TaxTMI 
TaxTMI 
2026 (5) TMI 596
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....ssessing Officer in treating the assessee as an Association of Persons (AOP), based on the nature of activities carried out by the assessee. The Ld.CIT(A) failed to appreciate that the assessee is engaged in business activity with a clear profit motive and therefore cannot be regarded as a valid TRUST' for the purpose of the Income-tax Act, 1961. 2. Whether on the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in deleting the entire addition of Rs. 11,16,62,430/- made by the Assessing Officer on account of business income, income from other sources, disallowances of protection/preservation/insurance expenses, management fees, and interest income, without properly appreciating the facts brought on record by the Assessing Officer. 3. Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in holding that the assessee is a revocable trust entitled to the benefit of section 61 to 63 of the Income-tax Act, 1961, without appreciating that the contributors (beneficiaries) have practically no control over the income arising from the activities of the fund, and that the contribution can be revoked o....
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....ether for a common purpose or common action with the objective of producing income, profits and gains and therefore, the assessee is laible to be categorised and assessed as an Association of Persons (AOP) in accordance with law. 5. The appellant craves leave to amend or alter or add a new ground which may be necessary." 3. The above captioned appeals are for two different assessees. There is commonality in both the appeals for issue raised in the aforestated grounds of appeals. Both the assessees have similar structure and have engaged into similar transactions for which similar treatment was given by the authorities below, against which both the assessees are in appeal before the Tribunal. Owing to the commonality, both the appeals are taken up together for adjudication by passing this consolidated order. We take appeal in ITA No.7210/Mum/2025 as the lead case to draw the facts and make our observations and findings thereon which shall apply mutatis mutandis to the other appeal. 4. Brief facts as culled out from the records are that assessee is registered with Reserve Bank of India (RBI) u/s 3 of the Securitization of Financial Assets and Enforcement of Security In....
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....ed the claim of expenses on account of protection, preservation and insurance expenses of Rs. 77,92,833/- by holding that assessee has failed to establish that it has actually incurred these expenses. Assessment was thus, completed with total income assessed at Rs. 11,16,62,430/-. 5. Aggrieved, assessee went in appeal before the Ld. CIT(A) wherein detailed submissions were reiterated, describing the creation and the set-up of the assessee as a trust, modus operandi of business conducted by it and income generated thereon and its taxability. Detailed submissions were also made in respect of non-revocable nature of the assessee trust, its determinate nature and applicability of section 164 of the Act. Reference was also made to CBDT Circular No.13/2014 for highlighting the direction given by CBDT. After exhaustive deliberation on all these aspects of the issue, which led to addition in the hands of the assessee, ld. CIT(A) held that assessee is a valid trust and not an AOP. The beneficiaries are determinable and, therefore, section 164(1) does not apply. According to him, trust is not liable to be taxed in its own hands at maximum marginal rate but the income is to be assessed in ....
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....etail Loan Portfolio 004 B Trust for the Assessment Year 2016-17 (ITA No.256/Mum/2024) 6 Order of the Income Tax Appellate Tribunal, 'A' Bench, Mumbai, in the case of ARCIL Retail Loan Portfolio 001 J Trust (ITA No.4199/Mum/2023) and ARCIL Shalimar Wires Industries Ltd II Trust (ITA No.2909/Mum/2023) and ARCIL Asset Reconstruction Fund II Trust (ITA No.3050/Mum/2023) for the Assessment Year 2016-17 7. Ld. Counsel for the assessee submitted that the facts of the present case are pari materia with the facts considered in the aforesaid decisions, the statutory framework governing the assessee trust is identical, and there is no distinguishing feature brought on record by the Revenue. It was therefore contended that, following the principle of judicial consistency and discipline, the order passed by the learned CIT(A) deserves to be upheld and the appeal filed by the Revenue be dismissed. 7.1. Per contra, ld. CIT DR relied heavily on the order passed by the ld. Assessing Officer and submitted that ld. CIT(A) has erred in granting relief to the assessee without properly appreciating the statutory scheme of sections 61 to 63 of the Act. It was submitted that the assessee has ....
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....ation trusts, which are mandated under the SARFAESI Act and RBI Guidelines to operate as pass-through vehicles with beneficial ownership resting with Security Receipt Holders. 16. In this context, it is relevant to reproduce paragraph 9.4 of the order of the co-ordinate Bench in ITO v. Scheme Al of ARCIL CPS 002 XI Trust (ITA No. 2293/Mum/2018), wherein the learned CIT(A)'s reasoning, subsequently approved by the Tribunal, has been set out as under: "9.4 Thus it is seen that under section 61 of the Act all income arising to any person by virtue of a revocable transfer of assets shall be chargeable to income-tax as the income of the transferor and shall be included in his total income. Section 62 of the Act provides that if a transfer is irrevocable for a specified period then section 61 will not apply. Section 63 defines as to what is 'transfer' and 'revocable transfer' for the purpose of sections 61 & 62 of the Act. It provides that: (a) a transfer shall be deemed to be revocable if: (i) it contains any provision for the re-transfer directly or indirectly of the whole or any part of the income or assets to the transferor, or (ii) it, in any wa....
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....t say the deed of transfer must confer or vest an unconditional or an exclusive power of revocation in the transferor. What emerges from out of the above discussion is that the beneficiaries need to be identifiable and the Trust Deed must contain provisions that vest the power of revocation. There is nothing in the section to read that such a power should be unconditional. 19. In view of the above binding exposition of law, it is evident that section 63 does not mandate unilateral or unconditional revocation, and that a revocation mechanism embedded in the governing instrument is sufficient. Collective revocation does not dilute the revocable character of the transfer. 20. The learned CIT(A), in our view, has rightly relied upon the aforesaid co-ordinate Bench decisions, including paras 9.4, 18-19 and 7.6.4-7.6.5 of the decision in ITO v. Scheme Al of ARCIL CPS 002 XI Trust (ITA No. 2293/Mum/2018). 21. The Assessing Officer has further sought to assess the assessee as an Association of Persons, invoking section 164 on the premise that beneficiaries are indeterminate and that the trust carries on business with a profit motive. We are unable to agree with t....
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....rced by later amendments and CBDT clarifications. The Finance Bill, 2016 expressly recognised securitisation trusts, including those set up by ARCs, as vehicles through which income is to be taxed in the hands of investors and not the trust. These amendments are clarificatory in nature, explaining the manner of taxation rather than altering the character of such trusts. They fortify the conclusion that, even prior to the amendments, the law recognised the trust as a conduit and not as a separate taxable entity in respect of cuck income. In view of the foregoing discussion, we hold as under: 1. The assessee trust is a revocable trust within the meaning of sections 61 to 63 of the Act. 2. The income arising from the trust is not chargeable to tax in the hands of the trust, but in the hands of the Security Receipt Holders. 3. The assessee cannot be assessed as an Association of Persons, and section 164 has no application to the facts of the case. 4. The learned CIT(A) has correctly appreciated the statutory scheme, the Trust Deed, and the binding judicial precedents, and has rightly deleted the addition made by the Assessing Officer. ....