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AI Drafter - (New and Powerful) ✕ Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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Issues: Whether the income arising from the securitisation trust was taxable in the hands of the trust or in the hands of the Security Receipt holders, and whether the trust could be assessed as an Association of Persons with section 164 of the Income-tax Act, 1961 applicable.
Analysis: The trust was constituted under the SARFAESI framework and the RBI guidelines. The issue had already been decided in an identical matter by the Coordinate Bench, which held that such securitisation trusts operate as revocable trusts within the meaning of sections 61 to 63 of the Income-tax Act, 1961. On that basis, the income is taxable in the hands of the contributors or Security Receipt holders and not in the hands of the trust. The same reasoning also excludes assessment of the trust as an Association of Persons and displaces the application of section 164. No contrary binding precedent or distinguishing feature was shown.
Conclusion: The income was not taxable in the hands of the trust and was taxable in the hands of the Security Receipt holders. The trust could not be assessed as an Association of Persons, and section 164 had no application. The additions made by the Assessing Officer were deleted.
Ratio Decidendi: A securitisation trust that functions as a revocable trust under sections 61 to 63 of the Income-tax Act, 1961 is a pass-through arrangement, so its income is assessable in the hands of the contributors and not as the income of the trust or an Association of Persons.
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