The Commissioner of Income-tax, Chennai v. TVS Shriram Growth Fund
[Citation -2020-LL-0928-66]

Citation 2020-LL-0928-66
Appellant Name The Commissioner of Income-tax, Chennai
Respondent Name TVS Shriram Growth Fund
Court HIGH COURT OF MADRAS
Relevant Act Income-tax
Date of Order 28/09/2020
Assessment Year 2009-10
Judgment View Judgment
Keyword Tags substantial question of law • representative capacity • interest income earned • venture capital fund • charge of tax • deed of trust • earn profit • trust deed • penalty • determinate trust • furnishing inaccurate particular of income
Bot Summary: 735, 736, 890 916 of 2018 473, 474, 480, 481, 569 570 of 2019 remains that as per the amended provisions of Sec.10(23fb) of the Income Tax Act by Finance Act, 2007 with effect from 01.04.2008, the income derived out of investment in Non Venture Capital undertaking is not exempt in the hands of the Venture Capital Fund like the assessee. As regards the interest, income of the Fixed Deposits with the banks assessed in the hands of the assessee Trust, the Tribunal held that the income should be assessed in the hands of the beneficiaries and not the assessee, since the Trust has been held to be a determinate Trust. Accordingly, the Tribunal set aside the order of the CIT(A) and remitted the issue back to the Assessing Officer to decide the matter afresh on merits and in accordance with Rule 12C and Section 115U for computation of correct income under the head interest income. The Tribunal erred in law in not considering the fact in the case of Venture Capital Fund through a special enactment in the statute dealing under Section 10(23FB) of the Act and the assessee must confirm to the parameters laid down under the above Section and therefore, would be eligible to pass through status but the same would be restricted to the extent of the income derived from VCUs and not the income which is derived from investments in bank deposits. The Tribunal failed to note that as per Form 64, which is a document created by a statute wherein the statement of income paid or credited by the Venture Capital Fund to its beneficiary as required under Section 115U read with Rule 12C, it has been clearly signified that the other income such as interest from investment in Venture Capital Undertaking has only to be passed on to the beneficiary. Section 161 provides for the extent of the liability of the representative assessee to the effect that every representative assessee as regards the income in respect of which he is a representative assessee, shall be subject to the same duties, responsibilities and liabilities as if the income received by or accruing to or in favour of him beneficially, and shall be liable to assessment in his own name in respect of that income; but any such assessment shall be deemed to be made upon him in his representative capacity only, and the tax shall, subject to the other provisions contained in Chapter XV, be levied upon and recovered from him in like manner and to the same extent as it would be leviable upon and recoverable from the person represented by him. 735, 736, 890 916 of 2018 473, 474, 480, 481, 569 570 of 2019 comes into play only where any income or any part thereof is not specifically receivable on behalf of or for the benefit of any one person or where the individual shares of the persons on whose behalf or for whose benefit such income or such part thereof is receivable are indeterminate or unknown, and in such case, the relevant income, or part of the relevant income shall be charged at the maximum marginal rate.


T.C.A.Nos.735, 736, 890 & 916 of 2018 & 473, 474, 480, 481, 569 & 570 of 2019 IN HIGH COURT OF JUDICATURE AT MADRAS DATED : 28.09.2020 CORAM HONOURABLE MR.JUSTICE T.S.SIVAGNANAM and HONOURABLE MRS.JUSTICE V.BHAVANI SUBBAROYAN Tax Case Appeal Nos.890, 735, 736 & 916 of 2018, 473, 474, 480, 481, 569 & 570 of 2019 T.C.A.Nos.890 & 916 of 2018 :- Commissioner of Income tax, Chennai. Appellant -vs- M/s.TVS Shriram Growth Fund, 249-A, Ambujammal street, Off: TTK Road, Near Alwarpet Post Office, Alwarpet, Chennai-600 018. PAN: AABIT5582H .. Respondent Appeals under Section 260A of Income-tax Act, 1961, against common order dated 07.06.2017, made in I.T.A.No.981/Mds/2016 & I.T.A.No.982/Mds/2016 on file of Income Tax Appellate Tribunal 'C' Bench, Chennai for assessment years 2009-10 and 2010-11 respectively. T.C.A.Nos.735 & 736 of 2018 :- Commissioner of Income tax, Chennai. .. Appellant -vs- 1/26 http://www.judis.nic.in T.C.A.Nos.735, 736, 890 & 916 of 2018 & 473, 474, 480, 481, 569 & 570 of 2019 M/s.TVS Shriram Growth Fund, 249-A, Ambujammal street, Off: TTK Road, Near Alwarpet Post Office, Alwarpet, Chennai-600 018. PAN: AABTT5582H .. Respondent Appeals under Section 260A of Income-tax Act, 1961, against common order dated 28.02.2018, made in I.T.A.No.2443/Chny/2017 & I.T.A.No.2444/Chny/2017 on file of Income Tax Appellate Tribunal 'C' Bench, Chennai for assessment years 2009-10 and 2010-11 respectively. T.C.A.Nos.473, 474, 480 & 481 of 2019 :- Commissioner of Income tax, Chennai. .. Appellant -vs- M/s.TVS Shriram Growth Fund, Jayalakshmi Estate, No.29 (Old No.8), Haddows Road, Chennai-600 006. PAN: AABTT5582H .. Respondent Appeals under Section 260A of Income-tax Act, 1961, against common order dated 15.11.2018, made in I.T.A.No.347/Chny/2018, I.T.A.No.344/Chny/2018, I.T.A.No.345/Chny/2018 & I.T.A.No.346/Chny/ 2018 on file of Income Tax Appellate Tribunal 'B' Bench, Chennai for assessment years 2014-15, 2011-12, 2012-13 and 2013-14 respectively. T.C.A.Nos.569 & 570 of 2019 :- Commissioner of Income tax, Chennai. .. Appellant 2/26 http://www.judis.nic.in T.C.A.Nos.735, 736, 890 & 916 of 2018 & 473, 474, 480, 481, 569 & 570 of 2019 -vs- M/s.TVS Shriram Growth Fund, 249-A, Ambujammal Street, Off: TTK Road, Near Alwarpet Post Office, Alwarpet, Chennai-600 018. PAN: AABIT5582H .. Respondent Appeals under Section 260A of Income-tax Act, 1961, against common order dated 04.04.2018 made in M.P.No.310/Chny/2017 in I.T.A.No.981/Mds/2016 and M.P.No.311/Chny/2017 in I.T.A.No.982/Mds/ 2016 on file of Income Tax Appellate Tribunal 'C' Bench, Chennai for assessment years 2009-10 and 2010-11 respectively. For Appellant : Mr.T.Ravi Kumar, (In all Appeals) Senior Standing Counsel For Respondent : Mr.Percy Pardiwalla, (In all Appeals) Senior Counsel for M/s.Subbaraya Aiyar, Padmanabhan & Ramamani ****** COMMON JUDGMENT (Delivered by T.S.Sivagnanam, J.) above tax case appeals, under Section 260A of Income Tax Act, 1961 (hereinafter referred to as Act ), have been filed by Revenue 3/26 http://www.judis.nic.in T.C.A.Nos.735, 736, 890 & 916 of 2018 & 473, 474, 480, 481, 569 & 570 of 2019 challenging orders passed by Income Tax Appellate Tribunal (for brevity Tribunal ), details of which are tabulated hereunder:- T.C.A. I.T.A.Nos./M.P.Nos. in Tribunal Date of Assessment Nos. I.T.A.Nos Bench Order Years 735/2018 I.T.A.No.2443/Chny/2017 'C' Bench 28.02.2018 2009-10 736/2018 I.T.A.No.2444/Chny/2017 'C' Bench 28.02.2018 2010-11 890/2018 I.T.A.No.981/Mds/2016 'C' Bench 07.06.2017 2009-10 916/2018 I.T.A.No.982/Mds/2016 'C' Bench 07.06.2017 2010-11 473/2019 I.T.A.No.347/Chny/2018 'B' Bench 15.11.2018 2014-15 474/2019 I.T.A.No.344/Chny/2018 'B' Bench 15.11.2018 2011-12 480/2019 I.T.A.No.345/Chny/2018 'B' Bench 15.11.2018 2012-13 481/2019 I.T.A.No.346/Chny/2018 'B' Bench 15.11.2018 2013-14 569/2019 M.P.No.310/Chny/2017 in 'C' Bench 04.04.2018 2009-10 I.T.A.No.981/Mds/2016 570/2019 M.P.No.311/Chny/2017 in 'C' Bench 04.04.2018 2010-11 I.T.A.No.982/Mds/2016 2.T.C.A.Nos.735 and 736 of 2018 were admitted on 03.09.2020, on following substantial questions of law:- 1.Whether Tribunal was right in deleting penalty levied under Section 271(1)(c) treating assessee as 4/26 http://www.judis.nic.in T.C.A.Nos.735, 736, 890 & 916 of 2018 & 473, 474, 480, 481, 569 & 570 of 2019 determinative Trust and allowing pass through status under Section 161(1) of Act on interest income earned by assessee from fixed deposit which is non venture capital undertaking activity and as per provision of Section 10(23fb) read with Section 115U do not allow same with effect from 1st April, 2008? and 2.Whether Tribunal was right in deleting penalty by treating assessee as determinative Trust and allowing it to pass through status under Section 161(1) especially when shares of beneficiary are ot incorporated in deed of Trust by are only shown in later contribution agreement which is in violation of Explanation 1(ii) to Section 164 of I.T.Act? 3.T.C.A.Nos.890 and 916 of 2018 were filed raising following substantial questions of law:- 1.Whether Tribunal was right in holding that assessee is determinate Trust as per Section 161(1) assessable in capacity of representative assessee, especially when shares of beneficiary are not incorporated in deed of trust and had only been shown in Contribution Agreement entered subsequently which is in 5/26 http://www.judis.nic.in T.C.A.Nos.735, 736, 890 & 916 of 2018 & 473, 474, 480, 481, 569 & 570 of 2019 violation of provisions of Explanation (1)(ii) to Section 164 of Income Tax Act, 1961? and 2.Whether Tribunal was right in law and had material to hold that assessee is determinate Trust, allowing it to pass through status under Section 161(1) in respect of interest income earned y assessee from fixed deposits which is non VCU activity and is to be assessed in hands of assessee's beneficiaries by remitting said issue back to file of AO for computing correct income under various heads in hands of beneficiaries especially when fact remain provisions of Section 10(23FB) read with Section 115U does not allow such benefit to be granted with effect from 01.04.2008? 4.T.C.A.Nos.473, 474, 480 and 481 of 2019 were admitted on 19.07.2019, on following substantial question of law:- Whether on facts and circumstances of case, Tribunal was right in holding that assessee Trust was determinate Trust eligible for pass through status and that interest income received by assessee funds out of income made in non venture capital undertaking is to be assessed only in hands of beneficiary especially when fact 6/26 http://www.judis.nic.in T.C.A.Nos.735, 736, 890 & 916 of 2018 & 473, 474, 480, 481, 569 & 570 of 2019 remains that as per amended provisions of Sec.10(23fb) of Income Tax Act by Finance Act, 2007 with effect from 01.04.2008, income derived out of investment in Non Venture Capital undertaking is not exempt in hands of Venture Capital Fund like assessee. 5.T.C.A.Nos.569 & 570 of 2019 were admitted on 09.08.2019, on following substantial questions of law:- 1.Whether Tribunal was right in deciding miscellaneous petition in favour of assessee when it had already remitted said issues back to file of Assessing Officer in main order passed earlier especially when it had no power of review by re-adjudicating said issues? 2.Whether Tribunal has powers under Section 254(2) to reappraise evidence on record and readjudicate same issues and give totally different finding to one earlier given, which it had already decided on merits? 3.Whether Tribunal was right in holding that assessee is determinate trust as per Section 161(1) assessable in capacity of representative assessee, especially when shares of beneficiary are not 7/26 http://www.judis.nic.in T.C.A.Nos.735, 736, 890 & 916 of 2018 & 473, 474, 480, 481, 569 & 570 of 2019 incorporated in deed of trust and had only been shown in contribution agreement entered subsequently, which is in violation of provisions of Explanation (1)(ii) to Section 164 of Income Tax Act, 1961? and 4.Is not reasoning and finding of Tribunal perverse and bad by holding that assessee is determinate trust, allowing it to pass through status under Section 161(1) in respect of interest income earned by assessee from fixed deposits, which is non VCU activity and is to be assessed in hands of assessee's beneficiaries by remitting said issue back to file of Assessing Officer for computing correct income under various heads in hands of beneficiaries especially when fact remains that provisions of Section 10(23FB) read with Section 115U do not allow any such benefit to be granted with effect from 01.04.2008? 6.Heard Mr.T.Ravi Kumar, learned Senior Standing Counsel for appellant/Revenue and Mr.Percy Pardiwalla, learned Senior Counsel for M/s.Subbaraya Aiyar, Padmanabhan and Ramamani, learned counsel for respondent/assessee. 8/26 http://www.judis.nic.in T.C.A.Nos.735, 736, 890 & 916 of 2018 & 473, 474, 480, 481, 569 & 570 of 2019 7.As could be seen from above tabulated statement, T.C.A.Nos.569 and 570 of 2019 have been filed by Revenue against order passed in miscellaneous petitions filed before Tribunal by assessee. 8.Two issues which have been raised by assessee are on merits, which would be dealt with while dealing with T.C.A.Nos.890 and 916 of 2018 and 473, 474, 480 and 481 of 2019. Two other issues are with regard to powers of Tribunal under Section 254(2) of Act, which we shall deal with after dealing with merits of matter. 9.Since facts are identical and assessee is one and same person, T.C.A.No.890 of 2019 is taken as lead case. 10.The assessee is assessed as Association of Persons (AoP) and for assessment year under consideration, viz., 2009-10, assessee filed their return of income on 31.07.2009. case was selected for scrutiny and notice under Section 143(2) of Act was issued on 24.08.2010. information called for 9/26 http://www.judis.nic.in T.C.A.Nos.735, 736, 890 & 916 of 2018 & 473, 474, 480, 481, 569 & 570 of 2019 was furnished by assessee. Assessing Officer opined that assessee, being Investment Management Entity, manages funds of TVS Investments I Fund. As per Trust Deed dated 01.02.2008, it has been stated that primary objective of Trust was to carry on activity of Venture Capital Fund as permissible under Venture Capital Fund Regulations and for purpose of raising resources to make available Venture Capital Assistance to investee companies so as to achieve long-term capital appreciation for contributors/beneficiaries under respective schemes. Assessing Officer held that prime activity of assessee is to earn profit and assessee had incurred expenses towards Investment Manager Fees, One Time Set Up Organisational Fee, Establishment Expenses and Administrative Expenses and these were incurred at regular intervals and in consistent manner. Therefore, Assessing Officer came to conclusion that these clearly indicate that aim of assessee was to earn profit. Accordingly, Assessing Officer held that income arising out of activities of assessee has to be assessed as 'income from business' and therefore, same is liable to be taxed at maximum marginal rate. 10/26 http://www.judis.nic.in T.C.A.Nos.735, 736, 890 & 916 of 2018 & 473, 474, 480, 481, 569 & 570 of 2019 11.It is stated that assessee is SEBI registered fund and has resources to make investment decisions and therefore, Assessing Officer held that it is hard to believe that assessee has paid exorbitant figures to investment manager M/s.TVS Capital Funds Ltd., and this was found to be on higher side and accordingly, 50% of it was disallowed and assessee was assessed under Section 37 of Act. Other deductions were made and ultimately, assessment was completed under Section 143(3) of Act, vide order dated 31.12.2011. Aggrieved by such order, assessee preferred appeal before Commissioner of Income Tax (Appeals)-4, Chennai (for brevity CIT(A)) claiming that they are entitled for exemption under Section 10(23FB)of Act. CIT(A) directed Assessing Officer to tax interest income earned out of Fixed Deposits with banks in hands of assessee and Assessing Officer also passed giving effect order. Aggrieved by order of CIT(A), assessee filed appeal before Tribunal contending that it is contributory Trust and income of assessee is to be allowed in accordance with Section 161(1) of Act. Tribunal held that trust was determinate Trust and shares of beneficiaries were identifiable and accordingly, allowed 11/26 http://www.judis.nic.in T.C.A.Nos.735, 736, 890 & 916 of 2018 & 473, 474, 480, 481, 569 & 570 of 2019 assessee's appeal. As regards interest, income of Fixed Deposits with banks assessed in hands of assessee Trust, Tribunal held that income should be assessed in hands of beneficiaries and not assessee, since Trust has been held to be determinate Trust. Accordingly, Tribunal set aside order of CIT(A) and remitted issue back to Assessing Officer to decide matter afresh on merits and in accordance with Rule 12C and Section 115U for computation of correct income under head interest income . Aggrieved by same, Revenue has filed T.C.A.No.890 of 2018. 12.Mr.T.Ravi Kumar, learned Senior Standing Counsel appearing for Revenue raised following contentions:- 12.1. Tribunal missed to note that as per Explanation 1(ii) to Section 164 of Act, for Trust to be determinate, both beneficiary and their individual shares need to be expressly stated in instrument of Trust itself and be identifiable/ascertainable as on date of instrument which is not case on hand, since beneficiary are totally unknown and are identified only by contribution agreement. 12/26 http://www.judis.nic.in T.C.A.Nos.735, 736, 890 & 916 of 2018 & 473, 474, 480, 481, 569 & 570 of 2019 12.2. Tribunal erred in law in not considering fact that beneficiaries of Venture Capital Fund are identified only by contribution agreement, that is, Private Placement Memorandum and hence assessee does not satisfy condition of Explanation 1(ii) to Section 164 of Act in order to become eligible to be treated as determinate Trust. 12.3. Tribunal erred in law in not considering fact in case of Venture Capital Fund through special enactment in statute dealing under Section 10(23FB) of Act and assessee must confirm to parameters laid down under above Section and therefore, would be eligible to pass through status but same would be restricted to extent of income derived from VCUs and not income which is derived from investments in bank deposits. 12.4. Tribunal failed to note that as per Form 64, which is document created by statute wherein statement of income paid or credited by Venture Capital Fund to its beneficiary as required under Section 115U read with Rule 12C, it has been clearly signified that other income such as interest from investment in Venture Capital Undertaking has only to be passed on to beneficiary. 13/26 http://www.judis.nic.in T.C.A.Nos.735, 736, 890 & 916 of 2018 & 473, 474, 480, 481, 569 & 570 of 2019 13.The learned Senior Standing Counsel further submitted that in respect of assessee, M/s.TVS Investments I Fund, identical issue was considered by Tribunal and in I.T.A.No.3339/Mds/2016 for assessment year 2009-10 by order dated 19.04.2017, Tribunal dismissed appeal filed by assessee. Thus, it is submission of learned Senior Standing Counsel that apart from grounds raised above, reasons assigned by Tribunal in its order dated 19.04.2017 in case of M/s.TVS Investments I Fund would, in fact, be argument of Revenue and would support their stand. 14.To be pointed out that as against said order dated 19.04.2017, said assessee has filed T.C.A.No.319 of 2018, which will be dealt separately and outcome of appeal would depend upon decision taken in these appeals. 15.Mr.Percy Pardiwalla, learned Senior Counsel prefaced his submissions by stating that substantial questions of law, which have been raised for consideration in these appeals were considered and answered in favour of assessee and against Revenue by High Court of Karnataka in CIT & Anr. 14/26 http://www.judis.nic.in T.C.A.Nos.735, 736, 890 & 916 of 2018 & 473, 474, 480, 481, 569 & 570 of 2019 vs. India Advantage Fund-VII [(2017) 293 CTR 0510 (Kar.)]. It is submitted that said decision was rendered by Court on 01.02.2017 and Tribunal did not have benefit of going through said decision because Tribunal had heard appeal in case of TVS Investments I Fund on 01.02.2017 and has reserved judgment and was pronounced on 19.04.2017. It is submitted that in impugned order, Tribunal rightly took note of order passed by Bangalore Bench of Tribunal in said case, which was affirmed by High Court of Karnataka in case of India Advantage Fund-VII. For better appreciation, learned Senior Counsel has invited our attention to order passed by Bangalore Bench of Tribunal in case of India Advantage Fund-VII, which has been extensively referred to and extracted in impugned order of Tribunal. In paragraph 6.6 of impugned order, Tribunal noticed decision of High Court of Karnataka in case of India Advantage Fund-VII. 16.With regard to issue pertaining to interest income of Trust, on whom it has to be assessed, Tribunal has held in favour of assessee and has 15/26 http://www.judis.nic.in T.C.A.Nos.735, 736, 890 & 916 of 2018 & 473, 474, 480, 481, 569 & 570 of 2019 given elaborate reasons and has come to decision by referring to judgment of Hon'ble Division Bench of this Court in case of CIT vs. P.Sekhar Trust [(2010) 321 ITR 304 (Mad.)]. 17.After elaborately hearing learned counsels for parties and carefully perusing materials placed on record, we are of considered view that appeals filed by Revenue are to be decided against them and we support such conclusion with following reasons. 18.The broad issues which would fall for consideration are whether assessee Trust is determinate Trust or indeterminate Trust. Assessing Officer came to conclusion that it is indeterminate Trust, as list of beneficiaries has not been specifically set out in Deed of Trust. other issue would be whether if in case, beneficiaries are assessed for income arising from Trust and whether it is determinate or indeterminate can trust be assessed once over again. third issue would be whether merely because names of beneficiaries are not mentioned in Trust Deed, but shown as 16/26 http://www.judis.nic.in T.C.A.Nos.735, 736, 890 & 916 of 2018 & 473, 474, 480, 481, 569 & 570 of 2019 beneficiaries and are identifiable and having been assessed whether Trust can be assessed again. In fact, Tribunal ought to have followed decision of Division Bench of this Court in case of P.Sekhar Trust (supra). However, same has been distinguished by Tribunal in case of TVS Investments I Fund by observing that said judgment is not applicable to facts of case because in it, beneficiaries are incorporated on day of institution of Trust Deed and moreover, they did not receive any income in that year. Unfortunately, Tribunal in case of TVS Investments I Fund, did not fully appreciate finding rendered by Hon'ble Division Bench of this Court and post wrong question, which led to wrong answer. For better appreciation, we quote relevant paragraphs of judgment in P.Sekhar Trust (supra) hereunder:- 11. Section 5 of Act deals with scope of total income of any previous year of residents and non residents. Section 4 of Act deals with charge of income tax in respect of total income of previous year of every person 'subject to provisions of this Act'. Chapter XV of Act deals with liability in special cases. Representative assessees are dealt in Section 160 of Act. Section 17/26 http://www.judis.nic.in T.C.A.Nos.735, 736, 890 & 916 of 2018 & 473, 474, 480, 481, 569 & 570 of 2019 160(1)(iv) of Act provides that in respect of income which trustee appointed under trust declared by duly executed instrument in writing whether testamentary or otherwise (including any wakf deed, which is valid under Musalman Wakf Validity Act, 1913 (6 of 1913) receives or is entitled to receive on behalf of or for benefit of any person such trustee or trustees will be representative assessee. Section 161 provides for extent of liability of representative assessee to effect that every representative assessee as regards income in respect of which he is representative assessee, shall be subject to same duties, responsibilities and liabilities as if income received by or accruing to or in favour of him beneficially, and shall be liable to assessment in his own name in respect of that income; but any such assessment shall be deemed to be made upon him in his representative capacity only, and tax shall, subject to other provisions contained in Chapter XV, be levied upon and recovered from him in like manner and to same extent as it would be leviable upon and recoverable from person represented by him. 12. ................ 13. ................ 14. ................ 15. ................ 18/26 http://www.judis.nic.in T.C.A.Nos.735, 736, 890 & 916 of 2018 & 473, 474, 480, 481, 569 & 570 of 2019 16.. Thus, scheme of Act, statutory provisions, as well as line of judgments referred to above clearly state that though Section 5 referred to total income of person whose income is being assessed and charge on income tax under Section 4 of Act is on total income, what could be taxed in hands of representative assessee is only income which beneficiaries could be said to have received or to be deemed to have received in India or in whose favour income has accrued or arises or is deemed to accrue or arise to him in India; or accrues or arises to him outside India during relevant year. Though Trust may receive income, extent to which same can be taxed is to extent to which tax would leviable and recoverable from beneficiaries. Section 161 of Act specifically provides that tax to be levied on representative assessee and to be recovered from him is to be 'in like manner and to same extent as it would be leviable upon and recoverable from person represented by him.' (emphasis supplied) 17. Section 164 of Act gets attracts only when shares of beneficiaries are unknown, which is manifest from marginal heading of that Section itself, viz., Charge of tax where share of beneficiaries unknown. That Section 19/26 http://www.judis.nic.in T.C.A.Nos.735, 736, 890 & 916 of 2018 & 473, 474, 480, 481, 569 & 570 of 2019 comes into play only where any income or any part thereof is not specifically receivable on behalf of or for benefit of any one person or where individual shares of persons on whose behalf or for whose benefit such income or such part thereof is receivable are indeterminate or unknown, and in such case, relevant income, or part of relevant income shall be charged at maximum marginal rate. 18. From this, it is clear that in order to attract Section 164(1) of Act, beneficiaries on whose benefit, such income or such part thereof is receivable are indeterminate and unknown. 19.The legal position qua applicability of provisions of Section 14(1) of Act has been thoroughly examined by Tribunal and by elaborate order, Tribunal has held in favour of assessee. We find that Tribunal rightly took note of statutory provisions and law governing this subject and arrived at conclusion. view taken by Bangalore Bench of Tribunal was affirmed by High Court of Karnataka on following terms:- 6. As such, in our view matter should rest as finding of fact for simple reason that whether Trust Deed provides for shares of beneficiaries which are 20/26 http://www.judis.nic.in T.C.A.Nos.735, 736, 890 & 916 of 2018 & 473, 474, 480, 481, 569 & 570 of 2019 determinable or non-determinable would vary from facts to facts of each Trust including that of deed of trust etc. Such finding of fact can be arrived at after interpretation of terms and conditions of Trust Deed as well as other facts and circumstances which may be germane to reach conclusion on finding of fact. If matter is to rest on question of finding of fact, in our view, such question of finding of fact would be outside scope of judicial review in present appeals which would be limited to substantial questions of law. 7. ............. 8. ............. 9. ............. 10. In our view, contention is wholly misconceived for three reasons. One is that by no interpretative process explanation to Section 164 of Act, which is pressed in service can be read for determinability of shares of beneficiary with quantum on date when Trust deed is executed and second reason is that real test is determinability of shares of beneficiary and is not dependent upon date on which trust deed was executed if one is to connect same with quantum. real test is whether shares are determinable even when even or after Trust is formed or may be in future 21/26 http://www.judis.nic.in T.C.A.Nos.735, 736, 890 & 916 of 2018 & 473, 474, 480, 481, 569 & 570 of 2019 when Trust is in existence. In facts of present case, even assessing authority found that beneficiaries are to share benefit as per their investment made or to say in other words, in proportion to investment made. Once benefits are to be shared by beneficiaries in proportion to investment made, any person with reasonable prudence would reach to conclusion that shares are determinable. Once shares are determinable amongst beneficiaries, it would meet with requirement of law, to come out from applicability of Section 164 of Act. 11. Under circumstances, we cannot accept contention of Revenue that shares were non- determinable or view taken by Tribunal is perverse. On contrary, we do find that view taken by Tribunal is correct and would not call for interference so far as determinability of shares of beneficiaries are concerned. 12. Once shares of beneficiaries are found to be determinable, income is to be taxed of that respective sharer or beneficiaries in hands of beneficiary and not in hands of Trustees which has already been shown in present case. 22/26 http://www.judis.nic.in T.C.A.Nos.735, 736, 890 & 916 of 2018 & 473, 474, 480, 481, 569 & 570 of 2019 13. Under circumstances, in any case, it cannot be said that Tribunal has committed error. Accordingly, question is answered in affirmative against Revenue and in favour of assessee. 20.Thus, in light of above, substantial questions of law framed for consideration in these appeals are required to be answered against appellant/Revenue. 21.Insofar as T.C.A.Nos.569 and 570 of 2019 are concerned, substantial question of law Nos.1 and 2 relate to jurisdiction of Tribunal. Since we have held substantial questions of law framed for consideration in other appeals against Revenue and also held substantial question of law Nos.3 and 4 in instant case against appellant/Revenue, we find that substantial question of law Nos.1 and 2 regarding jurisdiction of Tribunal under Section 254(2) of Act has become academic and there would not be necessity to decide said questions in these appeals. Accordingly, those two questions are left open. 23/26 http://www.judis.nic.in T.C.A.Nos.735, 736, 890 & 916 of 2018 & 473, 474, 480, 481, 569 & 570 of 2019 22.With regard to T.C.A.Nos.735 and 736 of 2018, appeals arose out of orders of penalty passed under Section 271(1)(c) of Act for assessment years 2009-10 and 2010-11. We have perused penalty orders dated 18.05.2016 and 19.05.2016 respectively. penalty was levied on ground that assessee has furnished inaccurate particulars. orders stem out of assessment orders in which Assessing Officer held that assessee is indeterminate Trust. This issue has been answered in favour of assessee by Tribunal which order we have upheld in preceding paragraphs. Taking note of order passed by Tribunal in substantive appeals, Tribunal in instant appeals held that no penalty could have been levied and, affirmed order passed by CIT(A), which set aside order of penalty. 23.We find no error in order passed by Tribunal and in fact, no substantial question of law would arise for consideration in these appeals, as substantive appeal, based on which penalty show cause notice was issued, has gone, as legal issue has been decided in favour of respondent/assessee. 24/26 http://www.judis.nic.in T.C.A.Nos.735, 736, 890 & 916 of 2018 & 473, 474, 480, 481, 569 & 570 of 2019 24.Accordingly, T.C.A.Nos.735 and 736 of 2018 are also dismissed holding that no substantial question of law arise for consideration. 25.For above reasons, all these appeals stand dismissed. No costs. (T.S.S., J.) (V.B.S., J.) 28.09.2020 Index : Yes/No Speaking/Non-Speaking Order abr To 1.The Income Tax Appellate Tribunal 'B' Bench, Chennai. 2.The Income Tax Appellate Tribunal 'C' Bench, Chennai. 25/26 http://www.judis.nic.in T.C.A.Nos.735, 736, 890 & 916 of 2018 & 473, 474, 480, 481, 569 & 570 of 2019 T.S.Sivagnanam, J. and V.Bhavani Subbaroyan, J. (abr) T.C.A.Nos.735, 736, 890 & 916 of 2018, 473, 474, 480, 481, 569 & 570 of 2019 28.09.2020 26/26 http://www.judis.nic.in Commissioner of Income-tax, Chennai v. TVS Shriram Growth Fund
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