ITAT Mumbai Remands TDS Liability of Securitization Trust Under Section 194LBC

The assessee, Arcil SBPS 001 I Trust, is a securitisation trust constituted by ARCIL under the SARFAESI Act and RBI guidelines. The trust receives contributions from Security Receipt holders for acquisition of financial assets and distributes surplus, after expenses, in accordance with the trust deed. For AY 2017-18, a survey conducted in the case of ARCIL revealed that the assessee trust had an undistributed surplus of Rs. 3.44 crore as on 31.03.2017.

The Assessing Officer treated the surplus as income deemed to be credited to investors under Section 115TCA(3) and held that the assessee failed to deduct tax at source under Section 194LBC. The trust was thereafter treated as an assessee in default under Section 201(1), and interest of Rs. 13.44 lakh was levied under Section 201(1A). The CIT(A) rejected these submissions and confirmed the demand.

Issue Before ITAT: Whether the securitisation trust was liable to deduct tax at source under Section 194LBC on undistributed surplus deemed to be credited under Section 115TCA(3), and whether the proceedings under Sections 201(1) and 201(1A) could be sustained without examining material evidence relied upon by the assessee.

ITAT’s Order: The ITAT noted that several crucial documents relied upon by the assessee, including a NIL Withholding Certificate, NSDL statements, Chartered Accountant’s certification, amended trust deed, bank statements, and correspondence with Deutsche Bank AG, were not placed before the Assessing Officer at the time of passing the order under Sections 201(1) and 201(1A).

The Tribunal held that the determination of TDS liability under Section 194LBC necessarily required examination of these documents. In the interest of justice, it set aside the orders of the Assessing Officer and the CIT(A) on this issue and restored the matter to the file of the Assessing Officer for fresh adjudication after considering the additional evidence and granting due opportunity of hearing to the assessee. The appeal was allowed for statistical purposes.

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