Photo of S.R. Patnaik

Head and Partner in the Tax Practice at the Delhi office of Cyril Amarchand Mangaldas. Mr. Patnaik specialises in various aspects of direct tax, such as international tax, transfer pricing, corporate tax etc. He can be reached at sr.patnaik@cyrilshroff.com

 TO TRUST OR NOT TRUST - MUMBAI ITAT AFFIRMS EXCLUSION OF CORPUS FUND OF OFFSHORE TRUST FROM INDIAN WEALTH TAX

Background:

Creation of private trusts have been considered as a popular method by rich families for succession planning. Trusts are a legal arrangement whereby assets are placed into the care of an individual who manages them for the benefit of someone else. Trust can be further classified into specific or discretionary based on the scheme of distribution of the trust fund. However, in recent times, offshore trust structures are suspected to be more commonly used as a means of money laundering than lawful tax planning. Consequently, the Income-tax Department has been unveiling various private offshore trusts and imposing tax liability on the beneficiary owners. This has led to an increase in reassessment proceedings and dissatisfaction among the residents for being subjected to wrongful tax liability. Recently, the Mumbai Income-tax Appellate Tribunal (“ITAT”) provided relief to Mr. Yashovardhan Birla and held that offshore trusts are considered to be acceptable form of tax planning and a beneficiary of an offshore discretionary trust cannot be taxed on the entire corpus fund merely because he has been provided with the power to appoint/ reappoint trustee. The case is discussed in detail below:
Continue Reading To Trust Or Not Trust: Mumbai ITAT affirms exclusion of corpus fund of Offshore Trust From Indian Wealth Tax

Primacy of family settlements upheld

Family settlements and ensuing documentation have been a subject matter of litigation for various reasons. One such litigious issue is whether the documents pertaining to family settlements are required to be registered under the Registration Act, 1908 (“Act”). If a document, which was otherwise required to be compulsorily registered, has not been registered, then as per Section 49 of the Act, such document would not affect any immovable property comprised therein, or confer any power to adopt, or be received as an admissible evidence of any transaction recorded in the document. The consequential issue that has evolved is whether the documents recording family arrangements are required to be registered. Recently, the Supreme Court (“SC”), in the case of Ravinder Kaur Grewal & Others. v. Manjit Kaur & Ors.,[1] has held that a memorandum of family settlement, which merely records the terms of a family settlement already acted upon by the concerned parties, is not required to be registered.
Continue Reading Primacy of Family Settlements Upheld