Manoj Kumar Aggarwal ORDER
Manoj Kumar Aggarwal, Member (A)
1. Aforesaid appeal by revenue for Assessment Year (AY) 2013-14 arises out of the order of learned Commissioner of Income-Tax (Appeals)-33, Mumbai [CIT(A)], dated 17/09/2019 in the matter of assessment framed by Ld. Assessing Officer (AO) u/s. 143(3) on 19/02/2016. The ground read as under:-
1. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in changing the status of assessee as "Trust" and not AOP and allowing expenses of Rs. 6,18,21,763 which was made by the assessee for protection preservation and insurance expenses and management fees from such investment activity upon redemption of the principal amount of Security Receipts(SR)."
2. "On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in considering that assessee is a trust which does not fall within the meaning of section 61 to 63 of the I.T. Act, 1961."
3. "On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in considering that the assessee trust, setup 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 device to evade taxes."
4. "On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in considering that assessed has carried on business from the contribution of various beneficiaries as per common motive to earn income and hence, it is an AOP."
The Ld. AR, at the outset, submitted that the issue is squarely covered by various judicial pronouncements. The copies of the same have been placed on record. The attention has been drawn to the fact that Ld. CIT(A) has merely followed these decisions. The Ld. DR relied on the order of Ld. AO. However, the legal position as put forward by Ld. AR, remain un-controverted. No distinction in facts could be pointed out by revenue. In the said background, our adjudication to the appeal would be as given in succeeding paragraphs.
Assessment Proceedings
2.1. The material facts are that the assessee is a Trust created by Asset Reconstruction Company India Ltd. (ARCIL) for the purpose of liquidating/recovering/realizing the non-performing assets. The assessee has been created pursuant to the provisions of Securitization and Reconstruction of Financial Assets and Enforcement Security Interest Act, 2002 (SARFAESI Act) and the guidelines of RBI to acquire financial assets of the borrowers classified as non-performing assets (NPAs). ARCIL is registered with RBI under Sec. 3 of SARFAESI Act as a Securitization and Reconstruction Company. ARCIL acts as a trustee of the assessee in pursuance to the provisions of the aforesaid Act and the RBI guidelines. Accordingly, ARCIL acquires stressed financial assets that are classified as NPAs from the banks/Financial Institutions. The assessee derived income from asset reconstruction activity and handling of NPAs of banks and Financial Institutions. The assessee declared Nil Income in its return of income. The shareholding of the assessee was as under:-
2.2. During assessment proceedings, Ld. AO called upon the assessee to explain as to on what basis it had claimed its receipts as not liable to tax in its hand. Also, the assessee was directed to put forth an explanation as to why the income/loss derived by it may not be taxed in its hands in the status as that of a trust/AOP.
2.3. In reply, it was explained that ARCIL was a registered entity with RBI to acquire financial assets classified as Non-Performing Assets (NPAs) from banks, financial institutions and housing finance companies operating in India (collectively referred to as banks/FIs). The concerned bank/Fl, which intends to transfer the financial assets........