TaxTMI 
TaxTMI 
2022 (2) TMI 328
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....ies, the appeal for Asst Year 2015-16 in ITA No. 887/Mum/2020 is taken up for adjudication first. 3. The revenue has raised the following grounds of appeal before us :- 1."On the facts and circumstances of the case and in law , the Ld CIT (A) erred in changing the status of assessee as 'TRUST and not an AOP and allowing expense of 7,74,25,409 which was made by the assessee for protection, preservation , insurance expenses and management fees from such investment activity upon redemption of the principal amount of Security Receipts (SR). 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in considering that assessee is a trust which does not fall within the meaning of section 61 to 63 of the IT.Act, 1961. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in considering that the assessee trust, set up and functioning in accordance with the mechanism of the SARFAESI Act, 2002 and under guidance of RBI whereas it is clear that trust is a smoke screen and colourable device to evade taxes. 4.On the facts and in the circumstances of the case and in law, the Id. CIT(A) ....
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....primary facts and the legal position emanating from section 61 to 63 of the Income Tax Act , the assessee took the view that the income in respect of the financial assets realised will be taxable in the hands of the transferor i.e in the hands of Security Receipt Holders (SR Holders) . The assessee accordingly filed its return of income declaring Nil income. It was also clarified by the ld. AR that the SR Holders offer the income realised from the trust in their return of income. A confirmation to this effect was also filed in the course of assessment proceedings which had been ignored by the ld. AO. 5. The ld AO rejected the contentions of the assessee on the following grounds :- a) The assessee has declared itself as a private trust created through a trust deed dated 26.04.2010 by its trustee ARCIL. Subsequently by a contribution agreement dated 26.04.2010, it has entered into the activity of asset reconstruction and handling of NPAs of banks/Financial Institutions by Issuing SRs only to QIBs. b) During the year under consideration, the assessee has received income/(Loss) of Rs. 4,67,65,656/- after claiming a total expenses of Rs. 4,68,11,986/- on account of ....
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.... termed as AOP as per provisions of section 2(31). Hence, the assessee was held as AOP and income arising to the assessee by way of application of funds of investors was taxed in the hands of the assessee. The AO also held that the activities of the assessee are commercial transactions. i) The AO relied on the decision of the Madras High Court in the case of Indo Tech Electric Co. Vs. Deputy Commissioner of Income Tax and contended that the appellant has created a smokescreen in the name of trust in order to evade taxes. j) The AO explained the meaning of an AOP by discussing several judicial pronouncements. k) There is in tact de facto inter se arrangement between one contributed / beneficiary and the other as each or hem entered into contribution arrangement with the assessee Keeping in view the presence and involvement of other contributor/beneficiary. Hence, it can be said that the beneficiaries have joined in a common purpose l) The revocable clause 5.2.1 relied on by the assessee clearly say that individual contributor cannot revoke their contributions, it can be done only when 75% of the contributors consent together. m) Even if t....
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....t in the case of India Advantage Fund -VII wherein it was held that once the beneficiaries were identifiable and their shares were known, section 164 of the Act cannot be applied. The assessee also placed reliance on numerous tribunal decisions in support of its contentions. It was also submitted that the assessee trust was set up pursuant to section 7 of SARFAESI Act and RBI guidelines issued thereon. It was specifically submitted that the trust was not created as a smokescreen to evade tax. Hence the assessee trust cannot be construed as an AOP as there is no inter se agreement between the names of the beneficiaries and their shares were known and have remained unchanged. Beneficiaries and each of them enter into separate contribution agreement with the assessee. It was also submitted that Circular No. 13/2014 issued by CBDT applies to Alternate Investment Funds only. 7. The ld. CIT(A) by placing reliance on the order of his predecessor in the case of Scheme A1 of ARCIL CPS 002 XI Trust for Asst Year 2013-14 dated 03.01.2018 and also having given a finding that the facts are identical to the present case, decided the issue in favour of the assessee. Aggrieved, the revenue is i....