Revocable securitisation trusts attribute income to Security Receipt holders and cannot be taxed as an Association of Persons.

Income of a securitisation trust funded through Security Receipts is assessable in the hands of Security Receipt holders where contributors retain contractual revocation rights. Applying the revocable-transfer provisions, income from transferred assets is attributed to contributors rather than the trust. The absence of an inter se agreement among Security Receipt holders to pursue a common purpose also prevents classification of the trust as an Association of Persons, rendering the AOP taxation provision inapplicable. The analysis states that additions in the trust's assessment were deleted.

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Issues: Whether income of a securitisation trust funded through Security Receipts is taxable in the hands of the trust or in the hands of the Security Receipt holders, and whether the trust can be assessed as an Association of Persons.

Analysis: The trust was constituted under the statutory securitisation framework and governed by the applicable regulatory guidelines. Its contributors retained a contractual right to revoke their contributions. Applying Sections 61 to 63 of the Income-tax Act, 1961, the trust was treated as revocable, so that income arising from the transferred assets was assessable in the hands of the contributors. The coordinate-bench ruling on materially identical facts was followed, there being no distinguishing feature or contrary higher precedent. Since the Security Receipt holders had no inter se agreement to join in a common purpose, the trust could not be characterised as an Association of Persons; consequently, Section 164 of the Income-tax Act, 1961 was inapplicable.

Conclusion: The income is not taxable in the hands of the assessee trust and is taxable in the hands of the Security Receipt holders; the assessee cannot be assessed as an Association of Persons, and the additions were deleted.

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