The Income Tax Appellate Tribunal, Delhi (“E” Bench), in Assistant Commissioner of Income-tax v. Merilina Foundation (ITA No. 1881/Del/2020 with C.O. No. 110/Del/2022), examined the validity of reassessment proceedings and the availability of deduction under Section 54F of the Income-tax Act, 1961, to a private trust assessed as a representative assessee.

The assessment for A.Y. 2011–12 was reopened under Sections 147/148 on the premise that income had escaped assessment in view of substantial term deposits and interest receipts. In reassessment, the Assessing Officer denied the exemption claimed under Section 54F on the ground that the provision is available only to individuals or HUFs and not to a trust/AOP. The CIT(A) deleted the addition, holding inter alia that the return originally filed was to be treated as valid in the peculiar facts and that the assessee was entitled to Section 54F relief.

Before the Tribunal, the Revenue challenged the grant of Section 54F deduction. The Tribunal noted that the assessee is a private trust with identified beneficiaries and that the trust is assessed as a representative assessee under Section 161. Relying on judicial precedents, including Bal Gopal Trust (ITAT Mumbai), Mrs. Amy F. Cama (Bombay High Court), Niti Trust (Gujarat High Court), CIT v. Deepak Family Trust (Gujarat High Court), and CIT v. Shri Krishna Bandar Trust (Calcutta High Court), the Tribunal reiterated the settled principle that, by virtue of Section 161, the trustee bears the same duties, responsibilities, and liabilities as the beneficiary, and all benefits available to the beneficiary must equally be available to the trustee when assessed in a representative capacity.

Applying the above principle, the Tribunal held that denial of Section 54F merely on the ground that the assessee is a trust/AOP is unsustainable where the trust is a private trust assessed under Section 161 and the transaction and investment conditions of Section 54F are otherwise satisfied. The Tribunal further found no infirmity in the CIT(A)’s approach and declined to interfere.

Accordingly, the Revenue’s appeal was dismissed. Consequentially, the assessee’s cross objection was held to be infructuous and dismissed

Source- https://itat.gov.in/public/files/upload/1757488430-fqjCW9-1-TO.pdf

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