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September 17, 2022

To claim the benefit of a private beneficiary trust, the assessee must provide evidence

by CA Shivam Jaiswal in Income Tax, Legal Court Judgement

To claim the benefit of a private beneficiary trust, the assessee must provide evidence

Facts and Issue of the Case

The assessee has raised the following common grounds of appeal

1. BECAUSE THE LD AO ERRED IN LAW AS WELL AS ON FACTS TO HAVE DISALLOWED THE CLAIM OF THE ASSESSEE I.E. THE ASSESSEE BEING A PRIVATE BENEFICIARY TRUST WITH A DETERMINATE PERCENTAGE OF SHARE IS LIABLE TO BE TAXED IN THE MANNER OF AN INDIVIDUAL

2. BECAUSE THE LD CIT(A), NFAC ALSO ERRED IN LAW AS WELL AS 0N F ACTS TO HAVE DISALLOWED THE CLAIM OF THE ASSESSEE I.E. THE ASSESSEE BEING A PRIVATE BENEFIClARY TRUST WITH A DETERMINATE PERCENTAGE OF SHARE IS LIABLE TO BE TAXED IN THE MANNER OF AN INDIVIDUAL

3. THAT THE APPELLANT PRAYS FOR RELEIF AGAINST ACTIONS OF THE LOWER AUTHORITY IN DENYING INCOME TAX EXEMPTION AS APPLICABLE FOR THE ASSESSEE.

4. THAT THE APPELLANT CRA YES LEA YE TO ADD, AMEND, ALTER, YARY A DIOR WITHDRAW A Y OR ALL THE ABOVE GROUNDS OF APPEAL.

The facts of the case are that the assessee filed its return of income for the AY 2016-17 on ITR-7 declaring income at Rs.1,57,340/-. The said return was processed by Centralized Processing Center (CPC) assessing the income at Rs.1,57,340/-, but charging tax thereon by treating the assessee as charitable trust. Aggrieved, the assessee preferred an appeal before the ld. CIT(A), but failed to succeed. Now, the assessee is in appeal before this Tribunal.The Ld. Departmental Representative supported the order of the ld. CIT(A).

Observation by the Court

The court had heard the Ld. DR and perused the record placed before us. We observe that the claim of assessee is that it is a Private Beneficiary Trust and thus, it was required to file its return of income on ITR-5, but inadvertently it filed ITR-7, which is meant for charitable trust claiming exemption(s). Before ld. CIT(A), it was submitted by the assessee that it tried to file revised return, but failed to do it and the rectification application filed thereafter could not bring any relief claimed. It was also submitted before ld. CIT(A) that the assessee is a Private Beneficiary Trust with the determinate percentage of share and thus, liable to be taxed in the manner of an individual and since the income of the assessee trust is less than the prescribed limit of income, not chargeable to tax, in case of an individual no tax was payable.

The court further observe that the assessee could not file any evidence to establish that it is a private beneficiary trust with a determinate percentage of share. For lack of this evidence, the ld. CIT(A) dismissed the assessee’s appeal. The court therefore, in the interest of justice and being fair to both the parties deem it fit and proper to restore the issues raised in this instant appeal to the ld. CIT(A) for fresh adjudication with a liberty to the assessee to file the necessary evidence(s) to prove that it is a private beneficiary trust with the determinate income percentage of share and is liable to tax in the manner of an individual. Needless to mention that the assessee be provided reasonable opportunity of being heard. The assessee is also directed to remain compliant and not to take adjournment unless otherwise required for reasonable cause. In case the assessee is not able to file necessary evidence, then ld. CIT(A) can proceed as per law.

Conclusion

The appeal of the assessee is allowed for statistical purpose.

Ramgopal-Thirani-Vs-D.CIT-ITAT-Kolkata

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