi Bench ofITAT in the case of ACIT, Circle 17(1), New Delhi vs. VireetInvestment (P) Ltd. [(2017) 82 Taxman.com 415 (Delhi-Trib.)(SB)]also decided the said issue in favour of the assessee. Thus,following the above referred decision, substantial question oflaw No.1 is answered in favour of the assessee and against therevenue. 40.Substantial question of law Nos.2 and 3 areinterconnected, namely, a decision on the status of the assesseewhether it has to be assessed as an individual or as anassociation of persons and whether the assessee