Commissioner of Income Tax vs Smt. Comilla Mohan

The Income Tax Appellate Tribunal, Allahabad Bench, Allahabad, has referred the following two questions of law u/s 256(1) of the Income Tax Act, 1961, for the opinion of this Court:

Whether, on the facts and circumstances of the case, the Income Tax Appellate Tribunal was justified in holding that the assessee''s-trusts were validly created trusts, when the sole beneficiaries of these trusts were neither in existence nor were identifiable at the time of creation of the trusts?

Whether, on the facts and circumstances of the case, the Income Tax Appellate Tribunal was justified in confirming the Commissioner of Income Tax (Appeals)''s decision holding that the dividend income arising out of 60,000 shares of Mohan Meakin Ltd. transferred by the assessee to two trusts could not be validly included in the hands of the assessee?

The reference relates to the assessment years 1977-78, 1978-79 and 1979-80.

Briefly stated the facts giving rise to the present reference are as follows:

Smt. Comilla Mohan created two trusts known as first son of Vinay Mohan and the first son of Hemant Mohan dated February 18, 1973, and May 22, 1973, respectively, by transferring 60,000 equity shares of Mohan Meakin Ltd. As per the Department''s stand, these two trusts were not validly created as the sole beneficiary of each of the two trusts was neither in existence nor identifiable at the time of the creation of these trusts. Due to creation of these trusts the assessee did not show the dividend income on the above shares in her returns of income. Hence, the Department took action u/s 147(a)/148 and added the dividend income on these shares in the hands of the assessee.

Aggrieved, the assessee filed appeals before the Commissioner of Income Tax (Appeals), who allowed the same and deleted the dividend income from the assessment made in the assessee''s hands, following the Income Tax Appellate Tribunal''s decision dated April 20, 1989, in I.T.A. No. 1250 (Alld.) of 1986 for the assessment year 1983-84.

The Department filed second appeals before the Tribunal for the assessment years under consideration and took the plea that the Department''s reference applications having been allowed by the Income Tax Appellate Tribunal in R.A. No. 441/(Alld.) of 1987 dated February 26,1988, the matter is still sub judice before the Allahabad High Court. The Tribunal, however, dismissed the Department''s appeals for the assessment years under consideration on the ground that the High Court''s decision was not available.

We have heard S. Chopra, learned standing counsel for the Revenue.

We find that identical questions came up for consideration by this Court in W.T.R. No. 150 of 1988, Commissioner of Wealth Tax Vs. Rakesh Mohan, decided on January 17, 2005. This Court has answered both the questions in favour of the assessee and against the Revenue.

Respectfully following the aforesaid decision we answer both the questions referred to us in the affirmative, i.e., in favour of the assessee and against the Revenue. There shall be no order as to costs.