Wednesday, November 30, 2011

Compilations of case law: STATUS OF ASSESSEE ; TRUST

Amendment to Trust deed has no retrospective effect.
Bhriguraj Charitable Trust Vs CIT (Del) 228 ITR 50

For 80G registration, Trust should qualify for exemption u/s 11.
Mundakapadam Mandirams Society (Ker) 258 ITR 395

Assessee Trust not carrying out any charitable activity but using funds for construction of shopping complex – Renewal of 80G approval rejected by CIT.
Madani Musafir Khamar Welfare Society Vs CIT & Anr. (Patna) 264 ITR 481

Donation to charitable trust – Trust for religious purposes also – Trustees could spend the entire income of trust for religious purpose – Donation to such trust not entitled to 80G deduction.
Upper Ganges Sugar Mills Ltd Vs CIT (SC) 227 ITR 578
Arsha Vijnana Trust Vs D.P. Sharma, DIT(Exemptions ) (AP) 295 ITR 437

Charitable Trust – Income used for religious purpose, temple construction – CIT denies renewal of recognition.
KirtichandTarawati Charitable Trust Vs DIT (Exemption) & Ors. (Del) 232 ITR 11

Trust for propagation of a particular religion – Not a public charitable Trust.
M.P. Santhivarma Jain Vs State of Kerala & Anr. (Ker) 265 ITR 385

Trust created by members of family for upkeep of temples - Not public trust.
Kizhakke Kovilakam Trust Vs ACIT (Ker) 256 ITR 238

Sole beneficiary is minor – As per Trust deed, he is not entitled to any income when he is a minor – Assessment on Trust u/s 164(1) upheld.
ITO Vs Sheetal Sunder Trust (ITAT, Bang) 96 ITD 128

Trust not specifying shares of beneficiaries – Subsequent rectification deed specifying shares – Does not relate back – Prior to rectification, trust assessable as discretionary Trust
Ranga rao Lottery Agencies Vs CIT (MP) 287 ITR 542

Option to assess trust or beneficiary directly.
CIT Vs Bharti Devi Sarabhai (SC) 231 ITR 526
CIT Vs Dr. Anand Sarabhai Trust (SC) 231 ITR 524

When Assessing Officer assessed Trust, in fact, it was made on Trustees who were representing beneficiaries as representative assessees u/s 160(1)(iv) – Sec. 161(1A) overrides provisions of Sec. 166—It was the duty of Assessing Officer to tax the right person – Hence eventhough assessments were made on beneficiaries on the basis of return filed by Trustees on behalf of beneficiaries, Assessing Officer can assess the right person i.e., Trustees as representative assessee on whole of income consisting of profits & gains of business at maximum marginal rate.
DCIT Vs Manilal Bapalal Family Benefit Trust (ITAT, Mad) 66 ITD 179

Business carried on in terms of Trust deed – Tribunal correct in holding that trustees were not assessable as AOP.
CIT Vs K. Shyamaraju (Trustees) & Ors. (Kar) 189 ITR 392
As per Trust deed, Trustees had no discretion with regard to choice of beneficiary – all assets held by them were meant to be held solely for benefit of one solitary beneficiary – Maximum marginal rate applicable.
CIT Vs Saroja Raman & T.G. Ranjini Trust (Mad) 104 Taxman 163.

Trust deed named grand daughter of author of Trust as beneficiary entitled to Trust income on attaining majority – Not attained majority – Hence payment was left to absolute discretion of trustees, beneficiary is unknown and share indeterminate – Tax at maximum rate.
Anasuya Muthanna Vs CIT (Mad) 232 ITR 561

Since rights of beneficiaries to get corpus of trust fund come into existence only on a future date, interest of beneficiaries is indeterminate or unknown – contingent – Sec. 21(4) of WT Act attracted –Interest of beneficiaries to be assessed.
A.V. Reddy Trust & Ors. Vs CWT (SC) 240 ITR 409

Will comes into operation on the death of testator and not "in presenti" - Since the deed came into effect on the date of execution, it is not Will – Since only 10% income went to the benefit of relatives and balance went to charitable purposes, it cannot be said to be solely for the benefit of relatives.
Not covered by provisions (ii) & (iii) to 164(1)- To be taxed at 65%.
Chintamani Ghosh Trust Vs CIT (All) 222 ITR 578

Trust deriving income from business – assessment to be made in the hands of trustee.
CIT Vs Manoranjitham Thanga Maligai Trust (Mad) 260 ITR 143

Trust created by or on behalf of minor without prior sanction of Civil Court – Not a valid Trust.
T.A.V. Trust Vs CIT (SC) 236 ITR 788

Distribution received by beneficiary from various discretionary trust can be assessed in the hands of beneficiary.
CIT Vs Anand Sarabhai Trust (SC) 231 ITR 524

Amount collected in the name of God / deities, but utilized for benefit of family concerns – Trust to be assessed as AOP at maximum marginal rate.
ITO Vs Shri Radha Dharmarth Trust (ITAT, Del) 66 ITD 253

Not only objects of trust, but application of its income for charitable purposes, is also important.
Al Madeena Charitable Trust Vs ACIT (ITAT, Coch) 76 ITD 214

Even prior to amendment in 1972, under Sec. 12(1) voluntary contribution themselves were taxable if they were not applied solely for charitable or religious purposes.
R.B. Shreeram Religious & Charitable Trust Vs CIT (SC) 233 ITR 53

Local authority constituted for planned development of State – For carrying out its objects, assessee is acquiring lands at nominal rates and selling the same after developing it to general public at higher rates – Assessee is not allotting houses to poor masses free of cost – Objects not of charitable nature but more of commercialised nature involving profit motive
Punjab Urban Planning & Development Authority Vs CIT ( ITAT, Chd ) 103 TTJ 988
Income to be arrived at in a commercial manner without classification under various heads.
CIT Vs Rao Bahadur Calavala Cunnan Chetty Charities (Mad) 135 ITR 485

Amount credited to the account of beneficiaries cannot be treated as loan – Interest paid to such beneficiaries cannot be allowed as deduction.
Arun Family Trust Vs CIT (Guj) 165 Taxman 15

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