The Income Tax Appellate Tribunal (ITAT), Mumbai bench has held that the private discretionary trust shall be treated as “AoP” and rejected the plea of the assessee based on the CBDT circular wherein such trusts are treated as “individual” due to difficulties in the e-filing software.
The assessee engaged in the running of a plastic industry at Daman, was assessed u/s 143(3) on 24.11.2008 at total income at Rs. 76,94,480/- as against the returned income of Rs. NIL. Assessee’s original return of income as revised return of income was not accepted. The AO then insisted the assessee to file return of fringe benefit in Form 3B which was then filed on 05.10.2012 declaring total value of fringe benefit at Rs. NIL. Subsequently, the assessment was completed u/s 115WE r.w.s 115WG of the Act determining the total value of fringe benefits at Rs. 25,45,810/-. The AO also concluded the status of assessee as AOP trust as against the contention of assessee that the trust is a private discretionary trust which ought to be regarded as an individual and not AOP and does not attract levy of FBT.
The assessee relied on the CBDT circular No. 6/2012 [F.No. 133/44/2012-SO(TPL)], dated 03.08.2012, which mention that status of private discretionary limit held in law as that of an ‘individual’. The assessee further stated that even if it was to be treated as beneficiaries then such beneficiaries will come under the ambit of ‘individual’ and Hindu Undivided Family both of which are excluded from the definition of term ‘employer’ u/s 115WA(1) for which FBT for certain expenses incurred for the benefit of privilege of employees will not be justifiable.
A bench of Shri A. M. Alankamony, AM & Ms. Kavitha Rajagopal, JM observed that the substantial issue of treating the assessee as AOP as against the status of a private discretionary trust as ‘individual’, we are of the considered view that the Ld. CIT(A) has rightly decided the issue in the light of various judicial decisions.
Upholding the orders of the lower authorities, the Tribunal concluded that “The Ld. CIT(A) has interpreted the meaning of AOP on a comparison with the Hon’ble Supreme Court decision in the case of CIT vs. Indira Balkrishna (39 ITR 546) (SC) with that of the subsequent amendment by explanation to section 2(31) wherein the AOP can be formed without the common objective of deriving income, profits or gains, thus concluding that private discretionary trust will come under the purview of AOP. In addition to this, the proviso to section 164(1) also states that under the circumstance provided therein, the income of the discretionary trust shall be assessed to tax as AOP. The Ld. CIT(A) has also rejected the submission of assessee that the departmental circular referring to the discretionary trust as ‘individual’ is also not very relevant in view of the explanation provided to section 2(31) of the Act and the said circular merely refers to the difficulty in accepting the return by existing e-filing software if the status of private discretionary trust is shown as ‘individual’ is also not disputed.”
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