The ITAT Mumbai rules the securitisation trust is a revocable trust under Sections 61–63; it rejects AOP classification and deletes additions.
Meetu Kumari | Apr 23, 2026 |
ITAT Holds Trust Income Taxable in Hands of Security Receipt Holders, Not Trust
The assessee, Arcil Retail Loan Portfolio-001-F Trust, was created by Asset Reconstruction Company India Ltd. (ARCIL) under the SARFAESI Act for the acquisition and resolution of non-performing assets (NPAs). The trust raised funds from Security Receipt (SR) holders, who contributed capital and were entitled to income generated from asset reconstruction activities. The assessee filed its return declaring Nil income, contending that the income was taxable in the hands of SR holders as the contributions were revocable in nature under Sections 61 to 63 of the Income Tax Act.
The Assessing Officer rejected this contention and held that the assessee was an Association of Persons (AOP), not a trust. It was treated as a non-revocable trust with indeterminate beneficiaries, attracting Section 164. The AO taxed the income of Rs. 16.30 crore in the hands of the assessee.
On appeal, the CIT(A) held that the trust was validly constituted, the contributions were revocable, and income was taxable in the hands of SR holders. Aggrieved, the Revenue appealed before the ITAT.
Main Issue: Whether the income of a securitisation trust created under SARFAESI Act is taxable in the hands of the trust or in the hands of Security Receipt holders under Sections 61-63 of the Income Tax Act.
ITAT Decided: The ITAT dismissed the Revenue’s appeal and upheld the order of the CIT(A). It held that the assessee is a revocable trust within the meaning of Sections 61 to 63, and therefore, income arising from the trust is taxable in the hands of the contributors/SR holders and not in the hands of the trust.
The Tribunal rejected the AO’s contention that the assessee was an AOP, noting that there was no inter se agreement among contributors to carry on a joint enterprise. It also held that Section 164 had no application. The Tribunal followed judicial discipline in absence of any contrary ruling and deleted the additions made by the AO.
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