ARCIL SBPS 001 I TRUST ,MUMBAI V. DCIT(TDS)-1(1), MUMBAI

ITA 4700/MUM/2025

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The case involves Arcil SBPS 001 I Trust, a securitisation trust, which appealed against the orders of the Assessing Officer and the CIT(A) regarding the deduction of tax at source under section 194LBC of the Income-tax Act, 1961. The Assessing Officer had treated the trust as an assessee in default for not deducting tax on a surplus amount, while the CIT(A) upheld this decision. The Tribunal found that additional evidence, which was crucial for the proper adjudication of the case, was not considered by the Assessing Officer and thus restored the matter for re-examination.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 834125 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-02-2026
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2017-2018
• Appeal Filed On: 24-07-2025
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SURENDRA MOHAN; LD
• Assessee Lawyers: RAHUL SARDA; LD
• Keywords: Set aside; Opportunity of being heard; Additional evidence; TDS; Non-deduction of tax
• Section: 201(1)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH MUMBAI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER & SHRI MAKARAND VASANT MAHADEOKAR, ACCOUNTANT MEMBER ITA No. 4700/Mum/2025 (Assessment Year: 2017-18) Arcil SBPS 001 I Trust The Ruby, 10th Floor, 29, Senapati Bapat Marg, Dadar (W), Mumbai- 400 028 Vs. DCIT (TDS)-(1)(1), MTNL Building, Cumballa Hills, Pedder Road, Mumbai-400 026 PAN/GIR No. AABTA3859J (Applicant) (Respondent) Assessee by Shri Rahul Sarda, Ld. AR Revenue by Shri Surendra Mohan, Ld. DR Date of Hearing 29.01.2026 Date of Pronouncement 04.02.2026 आदेश / ORDER PER MAKARAND VASANT MAHADEOKAR, AM: This appeal is directed against the order dated 26.05.2025 passed by the learned Commissioner of Income-tax (Appeals), Addl./JCIT (Appeals), Panaji [hereinafter referred to as “CIT(A)”] under section 250 of the Income-tax Act, 1961[hereinafter referred to as “the Act”], arising out of the order dated 12.02.2020 passed by the Deputy Commissioner of Income-tax (TDS)-1(1), Printed from counselvise.com 2 ITA No. 4700/Mum/2025 Arcil SBPS 001 I Trust Mumbai[hereinafter referred to as “Assessing Officer”] under sections 201(1) and 201(1A) of the Act for the assessment year 2017-18. Facts of the case 2. The assessee is a securitisation trust constituted by Asset Reconstruction Company (India) Limited (ARCIL) under the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and the guidelines issued by the Reserve Bank of India. The trust receives contributions from Security Receipt holders and utilises the same for acquisition of financial assets. The financial assets are realised over a period and the surplus, after adjusting expenses and management fees, is distributable to the Security Receipt holders in accordance with the trust deed and regulatory framework. 3. A survey under section 133(2A) of the Act was carried out in the case of ARCIL on 22.10.2018 and 23.10.2018. During post- survey proceedings, the Assessing Officer noticed that the assessee trust had a closing surplus of Rs. 3,44,73,676.80/- as on 31.03.2017, which, according to the Assessing Officer, represented income accrued to the investors. A show cause notice was issued proposing to treat the assessee as an assessee in default under section 201(1) for failure to deduct tax at source under section 194LBC of the Act. Printed from counselvise.com 3 ITA No. 4700/Mum/2025 Arcil SBPS 001 I Trust 4. The assessee submitted before the Assessing Officer that it was not in a position to distribute the surplus to the Security Receipt holders, as the period of eight years for realisation of assets had expired and the extension from the Security Receipt holders was awaited in terms of the SARFAESI Act and RBI guidelines. It was further contended that deduction of tax at source in such circumstances would result in practical difficulty and possible double taxation in the hands of investors. 5. The Assessing Officer, however, rejected the explanation of the assessee and held that in view of section 115TCA(3) of the Act, the income, if not paid or credited, shall be deemed to have been credited on the last day of the previous year and, therefore, tax was required to be deducted under section 194LBC. The Assessing Officer accordingly treated the assessee as an assessee in default under section 201(1) and levied interest under section 201(1A). The computation made by the Assessing Officer was as under: - Surplus as on 31.03.2017: Rs. 3,44,73,676.80/- - TDS @ 30% under section 194LBC: Rs. 1,03,42,103.04/- - Interest under section 201(1A): Rs. 13,44,473.40/- Thus, interest demand of Rs. 13,44,473/- was raised. 6. The assessee carried the matter in appeal before the CIT(A). The CIT(A), after considering the submissions of the assessee and the material on record, upheld the action of the Assessing Officer. Printed from counselvise.com 4 ITA No. 4700/Mum/2025 Arcil SBPS 001 I Trust The CIT(A) held that section 115TCA(3) creates a statutory fiction whereby income not paid or credited by the securitisation trust shall be deemed to have been credited on the last day of the previous year and, therefore, tax was deductible under section 194LBC. The CIT(A) further held that commercial hardship or regulatory constraints cannot override the statutory mandate of the Income-tax Act. Relying upon judicial precedents and CBDT Circular No. 18/2017, the CIT(A) confirmed the levy of interest under section 201(1A) and dismissed the appeal of the assessee. 7. Aggrieved by the order of CIT(A), the assessee has raised the following ground of appeal before us: The NFAC failed to appreciate that the assessee was not required to deduct tax at source under section 194LBC and hence erred in upholding the order of the Assessing Officer treating the assessee as an assessee in default and raising a demand for interest amounting to Rs. 13,44,473.40/-. The said demand is liable to be deleted. 8. During the course of hearing before us, the learned Authorised Representative submitted that the assessee has filed an application for admission of additional evidence. It was submitted that the following documents were not available before the Assessing Officer at the time of passing the order under sections 201(1) and 201(1A): (a) Nil Withholding Certificate issued to Deutsche Bank AG by the Assistant/Deputy Commissioner of Income Tax, International Tax Circle 2(1)(2), Mumbai. Printed from counselvise.com 5 ITA No. 4700/Mum/2025 Arcil SBPS 001 I Trust (b) Statement issued by National Securities Depositories Limited (NSDL) to Deutsche Bank AG. (c) Certificate issued by a Chartered Accountant certifying that the dividend distributed pertains to Class „A‟ Security Receipts held by Deutsche Bank AG. (d) Copy of amended and restated Trust Deed dated 14th December 2007. (e) Bank statement of the Trust. (f) Communication dated 15th November 2017 addressed to Deutsche Bank AG informing about the remittance. (g) Working for surplus amount. 9. It was submitted that these documents go to the root of the issue and are necessary for proper adjudication of the question whether tax was required to be deducted under section 194LBC. The learned Authorised Representative prayed that since these evidences were not before the Assessing Officer, the matter may be restored to the file of the Assessing Officer for fresh adjudication after considering the said documents. 10. The learned Departmental Representative fairly submitted that he has no objection if the issue is restored to the file of the Assessing Officer for fresh adjudication after considering the additional evidences filed by the assessee. 11. We have considered the rival submissions and perused the material available on record. We note that the Assessing Officer passed the order under sections 201(1) and 201(1A) on Printed from counselvise.com 6 ITA No. 4700/Mum/2025 Arcil SBPS 001 I Trust 12.02.2020 on the basis of the material available at that time. The CIT(A), by order dated 26.05.2025 passed under section 250 of the Act, confirmed the action of the Assessing Officer. 12. It is an admitted position that the additional evidences now sought to be relied upon by the assessee, namely the Nil Withholding Certificate, NSDL statement, Chartered Accountant‟s certificate, amended trust deed, bank statement, communication to Deutsche Bank AG and working for surplus amount, were not placed before the Assessing Officer. The determination of the liability under section 194LBC read with section 115TCA and the consequential applicability of sections 201(1) and 201(1A) would necessarily require examination of these documents. 13. In our considered view, the interest of justice would be served if the matter is restored to the file of the Assessing Officer for fresh adjudication after considering the aforesaid additional evidences. The Assessing Officer shall examine the claim of the assessee in accordance with law, after affording reasonable opportunity of being heard to the assessee, and shall pass a speaking order on merits. 14. Accordingly, the orders of the Assessing Officer dated 12.02.2020 passed under sections 201(1) and 201(1A) and the order of the CIT(A) dated 26.05.2025 passed under section 250 are set aside on this issue and the matter is restored to the file of the Assessing Officer for fresh adjudication in terms of the above directions. Printed from counselvise.com 7 ITA No. 4700/Mum/2025 Arcil SBPS 001 I Trust 15. In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open court on 04.02.2026. Sd/- Sd/- (AMIT SHUKLA) (MAKARAND VASANT MAHADEOKAR) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, Dated 04/02/2026 Dhananjay, Sr.PS आदेश की प्रतितिति अग्रेतिि/Copy of the Order forwarded to : 1. अपीलाथी / The Appellant 2. प्रत्यथी / The Respondent. 3. संबंधधत आयकर आयुक्त / The CIT(A) 4. आयकर आयुक्त(अपील) / Concerned CIT 5. धिभागीय प्रधतधनधध, आयकर अपीलीय अधधकरण, मुम्बई / DR, ITAT, Mumbai 6. गार्ड फाईल / Guard file. आदेशानुसार/ BY ORDER, सत्याधपत प्रधत //True Copy// 1. उि/सहायक िंजीकार ( Asst. Registrar) आयकर अिीिीय अतिकरण, मुम्बई / ITAT, Mumbai Printed from counselvise.com "