TMI Blog2022 (3) TMI 566X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome every year, nor any right is given to the beneficiary to exercise an option to receive the income or not each year, therefore, it cannot be held that the share of the beneficiaries were indeterminate. In our considered view, as the names of the beneficiaries of the assessee trust and their shares were known since inception i.e at the time of the formation of the trust as is evident from the minutes of the meeting dated 27.12.2007, therefore, it can safely be concluded that the assessee trust is a determinate trust i.e a non-discretionary trust. Accordingly, finding no infirmity in the view taken by the CIT(A) who had rightly concluded that the assessee is a determinate trust, we uphold the same - Decided against revenue. - ITA NO. 376/MUM/2021 - - - Dated:- 11-3-2022 - SHRI S. RIFAUR RAHMAN, HON'BLE ACCOUNTANT MEMBER AND SHRI AMARJIT SINGH, HON'BLE JUDICIAL MEMBER Assessee by : Shri Jitendra Jain Department by : Shri Mehul Jain ORDER PER S. RIFAUR RAHMAN (AM) 1. This appeal is filed by the revenue against the order of the Learned Commissioner of Income Tax (Appeals) 33, Mumbai [hereinafter in short Ld.CIT(A) ] dated 30.01.2020 for the A.Y. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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). e) It was claimed by the assessee that the contributions of the SR holders are revocable. Hence, income arising from revocable transfer shall be assessed in the hands of the contributors pursuant to section 6110 section 63 of the Act. The trust is a revocable trust and hence income is taxable in the hands of the transferor (i.e, SR holder). f) The trust deed itself mentions that the SR holders are entitled to revoke the contribution made by them. Relevant para in the trust deed reproduced was Para 5.2 g) The assessee has been incorporated as a 'Trust' under SARFAESI Act, 2002. is a statutorily formed entity. An AOP is one in which two or more persons join a common purpose or common action to earn profit. So, the assessee is a Trust and not an AOP. In case of assessee, the SR holders do not have any relationship inter se but only with the Trust managed by the ARCIL. h) If the trust is assessed as AOP, the income of the assessee is to be computed in accordance with the provisions of the Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e that it is a trust is completely erroneous. g) The assessee is only an AOP , as per section 2(31') having 2 QlBs as members. It is not a Trust Within meaning of section 61 to 63. The motive behind creation of this Trust is income -earning asset reconstruction activity. After creation, it entered into contribution agreements with QIBs for sole purpose of acquisition ofNPAs, transferring those at a profit and earning profit/income out of the same. Hence, it is like coming together of the two or more persons by way of contribution of sufficient funds into an entity in order to invest in the specified entities with a sole intention to earn profits and the same can only be 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. h) 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 or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re investors same and beneficial interest are not explicitly known on the date of its creation have to be treated as falling within section 164(1), S) The Substance of the transactions is that the assessee has carried on business from the contributions of various beneficiaries as per common motive to earn income and hence it is an AOP. 5. Aggrieved assessee preferred an appeal before the Ld.CIT(A) and filed detailed submissions. The Ld.CIT(A) summarized the main submissions of the assessee as under: - 6. Aggrieved with the action of the AO, the assessee has filed the present appeal under consideration. During the course of appellate proceedings, extensive arguments have been made by the Ld. ARs and written submissions are filed on 27.01.2020. The main points of the appellant's submission are as under: a) The Bangalore ITAT in case of DCIT vs. India Advantage Fund -VII (50 taxmann.com 350] has decided similar issue in favour of the assessee and the said decision was upheld by the Karnataka High Court. b) The CIT(A)-33 in similar case [ Scheme Al of ARC IL CPS 002 XI Trust) vide his order dated 03.01.2018 has also decided the matter in favour of the appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aforesaid decision was reproduced. k) The appellant trust cannot be called an AOP as there is no inter se agreement between L) 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. m) Circular 13/2014 of CBDT applies to Alternative Investment Funds only. n) Relying on Karnataka High Court in case of India Advantage Fund-VIP, it was submitted that once the beneficiaries were identifiable and their shares is known, section 164 of the Act cannot be applied. o) Appellant Trust was set up pursuant to section 7 of SARFAESI Act and RBI guidelines issued to SC/RCs. The trust was not created as a smokescreen to evade tax. p) Both the beneficiaries ARC IL and Oriental Bank of Commerce are assessed as company and pay tax @ 30%. 6. After considering detailed submissions filed by the assessee, Ld.CIT(A) allowed the appeal of the assessee with following observations:- 7. I have carefully considered the aforesaid arguments of the Ld. AR and the facts of the assessment order. The CIT(A)-33 passed the appellate order dated 03.01.2018 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re Capital Fund [(2017) (82 taxrnann.com 176). According to the Ld. AR, the 'Revocation of Contribution Clause of the trust in the later case law is similarly worded as in the case of appellant trust, wherein Hon'ble Mumbai ITAT had held that the assessee trust was 3 private revocable trust and section 61 and section 33 of the Act are applicable. f) The relevant revocation clauses are as under 5.2 Revocation of Contributions 1. 1. 1. The Security Receipt Holders shell be entitled to revoke the Contributions made by them at any time during the term of this Deed, in accordance with the terms and conditions contained therein for any reason, including but not limited to circumstances resulting from any adverse tax consequences (for either the Trust or the Security Receipts Holders) or any direction of any Statutory Authority, provided that no such revocation shall take effect unless the consent of the Security Holders holding Security Receipts representing not less than 75% of the total face value of the then outstanding Security receipts, issued pursuant to this Deed has been obtained, in this behalf, provided that a notice of not less Than 60 days of the inten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmon purpose or common action. The beneficiaries are mere recipients of the income earned by the trust. The beneficiaries make investment based on the Offer Document and on the basis of the investment made in the trust, they are allotted the Security Receipts which represents the undivided and proportionate interest of the investors in the corpus of the trust. It is found that the reliance of Ld. AR uponthe decisions of the Mumbai ITAT in the case of Indian Corporate Loan Securitization Trust - 2008 Series 14 Vs ITO (supra) and Bangalore ITAT in the case of DCIT Vs India Advantage Fund - VII (supra) is proper wherein an arrangement similar to that of the appellant trust was not considered as AOP. i) The AO has not brought on record any material which remotely suggest that a concerted effort has been made by the beneficiaries to earn income jointly. j) Merely because the realization flows through the appellant, it does not mean that It is income in the hands of the appellant. The money was always intended to be passed on to the SR holders and therefore, it can be said that only the SR holders had a right on the realized money. k) It is also observed that the names of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Security Receipts (SR) 2. Whether on the facts and in circumstances of the case and in law, the Ld.CIT (A) erred in considering that the assessee is a trust which does not fall within the meaning of section 61 to 63 of the I.T.Act, 1961 . 3. Whether on the facts and in circumstances of the case and in law, the Ld. CIT(A) 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 devise to evade taxes 4. Whether on the facts and in circumstances of the case and in law, the Ld. CIT(A) erred in considering that the assessee has carried on business from the contribution of various beneficiaries as per common motive to earn: income and hence it is an AOP . 5. The appellant prays that the Order of the CIT(A) on the above ground be reversed and that of Assessing Officer be restored. 6. The appellant craves to leave amend of alter any ground or add a new ground which may be necessary. 8. At the time of hearing, Ld. DR brought to our notice that this appeal filed by the Revenue is delayed du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ur notice facts of M/s. Scheme A1 of ARCIL CPS 002 XI Trust (supra) case and the assessee s case, and submitted that the purpose to establish the Trust are exactly same, no change in the trust deed clauses as well. Accordingly, he relied on the finding of the Ld.CIT(A). 11. Considered the rival submissions and material placed on record, we observed that Ld.CIT(A) has dealt with the issue in detail and gave a clear finding that assessee is a revocable trust and not an AOP. In view of the provisions of section 61, 62 and 63 of the Act, it was held that income is not taxable in the hands of the assessee but the same is taxable in the hands of the contributors. We observed that the facts in the present appeal are exactly similar to the facts in the case of ITO v. M/s. Scheme A1 of ARCIL CPS 002 XI Trust (supra), therefore we are inclined to follow the decision of the Coordinate Bench of the Tribunal, in which it was held as under: We have deliberated at length on the issue under consideration, and find, that a perusal of the trust deed and the minutes of the meeting dated 27.12.2007, therein clearly makes a mention of the names of the beneficiaries of the assessee trust, and als ..... X X X X Extracts X X X X X X X X Extracts X X X X
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