Tuesday, June 6, 2017

ITAT allowed sec. 54F relief to trust created for sole beneficiary of individual

The issue before the Tribunal was:

Whether a trust which was for the sole benefit of an individual was entitled to deduction under section 54F or not, when its status was that of AOP?

The Tribunal held in favour of trust as under:

1) As per section 54F the benefit of this section is available to individual or Hindu undivided family (HUF).The jurisdictional High Court in the case of Mrs. Amy F. Cama v. CIT [1994] 237 ITR 82 (Bom.) had elaborately considered the same issue. The High Court was dealing with trust's claim for deduction of purchase price of the flat from capital gain as per section 54. It was held that the trust was entitled to the same.

2) The High Court had held that section 161, makes a representative assessee subject to the same duties, responsibilities and liabilities as if the income was received by him beneficially. The fiction was 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.

3) The above decision of the High Court would squarely apply in the present case, when one was concerned with the issue of exemption under section 54F as Section 54 was also applicable to individuals and HUF.

4) In the instant case, the issue was benefit of investment made in purchase of flat for deduction under section 54F by the trustees and the sole beneficiary of the trust was the individual 'V'. Hence, the ratio emanating from the above jurisdictional High Courts decision was squarely applicable to the facts of the case.

5) Hence, It was clear that it was only by virtue of section 161 that trust had been assessed for the income that was for benefit of sole beneficiary. Accordingly, following the precedent, trust was principally entitled to deduction under section 54F. - [2017] 81 taxmann.com 367 (Mumbai - Trib.)
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