TaxTMI 
TaxTMI 
2021 (9) TMI 1334
X X X X Extracts X X X X
X X X X Extracts X X X X
....f the case and in law, the Ld. CIT(A) erred in changing the status of assessee as "Trust" and not AOP and allowing expenses of Rs. 6,18,21,763 which was made by the assessee for protection preservation and insurance expenses and management fees from such investment activity upon redemption of the principal amount of Security Receipts(SR)." 2. "On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in considering that assessee is a trust which does not fall within the meaning of section 61 to 63 of the I.T. Act, 1961." 3. "On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in considering that the assessee trust, setup and functioning in accordance with the mechanism of the SARFAESI Act, 2002 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ny. ARCIL acts as a trustee of the assessee in pursuance to the provisions of the aforesaid Act and the RBI guidelines. Accordingly, ARCIL acquires stressed financial assets that are classified as NPAs from the banks / Financial Institutions. The assessee derived income from asset reconstruction activity and handling of NPAs of banks and Financial Institutions. The assessee declared Nil Income in its return of income. The shareholding of the assessee was as under: - No. Name of Shareholders Percentage of equity shares held 1 Assets Reconstruction Company India Ltd. 11.59% 2 Bank of Baroda 4.07% 3 Bank of Maharashtra 0.10% 4 Exim Bank 39.55% 5 HDFC Bank 16.54% 6 HDFC Standard Life Insurance Co. Ltd 0.81% 7 ICICI Bank L....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ional Buyers (QIBs) as defined under SARFAESI Act for which trusts issue Security Receipts (SRs) to QIBs. QIBs include Banks, Financial Institutions, Insurance Companies, SC/RCs, mutual funds, eligible Non Banking Finance Companies (pursuant to RBI Guidelines in this regard) and Foreign Institutional Investors. SRs represent contribution of such QIBs in the trust and are in the nature of undivided right, title and interest in the trust fund (essentially financial assets held in trust) evidenced by the SRs issued to it. Subscription to SRs are governed by the terms and conditions mentioned in the transaction document (trust deed etc.). The contributions of the SR holders are revocable. Therefore the income arising from revocable transfer sha....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... contribution made by them. The relevant portion of the trust deed was brought to the notice of Ld. AO. On the basis of these submissions, it was submitted by the assessee that the income was to be taxed in the hands of the transferor i.e. in the hands of SR Holders. Further, the assessee was not to be considered as an 'Association of Persons' (AOP). 2.4 However, rejecting the same, Ld. AO opined that the assessee was to be assessed as AOP and not as a Trust. Alternatively, even if the status of the assessee was to be accepted as that of a trust, the same being in the nature of a non-revocable trust would thus not be eligible to avail the benefit of Sec. 61 to 63 of the Income Tax Act, 1961. As regards the claim of the assessee that since ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....peal, Ld. CIT(A) chose to rely upon its predecessor order in the case of Scheme A1 of ARCIL CPS 002 XI Trust for AY 2013-14. Accordingly, it was held that there was no prohibition in the Trust Act on the settler becoming beneficiary. The assessee was established under SARFAESI Act following guidelines of RBI and therefore, its validly was beyond doubt. Further. Sec. 61 to 63 does not imply that the right of revocation should be without any conditions. The terms of trust deed made it clear that the contributions was revocable and therefore, the income was to taxed in the hands of SR holders as per the provisions of Sec. 61 to 63 of the Act. The assessee could not be called an AOP since there was no agreement amongst beneficiaries inter-se. T....