The Mumbai bench of the ITAT, in Balgopal Trust v. ACIT, held that a trust which is for the sole benefit of an individual, has to be assessed as an “individual” and not as an “AOP” under the provisions of Income Tax Act. While holding so, the division bench held that the assessee- trust is eligible for Section 54F deduction under the Income Tax Act.
Assessee, a non-discretionary Trust managed by Mr. Vinay Somani and Mrs. Shrilekha Somani as Trustees. The sole beneficiary is Ms. Vidushi Somani who is the daughter of the trustees. Assessee-Trust was aggrieved by the order of the AO who denied the claim of s. 54F to them on ground that the deduction is allowable only to individual or HUF and not to any other person and the assessee, being a specific trust, is not eligible for deduction u/s. 54F of the Act.
The department, relying on the wordings of the provision, vehemently contended that it is clearly prescribed in the Act that Section 54F exemption will be applicable to individual or HUF and the assessee, an AOP, is not eligible for the benefit.
The bench relied on the decision of the Bombay High Court in the case of Mrs. Amy F. Cama, and held that “by virtue of Section 161 of the I.T. Act the representative assessee is subject to the same duties, responsibilities and liabilities as if the income was received by him beneficiary, and whatever benefits the beneficiary will get in the said assessment must be made available to the trustee while assessing him u/s. 161. It is clear that it is only by virtue of u/s. 161 that the trust has been assessed for the income that is for benefit of sole beneficiary. According respectfully following the precedent we hold that the assessee is principally entitled to deduction u/s. 54F and it cannot be said that since it is a AOP and not a individual or HUF the said exemption/deduction should be denied.”
Read the full text of the Order below.
