Income Tax Act

Official PDF pages 296–300

SOURCE PDF PAGE 296
F.—Special provisions relating to pass-through entities
Tax on income from securitisation trusts.
221.   (1) Irrespective of anything contained in this Act, where a person being an
investor of a securitisation trust, receives any income or any income accrues
or arises to him, out of investments made in the securitisation trust, such income
shall be chargeable to income-tax in the same manner as if it were the income
accruing or arising to, or received by, such person, had the investments by the
securitisation trust been made directly by him.
(2) The income paid or credited by the securitisation trust shall be deemed to be
of the same nature and in the same proportion in the hands of the person referred
to in sub-section (1), as if it had been received by, or had accrued or arisen to, the
securitisation trust during the tax year.
(3) The income accruing or arising to, or received by, the securitisation trust during
a tax year, if not paid or credited to the person referred to in sub-section (1), shall
be deemed to have been credited to the account of the said person—
( a )   on the last day of the tax year; and
( b )   in the same proportion in which such person would have been entitled
to receive the income had it been paid in the tax year.
(4) The person responsible for crediting or making payment of the income on behalf
of securitisation trust, and the securitisation trust, shall furnish, within such period,
as may be prescribed, to the person who is liable to tax in respect of such income
and to the prescribed income-tax authority, a statement in such form and verified
in such manner, giving details of the nature of the income paid or credited during
the tax year and such other relevant details, as may be prescribed.
(5) Any income which has been included in the total income of the person referred
to in sub-section (1) in a tax year, on account of it having accrued or arisen in the
said tax year, shall not be included in the total income of such person in the tax year
in which such income is actually paid to him by the securitisation trust.
(6) For the purposes of this section,—
( a )   “investor” means a person who is holder of any securitised debt instru -
ment or securities or security receipt issued by the securitisation trust;
( b )   “securities” means debt securities issued by a Special Purpose Vehicle as
referred to in the guidelines on securitisation of standard assets issued
by the Reserve Bank of India;
( c )   “securitised debt instrument”
65  
shall have the same meaning as assigned
to it in regulation 2(1)( s ) 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);

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( d )   “securitisation trust” means a   trust, being a—
( i )   “special purpose distinct entity”   as defined in regulation 2(1)( u )
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) and regulated under the said regulations; or
( ii )   “Special Purpose Vehicle” as defined in, and regulated by, the
guidelines on securitisation of standard assets issued by the
Reserve Bank of India; or
( iii )   trust set-up by a securitisation company or a reconstruction company
formed, for the purposes of the Securitisation and Reconstruction
of Financial Assets and Enforcement of Security Interest Act, 2002
(54 of 2002), or in pursuance of any guidelines or directions issued
for the said purposes by the Reserve Bank of India,
which fulfils such conditions, as may be prescribed;
( e )   “security receipt” shall have the same meaning as assigned to it in section
2(1)( zg ) of the Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002 (54 of 2002).
Tax on income in case of venture capital undertakings.
222.   (1) Irrespective of anything contained in any other provision of this Act,
where a person, out of investments made in a venture capital company or
venture capital fund, receives any income, or any income accrues or arises to him,
such income shall be chargeable to income-tax in the same manner as if it were the
income accruing or arising to, or received by, such person, had he made investments
directly in the venture capital undertaking.
(2) The person responsible for crediting or making payment of the income on behalf
of a venture capital company or a venture capital fund and the venture capital com -
pany or venture capital fund shall furnish, within such time, as may be prescribed,
to the person who is liable to tax in respect of such income and to the prescribed
income-tax authority, a statement in the prescribed form and verified in the pre -
scribed manner, giving details of the nature of the income paid or credited during
the tax year and such other relevant details, as may be prescribed.
(3) The income paid or credited by the venture capital company and the venture
capital fund shall be deemed to be of the same nature and in the same proportion in
the hands of the person referred to in sub-section (1) as it had been received by, or
had accrued or arisen to, the venture capital company or the venture capital fund,
as the case may be, during the tax year.
(4) The provisions of Chapter XIX-B shall not apply to the income paid by a venture
capital company or venture capital fund under this Chapter.
(5) The income accruing or arising to or received by the venture capital company
or venture capital fund during a tax year from investments made in venture capital

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undertaking, if not paid or credited to the person referred to in sub-section (1), shall
be deemed to have been credited to the account of the said person—
( a )   on the last day of the tax year; and
( b )   in the same proportion in which such person would have been entitled
to receive the income had it been paid in the tax year.
(6) Any income which has been included in total income of the person referred to
in sub-section (1) in a tax year, on account of it having accrued or arisen in the said
tax year, shall not be included in the total income of such person in the tax year in
which such income is actually paid to him by the venture capital company or the
venture capital fund.
(7) Nothing contained in this section shall apply in respect of any income accruing
or arising to, or received by, a person from investments made in a venture capital
company or venture capital fund, being an investment fund specified in section
224(10)( a ).
(8) For the purposes of this section, “venture capital company”, “venture capital
fund” and “venture capital undertaking” shall have the meanings respectively
assigned to them in Schedule V (Note 4).
Tax on income of unit holder and business trust.
223.   (1) Irrespective of anything contained in any other provisions of this Act, any
income distributed by a business trust to its unit holders shall be deemed to
be of the same nature and in the same proportion in the hands of the unit holder
as it had been received by, or accrued to, the business trust.
(2) Subject to the provisions of sections 196, 197 and 198, the total income of a
business trust shall be charged to tax at the maximum marginal rate.
(3) If in any tax year, the distributed income or any part thereof, received by a unit
holder from the business trust is of the nature as referred to in Schedule V (Table:
Sl. No. 3) or (Table: Sl. No. 4), then, such distributed income or part thereof shall
be deemed to be income of such unit holder and shall be charged to tax as income
of the tax year.
(4) The provisions of sub-section (1) shall not apply in respect of any sum referred
to in section 92(2)( k ) received by a unit holder from a business trust.
(5) Any person responsible for making payment of the income distributed on behalf
of a business trust to a unit holder, shall furnish a statement to the unit holder and
the prescribed authority, within such time and in such form and manner, as may be
prescribed, giving the details of the nature of the income paid during the tax year
and such other details, as may be prescribed.
Tax on income of investment fund and its unit holders.
224.   (1) Irrespective of anything contained in any other provision of this Act and
subject to the provisions of this section, where a person, being a unit holder of
an investment fund, out of investments made in the investment fund, receives any
income or any income accrues or arises to him, such income shall be chargeable to
income-tax in the same manner as if, it were the income accruing or arising to, or
received by, such person, had the investments made by the investment fund been
made directly by him.

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(2) Where in any tax year, the net result of computation of total income of the
investment fund, without giving effect to the provisions of Schedule V (Table: Sl. No.
1), is a loss under any head of income and such loss cannot be or is not wholly set
off against income under any other head of income of the said tax year, then out
of such loss,—
( a )   the loss arising to the investment fund as a result of the computation
under the head “Profits and gains of business or profession”, if any, shall
be—
( i )   allowed to be carried forward and it shall be set off by the invest -
ment fund as per the provisions of Chapter VII; and
( ii )   ignored for the purposes of sub-section (1);
( b )   the loss other than the loss referred to in clause ( a ), if any, shall also be
ignored for the purposes of sub-section (1), if such loss has arisen in
respect of a unit which has not been held by the unit holder for at least
twelve months.
(3) The loss other than the loss under the head “Profits and gains of business or
profession”, if any, accumulated at the level of investment fund as on the 31st March,
2019, shall be—
( a )   deemed to be the loss of a unit holder who held the unit on the 31st March,
2019 in respect of the investments made by him in the investment fund,
in the same manner as provided in sub-section (1); and
( b )   allowed to be carried forward by such unit holder for the remaining
period calculated from the year in which the loss had occurred for the
first time taking that year as the first year and shall be set off by him as
per the provisions of Chapter VII.
(4) The loss so deemed under sub-section (3) shall not be available to the investment
fund on or after the 1st April, 2019.
(5) The income paid or credited by the investment fund shall be deemed to be of
the same nature and in the same proportion in the hands of the person referred
to in sub-section (1), as if it had been received by, or had accrued or arisen to, the
investment fund during the tax year subject to the provisions of sub-section (2).
(6) The total income of the investment fund shall be charged to tax—
( a )   at the rate or rates as specified in the Finance Act of the relevant year,
where such fund is a company or a firm; or
( b )   at maximum marginal rate, in any other case.
(7) The income accruing or arising to, or received by, the investment fund, during
a tax year, if not paid or credited to the person referred to in sub-section (1), shall
subject to the provisions of sub-section (2), be deemed to have been credited to the
account of the said person on the last day of the tax year in the same proportion
in which such person would have been entitled to receive the income had it been
paid in the tax year.

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(8) Any income, which has been included in total income of the person referred to
in sub-section (1) in a tax year, on account of it having accrued or arisen in the said
tax year, shall not be included in the total income of such person in the tax year in
which such income is actually paid to him by the investment fund.
(9) The person responsible for crediting or making payment of the income on behalf
of an investment fund and the investment fund shall furnish, within such time, as
may be prescribed, to the person who is liable to tax in respect of such income and
to the prescribed income-tax authority, a statement in the prescribed form and
verified in such manner, giving details of the nature of the income paid or credited
during the tax year and such other relevant details, as may be prescribed.
(10) For the purposes of this section,—
( a )   “investment fund” means any fund established or incorporated in India
in the form of a trust or a company or a limited liability partnership or a
body corporate which has been granted a certificate of registration as a
Category I or a Category II Alternative Investment Fund and is regulated
under the—
( i )   Securities and Exchange Board of India (Alternative Investment
Funds) Regulations, 2012 made under Securities and Exchange
Board of India Act, 1992 (15 of 1992); or
( ii )   International Financial Services Centres Authority (Fund Manage -
ment) Regulations, 2022 made under the International Financial
Services Centres Authority Act, 2019 (50 of 2019);
( b )   “trust” means a trust established under the Indian Trusts Act, 1882 (2 of
1882)   or under any other law in force; and
( c )   “unit” means beneficial interest of an investor in the investment fund or
a scheme of the investment fund and shall include shares or partnership
interests.
G.—Special provisions relating to income of shipping companies
Income from business of operating qualifying ships.
225.   Irrespective of anything contained in sections 26 to 54 (except 50 and 53), in
the case of a company, the income from the business of operating qualifying
ships—
( a )   may, at its option, be computed as per provisions of this Part; and
( b )   such income shall be deemed to be the profits and gains of such busi -
ness chargeable to tax under the head “Profits and gains of business or
profession”.
Tonnage tax scheme.
226.   (1) In this Part, a company shall—
( a )   be regarded as operating a ship or inland vessel, as the case may be, if it
operates any ship or inland vessel, as the case may be, whether owned or
chartered by it and includes a case where even a part of the ship or inland
vessel, as the case may be, has been chartered in by it in an arrangement
such as slot charter, space charter or joint charter;