A trust which is solely for the benefit on an individual could claim deduction under section 54F

The Issue arose before the ITAT is that whether the assessee trust, which is only for the benefit of an individual, will be eligible to claim deduction under section 54F of the Income Tax Act or not when its status is that of A.O.P. According to the provisions contained in Section 54F of the IT Act that only individual or HUF can avail the benefits of this section. The Hon’ble jurisdictional High Court in the case of Mrs. Amy F. Cama vs. CIT 237 ITR 82 has also considered the same issue.

The High Court was considering the assessee’s (assessee’s trust) claim for the deduction under the section 54F of the IT Act for the purchase price of the flat from capital gain. However, the Hon’ble jurisdictional High Court stood up with his decision that the assessee trust was eligible to claim the deduction under section 54F of the IT Act.

High Court Ruled that Tax is to be charged on beneficial recipient of the Income

The jurisdictional High Court had expounded that the provisions of Section 161 of the Income Tax Act, permits a representative assessee subject to the same responsibilities, duties, and liabilities as if the representative assessee received the income beneficially. It was never the intention of the Act to charge income tax on the persons other than the persons who are the beneficial recipient of the income (i.e. the beneficial owners of the income). No matter what the benefit beneficiary will get the said assessment, it must be made available to the trustee while assessing him U/s 161 of the Income Tax Act.

The Learned Counsel of the assessee trust submitted that the issue covered in the favor of the assessee separately under the decision of jurisdictional High Court in the case of Mrs. Amy F. Cama vs. CIT. The learned Counsel further submitted other High Court’s decision that supports the assessee’s case. For this proposition the Learned Counsel for the assessee placed reliance upon the Hon’ble Gujarat High Court’s decision in the case of Niti Trust And Ors. Vs. CIT and also upon the CBDT direction dated 01.08.2012.

From the above-mentioned case laws it is adequately clear that by virtue of Section 161 of the Income Tax Act the representative assessee is subject to the same responsibilities, duties, and liabilities as if the representative assessee received the income beneficiary, and whatever benefits the beneficiary will avail under the said assessment must be made available to the trustee while assessing him under section 161 of the Income Tax Act.

Finally- The Trust would be able to get deduction u/s 54F as it is not AOP

Considerately following the precedent, the jurisdictional High Court hold that the assessee-trust is principally eligible to claim the deduction allowed under section 54F of the Income Tax Act and it cannot be said that since it is an Association of Persons (AOP) and not an individual or Hindu Undivided Family (HUF) the said deduction should be denied.

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