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Facts
The assessee, a securitization trust, inadvertently failed to claim an exemption of INR 31,40,227 under section 10(23DA) of the Income Tax Act while filing its return. This resulted in a tax liability being raised. The assessee's appeal is against the order upholding this tax liability.
Held
The Tribunal held that the appellate authority can entertain a fresh claim made by the assessee, citing Supreme Court and High Court judgments. The Tribunal found merit in the assessee's submission that the claim was inadvertently missed. The impugned order was set aside.
Key Issues
Whether the assessee can claim exemption under section 10(23DA) of the Act for the first time before the appellate authority, and if the failure to claim it in the original return was inadvertent.
Sections Cited
250, 115TCA, 10(23DA), 143(1)
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Income Tax Appellate Tribunal, “K(SMC
Before: SHRI SANDEEP SINGH KARHAILSHRI GIRISH AGRAWAL
Date of Hearing – 26/08/2025 Date of Order - 28/08/2025 O R D E R PER SANDEEP SINGH KARHAIL, J.M. The assessee has filed the present appeal against the impugned order dated 29/03/2025, passed under section 250 of the Income Tax Act, 1961 (“the Act”) by the learned Additional/Joint Commissioner of Income Tax (Appeals)-6, Chennai, [“learned Addl./Joint CIT(A)”], for the assessment year 2023-24.
In this appeal, the assessee has raised the following grounds:
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1. (a) On the facts and circumstances of the case and position of law, the Income Tax Authority has erred in holding the income of the Appellant to be taxable, disregarding the fact that the Appellant is a securitization trust within the meaning of section 115TCA of the Income Tax Act, 1961 ('Act').
(b) On the facts and circumstances of the case and position of law, the Income Tax Authority has erred in not considering the fact that the Appellant's income of Rs. 31,40,227/- is exempt w/s 10(23DA) of the Act. 2. The Appellant craves leave to add, amend, alter or delete the said grounds of appeal.”
3. We have considered the submissions of both sides and perused the material available on record. The brief facts of the case are that the assessee is a Securitisation Trust in accordance with the Indian Trusts Act, 1882 and the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. Edelweiss Asset Reconstruction Co Ltd (“EARCL”) is the “Declarant” of the assessee trust. According to the assessee, the trust was formed to which EARCL transferred the loan portfolio, and in turn, investors were issued Securities Receipts/instruments by the trust. As and when recoveries were made from the original borrowers, the trust transfers such amount to the investors, effectively acting as an intermediary and a pass-through entity. Accordingly, the assessee claimed that its income is exempt under the provisions of section 10(23DA) of the Act, and such income is taxable in the hands of the investors under the provisions of section 115- TCA.
As per the assessee, for the year under consideration, it filed its original return of income on 16/07/2023. However, while filing the return of income, the assessee inadvertently did not claim the exemption of INR 31,40,227 under section 10(23DA) of the Act. Therefore, due to the above, vide intimation issued under section 143(1) of the Act, a tax liability of INR 15,84,530 was determined to be payable by the assessee.
The learned Addl./Joint CIT(A), vide impugned order, following the decision of the Hon’ble Supreme Court in Goetze (India) Ltd v/s CIT, held that there is no provision under the Act to make an amendment in the return of income by modifying an application at the assessment stage without revising the return. Accordingly, the tax liability computed vide intimation issued under section 143(1) of the Act was upheld by the learned Addl./Joint CIT(A) vide impugned order. Being aggrieved, the assessee is in appeal before us.
During the hearing, the learned Authorised Representative (“learned AR”), by referring to the Schedule IE-1 to the return of income submitted, stated that the assessee inadvertently did not claim the exemption under section 10(23DA) of the Act. By referring to the financial statements for the year under consideration, the learned AR submitted that during the year under consideration, the assessee earned income, which was eligible to be claimed as an exemption under section 10(23DA) of the Act.
On the contrary, the learned Departmental Representative (“learned DR”) vehemently submitted that in the return of income at more than one place, the assessee can make a declaration regarding its claim of exemption under section 10(23DA) of the Act. However, the assessee did not make its claim.
Having considered the submissions of both sides and perused the material available on record, at the outset, it is pertinent to note that the Hon'ble Supreme Court in Goetze India Ltd. vs. CIT, reported in [2006] 284 ITR 323 (SC) and the Hon'ble Bombay High Court in CIT vs. Pruthvi Brokers and Shareholders Pvt. Ltd., reported in [2012] 349 ITR 336 (Bom.), have held that the appellate authority can entertain a fresh claim made by the assessee. We find that similar findings have been rendered by the Hon’ble Madras High Court in CIT vs. Abhinitha Foundation (P.) Ltd., reported in [2017] 396 ITR 251 (Madras). Therefore, we are of the considered view that the learned Addl/Joint CIT(A) erred in rejecting the claim of the assessee.
Section 10(23DA) of the Act provides as follows: - “(23DA) any income of a securitisation trust from the activity of securitisation. Explanation.—For the purposes of this clause,— (a) "securitisation" shall have the same meaning as assigned to it,— (i) in clause (r) of sub-regulation (1) of regulation 2 of the Securities and Exchange Board of India (Public Offer and Listing of Securitised Debt Instruments) Regulations, 2008 made under the Securities and Exchange Board of India Act, 1992 (15 of 1992) and the Securities Contracts (Regulation) Act, 1956 (42 of 1956); or (ia) in clause (z) of sub-section (1) of section 2 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002); or (ii) under the guidelines on securitisation of standard assets issued by the Reserve Bank of India; (b) "securitisation trust" shall have the meaning assigned to it in the Explanation below section 115TCA;”
As noted above, the assessee, vide its financial statements, claimed that during the year under consideration, it had a surplus of INR 31,40,226. Further, it is the claim of the assessee that during the year under consideration, the receipts eligible for exemption under section 10(23DA) of the Act are INR 31,40,227. However, as evident from the record, since the assessee did not make any claim under section 10(23DA) of the Act while filing its return of income, there was no examination of whether these receipts are eligible for exemption under the aforesaid section. Furthermore, we find that in its return of income, forming part of the paper book, the assessee specifically stated that section 10(23DA) of the Act is the provision under which the exemption was claimed. Therefore, we find merit in the submission of the assessee that the aforesaid claim under section 10(23DA) of the Act was inadvertently not made by the assessee while filing its return of income. Accordingly, we deem it appropriate to restore the issue of examination of the claim of exemption under section 10(23DA) of the Act to the file of the jurisdictional AO after providing due opportunity of hearing to the assessee. With the above directions, the impugned order is set aside, and the grounds raised by the assessee are allowed for statistical purposes.
In the result, the appeal by the assessee is allowed for statistical purposes. Order pronounced in the open Court on 28/08/2025