TaxTMI 
TaxTMI 
2026 (7) TMI 1225
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....se and in law, the Ld.CIT(A) has erred in deleting the entire addition of Rs. 8,88,51,828/-made by the Assessing Officer on account of income form business and other sources, without appreciating that the income arose from organized commercial activities carried out through the assessee entity. 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 sections 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 only with the consent of contributors holding at least 75 per cent of the units. Accordingly, the assessee is not a revocable trust within the meaning of section 61 to 63 of the Act. 4) Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) has failed to appreciate that the assessee trust and its beneficiaries have come together for a common purpose OR common action with the objective of producing income, profits and gains, and therefore, the asses....
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....d by the Reserve Bank of India governing securitization and asset reconstruction activities. It was submitted that the Security Receipt (SR) holders were identifiable beneficiaries whose respective shares were determinate and ascertainable. The assessee further contended that the contributions made by the SR holders were revocable within the meaning of sections 61 to 63 of the Act and, therefore, the income earned by the trust was liable to be assessed in the hands of the beneficiaries and not in the hands of the trust. The assessee also challenged the action of the Ld.AO in treating it as an Association of Persons (AOP) and taxing the entire income in its hands. 3.1. After considering the submissions of the assessee and examining the trust structure, the Ld.CIT(A) accepted the assessee's contentions, held that the assessee was a revocable determinate trust entitled to the benefit of sections 61 to 63 of the Act and consequently deleted the addition of Rs. 8,88,51,828/- made by the Ld. AO. Aggrieved by the relief granted by the Ld. CIT(A), the Revenue is in appeal before us. 4. Before us, the Ld.DR vehemently relied upon the assessment order and submitted that the Ld.C....
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.... that the income earned by the trust was liable to be assessed directly in the hands of the beneficiaries and not in the hands of the trust. 4.5. The Ld.AR submitted that the Ld.AO erred in treating the assessee as an AOP merely because the trust was engaged in acquisition and resolution of distressed assets. According to the Ld.AR, the beneficiaries had neither joined together voluntarily for carrying on any business nor acted with a common design so as to constitute an AOP under the Act. It was further submitted that the issue stood covered by various judicial precedents rendered in the context of securitisation trusts, investment funds and determinate trusts wherein such entities were held not assessable as AOPs. The Ld.AR therefore submitted that the Ld.CIT(A), after considering the trust structure, the relevant statutory provisions and judicial precedents, had rightly held the assessee to be a revocable determinate trust entitled to the benefit of sections 61 to 63 of the Act and had correctly deleted the addition made by the Ld. AO. The Ld. AR accordingly prayed that order of the Ld.CIT(A) be upheld. 4.6. The Ld.AR placed reliance on a compilation of decisions of the co....
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....t the contributors and beneficiaries of the trust are the same and that the trust structure was merely a pooling arrangement adopted by Qualified Institutional Buyers (QIBs) for carrying out commercial activities. On the other hand, the assessee has consistently contended that it is a securitisation trust constituted under the framework of the SARFAESI Act, 2002 and the RBI Guidelines governing Asset Reconstruction Companies and that the trust constitutes a revocable trust to which the provisions of Sections 61 to 63 of the Act are squarely applicable. 5.2. We note that the issue is no longer res integra and stands squarely covered by a series of decisions of the Hon'ble High Court as well as coordinate benches of the Tribunal. The Hon'ble Bombay High Court in the case of Marsons Beneficiary Trust reported in 188 ITR 224 has held that mere participation of several persons as beneficiaries under a trust does not constitute an Association of Persons. For constituting an AOP, there must exist voluntary combination of persons acting together with a common design and common management for earning income. Similarly, in the case of L.R. Patel Family Trust vs. ITO reported in 262 ITR 52....