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2025 Supreme(Online)(ITAT) 11816
INCOME TAX APPELLATE TRIBUNAL (MUMBAI BENCH)
SANDEEP SINGH KARHAIL, Judicial Member, GIRISH AGRAWAL, Accountant Member
Shri Trust T 2018 – Appellant
Versus
ITO (TDS) - 2(2)(1) – Respondent
ITA No.6190/MUM/2024 (Assessment Year : 2018-19)
For the Appellants/Petitioners: Gunjan Kakkad
For the Respondents: Vijaykumar G Subramanyam, Sr.DR
No TDS u/s 194LBC on Excess Interest Spread paid by Securitisation Trust to originator as not income in respect of investment.
Headnote:(A) Income Tax Act, 1961 - Sections 194LBC, 201(1), 201(1A), 250, 115TCA - TDS obligation on Securitisation Trust paying Excess Interest Spread (EIS) to originator - For S.194LBC to apply, originator must be 'investor' holding securitised debt instrument and income must be in respect of such investment - EIS is residual surplus post fixed yield to PTC holders, not return on investment but reward for creating assignable loan pool - MRR met via PTC subscription or alternatives like credit enhancement; mere MRR compliance doesn't make originator 'investor' under S.194LBC r.w.s S.115TCA if no PTC holding - No TDS required on EIS; assessee not 'assessee in default' u/s 201(1); interest u/s 201(1A) not leviable. (Paras 9, 10, 12, 20)
Facts of the case:
Securitisation Trust paid Rs.10,23,90,392/- as EIS to originator Sundaram Finance Ltd. without TDS u/s 194LBC; AO-TDS treated assessee as in default u/s 201(1)/201(1A), liability Rs.3,76,65,721/-; CIT(A) upheld; ITAT appeal allowed following co-ordinate benches.
Findings of Court:
TDS u/s 194LBC not applicable on EIS; tax and interest u/s 201(1)/201(1A) deleted.
Issues: Whether EIS payment to originator triggers TDS u/s 194LBC; whether assessee in default u/s 201 despite payee's tax payment.
Ratio Decidendi: Twin conditions for S.194LBC not satisfied - originator not 'investor' qua EIS (residual surplus per waterfall mechanism), not income from investment in Trust.
Result: Appeal allowed.
| Table of Content |
|---|
| 1. condonation of delay granted due to non-communication of cit(a) order. (Para 1 , 2 , 3) |
| 2. challenge to assessee-in-default status for non-tds on eis. (Para 4 , 5 , 6) |
| 3. lower authorities upheld tds liability on eis as investment income. (Para 7 , 8) |
| 4. no tds u/s 194lbc on eis; not income from originator's investment. (Para 9 , 10 , 11 , 12) |
| 5. appeal allowed; tax and interest deleted. (Para 13 , 14) |
ORDER
PER SANDEEP SINGH KARHAIL, J.M.
The assessee has filed the present appeal against the impugned order dated 12.05.2023, passed under section 250 of the Income Tax Act, 1961 (“the Act”) by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, [“learned CIT(A)”], which in turn arose from the order passed under section 201(1)/201(1A) of the Act, for the assessment year 2018-19.
2. The present appeal is delayed by 48 days. Along with the appeal, the assessee has filed an affidavit seeking condonation of delay in filing the appeal, stating as follows: -
“2. That the CIT(A) order dated 12 May 2023 passed under section 250 of the Income Tax Act ('the Act') was not received by the Appellant on the email address registered on the e-filing portal and the said order was also not physically delivered to the Appellant.
3. That the Appellant only came to know about this order on. 12 August 2024 when it was browsing through the income-tax portal for some routine work and filed an appeal before the Hon’ble Income Tax Appellate Tribunal (ITAT") in Form 36 on 27 November 2024.
4. That once the Appellant became cognizant of the order being passed. the Appellant made its best effort to look into the other email addresses as specified by CBDT in the Faceless Appeal Scheme. 2021 for valid delivery of order. however, the order could not be traced in those email ids. The Appellant also went through its postal records to check if the order was delivered physically. Further, the trustee of the Appellant manages 300+ securitization trusts which have the same nature of dispute pursuant to the survey that was carried out on IDBI. The trustee of the Appellant is furnishing the details and filing submissions for these trusts ever since in one proceeding or another. The Appellant was verifying its email addresses thoroughly and in the process, it took some time owing to the number of appellate proceedings the Trustee is participating in. The Appellant states that till date. the order of the CIT(A) is not yet communicated as is required under provisions of section 250(7) of the Income-tax Act. 1961.
5. That the Appellant is aware the appeal before the Hon'ble ITAT is required to be filed within 60 days of the date of receipt of the order. At the outset the Appellant may respectfully mention that there has been no delay in filing the appeal as the order cannot be said to have communicated to the Appellant as required under the law.
б. Having said this, if 12 August 2024 (the date on which the Appellant became cognizant of the order). is considered as the date of communication then accordingly, the due date to file the appeal should be 11 October 2024. There is a delay of 48 days (from the date on which the Appellant became cognizant of the order) in filing the appeal before the Hon’ble ITAT due to the reasons mentioned above.
7. That this declaration is true and correct and conceals nothing and that no part of it is false.
8. That there is no intention to jeopardize the interest of the revenue by delaying the filing of appeal.”
3. Considering the submissions of the assessee, we are of the considered view that there was sufficient cause for not filing the appeal within the prescribed limitation period. Accordingly, we condone the delay in filing the appeal by the assessee and proceed to decide the appeal on merits.
4. In the appeal, the assessee has raised the following grounds: -
“The following grounds of appeal are distinct and separate and without prejudice to each other.
Ground No 1: Invalid delivery of CIT(A) order.
On
