Document Fragment View
Fragment Information
Showing contexts for: settlor beneficiary same in South Asian Regional Apex Fund ,Mumbai vs Income Tax Officer -23(3)(4), Mumbai on 16 January, 2026Matching Fragments
8. The Learned CIT(A) erred in levying interest u/s 234B of the Act.
4. The assessee is a contributory trust registered as a Venture Capital Fund with SEBI. The assessee trust has been settled by Lazard Credit Capital Ltd. as settlor under a Trust Deed dated 22.06.1995 and Sara Fund Trustee Company Pvt. Ltd. is the trustee. The objects of the trust include pooling of resources for providing venture capital assistance to industrial and commercial undertakings and supporting establishment of state level venture capital funds. For A.Y. 2010-11, the assessee filed its return of income on 22.07.2010 declaring NIL total income, claiming that it is a private trust and that income earned by the trust was allocated among beneficiaries in specified/determinate ratios. During assessment proceedings, the AO held the interest income of Rs. 4,142 and short-term capital gains of Rs. 1,01,36,885 ITA No.670 & 669/M/2025 South Asian Regional Apex Fund as business income in the hands of the assessee, and assessed as an AOP, invoking provisions of section 161(1A) of the Act. The AO thereby assessed total income at Rs. 1,01,41,027. On appeal, the Ld. CIT(A) upheld the assessment mainly on the reasoning that settlor, trustee and beneficiaries are not three separate and distinct entities and also noticing that the assessee had filed its return under "AOP/BOI".
5. The Ld. Authorised Representative (Ld. AR) submitted that the assessee trust was created under the Trust Deed dated 22.06.1995 between Lazard Credit Capital Limited as settlor and Sara Fund Trustee Company Ltd. as trustee, and the beneficiaries are different parties as per list placed in the paper-book. It was argued that the observation of the Ld. CIT(A) that the settlor, trustee and beneficiaries are not distinct is incorrect on facts and record. The Ld AR has contended that it cannot be assessed as an AOP for the following reasons:
• The trust has been constituted by the settlor and trustee under the trust deed; beneficiaries have not joined together to form an AOP. • There is no inter-se agreement among beneficiaries to carry on business jointly.
• Beneficiaries are only recipients of income arising from the trust's investments.
• The assessee had e-filed the return under "AOP/BOI" as the applicable ITR for the year did not contain a suitable "Trust" status option other than AOP.
8. We have heard rival submissions and perused the material available on record. The short controversy arising for our consideration is, whether the assessee trust is liable to be assessed in the status of Association of Persons (AOP) and whether the income declared by the trust and allocated to beneficiaries can again be brought to tax in the hands of the trust, particularly when the assessee has claimed that the income has already been considered in the hands of beneficiaries as per ITA No.670 & 669/M/2025 South Asian Regional Apex Fund their respective shares. At the outset, it is observed that the assessee is a contributory trust registered as a Venture Capital Fund with SEBI, established under trust deed dated 22.06.1995. The assessee has consistently maintained that the trust is constituted by the settlor and trustee and that beneficiaries have not come together by any inter se agreement to form an AOP. We find merit in the submission of the assessee that merely because multiple investors/beneficiaries have contributed to a common pool, it cannot automatically lead to an inference that they have combined in the manner of an AOP, unless there is a finding that the persons have voluntarily joined together for a common purpose of producing income with some element of joint management or common action.