Section 115TA — Case Laws & Commentary

CHAPTER XII-EA — SPECIAL PROVISIONS RELATING TO TAX ON DISTRIBUTED INCOME BY SECURITISATION TRUSTS

Section 115TA — Tax on distributed income to investors

Case Laws & Commentary · Income-tax Act, 1961 (as amended by the Finance Act, 2026) · bharattax.co Treatise

Provision: Charging section of Chapter XII-EA. Levies an additional income-tax (a “distribution tax”) on a securitisation trust on income it distributes to its investors.

Operative window: Inserted by the Finance Act, 2013, with effect from 1 June 2013. By its own sub-section (5) the section ceased to apply to income distributed on or after 1 June 2016.

Present status under FA 2026: Retained on the statute book but spent. The Finance Act, 2026 makes no amendment to section 115TA (or to sections 115TB and 115TC). The live regime for securitisation income is the pass-through under section 115TCA (Chapter XII-EB).

Reading note: Direct merits litigation on section 115TA is effectively absent. The relevant body of authority concerns the very controversy the section was enacted to settle — whether a securitisation trust is taxable as an association of persons or is a pass-through. Those authorities are catalogued below, with their relationship to the section stated candidly.

A. SECTION COMMENTARY

A.1 What section 115TA did — a single-point tax collected at the trust gate

Section 115TA was the charging provision of a self-contained, three-section code (sections 115TA to 115TC) that the Finance Act, 2013 inserted as Chapter XII-EA to tax the income thrown off by securitisation structures. The design mirrored the dividend-distribution tax of Chapter XII-D and the mutual-fund income-distribution tax of Chapter XII-E: instead of taxing each investor on the income he received, the Act collected a single additional income-tax from the trust at the point of distribution, and then exempted the income both in the hands of the trust (section 10(23DA)) and in the hands of the investor (section 10(35A)). The slogan for the scheme is “tax once, at the trust gate, and let the money flow out clean.”

The charge fell on “any amount of income distributed by the securitisation trust to its investors.” It was an additional income-tax on the trust — not a tax on the investor — even though its measure was the amount handed to the investor. That characterisation is the same one the Supreme Court fixed for the dividend-distribution tax, and it governs the reading of the whole chapter.

A.2 The mechanics — rates, the fourteen-day deposit, the exempt-investor proviso, no deduction, sunset

Five operative features sit in the section. First, the rates (sub-section (1)): twenty-five per cent where the income was distributed to an individual or a Hindu undivided family, and thirty per cent in every other case; the additional tax was further increased by the applicable surcharge. Second, the exempt-investor proviso: the charge did not apply to income distributed to a person “in whose case income, irrespective of its nature and source, is not chargeable to tax under the Act” — the carve-out that spared distributions to wholly tax-exempt holders. Third, the collection machinery (sub-section (2)): the “person responsible for making payment” had to pay the tax to the credit of the Central Government within fourteen days of distribution or payment, whichever was earlier. Fourth, the no-deduction rule (sub-section (4)): the trust got no deduction under any other provision for income charged under sub-section (1) — the charge was on the gross distributed amount. Fifth, the sunset (sub-section (5)): the section does not apply to income distributed on or after 1 June 2016.

Sub-section (3) — which had required the person responsible to furnish a statement of distributed income — now reads “[***]”, having been omitted on the consequential reworking of the chapter when the pass-through replaced the distribution tax.

A.3 Why the section was enacted — the AOP-versus-pass-through controversy

The section did not arise in a vacuum. Before 2013, a securitisation special-purpose vehicle was typically settled as a trust that issued pass-through certificates (PTCs) or security receipts to its investors — most of whom were mutual funds and banks. The investors, not the trust, were meant to bear tax, the trust being treated as a conduit. The Revenue, however, began assessing the trusts themselves as associations of persons (AOPs) at the maximum marginal rate under section 161(1A), on the footing that the beneficiaries had associated to earn income through the vehicle. Because many investors were tax-exempt mutual funds (section 10(23D)), taxing the trust as an AOP threatened to convert an exempt income stream into a fully taxed one, and cast a pall of uncertainty over the rating and pricing of securitisation paper.

The Finance Act, 2013 cut through that uncertainty by statutory fiat: it exempted the trust's income, exempted the investor's income, and substituted the single distribution tax in section 115TA. The Memorandum to the Finance Bill and CBDT Circular No. 3/2014 record this as the express object — “to provide a special tax regime” for securitisation trusts so as “to facilitate the securitisation process.” The litigation catalogued in Cluster C-1 is, almost entirely, the run-off of the old AOP controversy in years before (and after) the section's window; it is the backdrop against which section 115TA must be read.

A.4 The exemption architecture — sections 10(23DA) and 10(35A)

Section 115TA cannot be read alone. It is one leg of a tripod. Section 10(23DA) exempts the income of a securitisation trust from the activity of securitisation; section 10(35A) exempts, in the investor's hands, the distributed income referred to in section 115TA. The distribution tax is the price of those two exemptions. The structure is deliberately closed: the investor receives the income free of further tax precisely because the trust has already paid the section 115TA charge, and the trust is denied any offsetting deduction (sub-section (4)) so that the charge bites on the full distributed sum. The exempt-investor proviso then prevents the scheme from taxing money destined for a holder who would itself have borne no tax — a refinement absent from the earlier dividend-distribution tax and characteristic of the more carefully calibrated 2013 design.

A.5 Sunset on 1 June 2016 — migration to the section 115TCA pass-through

The distribution-tax model proved short-lived. Industry representations (including those of ICAI) pointed out that levying a flat 25/30 per cent at the trust gate over-taxed investors who were on lower slabs or were themselves exempt, and broke the very tax-neutrality that securitisation depends on. The Finance Act, 2016 responded by switching to a genuine pass-through: section 115TCA (Chapter XII-EB) now provides that income accruing to an investor out of investments in a securitisation trust is taxable in the investor's hands as if the investment had been made directly, retaining the income's character and source, with a withholding mechanism. Section 115TA's own sub-section (5) implements the change-over date — the distribution tax does not apply to income distributed on or after 1 June 2016. From that date the chapter became spent; sections 115TA to 115TC apply only to the three-year window of distributions between 1 June 2013 and 31 May 2016.

A.6 Reading section 115TA in 2026

For the practitioner, the section now matters in three residual situations: (a) reopened or appellate proceedings touching distributions made within the 2013–16 window; (b) recovery or interest disputes carried forward under sections 115TB and 115TC for that window; and (c) as the interpretive bridge to the live section 115TCA, whose pass-through rationale is best understood against the distribution tax it replaced. The Finance Act, 2026 leaves the section untouched. No case has been reported in which the charge under section 115TA was itself adjudicated on the merits — a candour the Treatise records rather than papers over; the authorities below illuminate the section's context and the surrounding law, and are presented on that basis.

B. STATUTORY POSITION (verbatim operative text)

Section 115TA, Income-tax Act, 1961 (Chapter XII-EA), as it stands on the statute book:

115TA. (1) Notwithstanding anything contained in any other provisions of the Act, any amount of income distributed by the securitisation trust to its investors shall be chargeable to tax and such securitisation trust shall be liable to pay additional income-tax on such distributed income at the rate of—

(i) twenty-five per cent on income distributed to any person being an individual or a Hindu undivided family;

(ii) thirty per cent on income distributed to any other person:

Provided that nothing contained in this sub-section shall apply in respect of any income distributed by the securitisation trust to any person in whose case income, irrespective of its nature and source, is not chargeable to tax under the Act.

(2) The person responsible for making payment of the income distributed by the securitisation trust shall be liable to pay tax to the credit of the Central Government within fourteen days from the date of distribution or payment of such income, whichever is earlier.

(3) [***]

(4) No deduction under any other provisions of this Act shall be allowed to the securitisation trust in respect of the income which has been charged to tax under sub-section (1).

(5) Nothing contained in this section shall apply in respect of any income distributed by a securitisation trust to its investors on or after the 1st day of June, 2016.

C. AUTHORITIES

Candour note: section 115TA operated only for distributions between 1 June 2013 and 31 May 2016 and, because the income was exempt at both the trust and investor stages, generated no reported decision adjudicating the charge itself. The authorities below are grouped by the work they do — first, the trust-taxability controversy the section was designed to end (and which continued to be litigated for pre- and post-window years under sections 61–63); second, the foundational principles those decisions rest on; third, the wider securitisation tax architecture (originator's gain); and fourth, the governing administrative explanation. Each entry states its precise relationship to section 115TA.

Cluster C-1 : The controversy section 115TA was enacted to settle — securitisation trust as AOP vs. pass-through

ITO v. Indian Corporate Loan Securitisation Trust 2008 (ITAT Mumbai, Stay Order dated 24 May 2013, S.A. Nos. 158–162/Mum./2013 in ITA Nos. 3986–3988, 4039 & 4034/Mum./2013, AY 2009-10).

Principle: A determinate private trust settled to securitise a loan (here, a Yes Bank loan to HPCL), whose beneficiaries were mutual funds subscribing to pass-through certificates, has a strong prima facie case that it cannot be assessed as an association of persons at the maximum marginal rate under section 161(1A). The Tribunal recorded the assessee's contentions — that under section 63 read with section 61 a revocable transfer makes the income chargeable in the transferor/beneficiary's hands; that mutual-fund beneficiaries are exempt under section 10(23D) so no demand can be enforced; that a determinate trust is not an AOP (relying on CIT v. Marsons Beneficiaries Trust and L.R. Patel Family Trust); and that the income reached the beneficiaries by diversion by overriding title — and granted a full stay of the entire demand.

Application to s.115TA: The clearest contemporaneous judicial snapshot of the very problem section 115TA was enacted to cure, decided in the same year the section came into force. The Tribunal itself noted that the Finance Act, 2013 had “brought a special tax regime… to facilitate the securitisation process” and that, even though effective only from 1 June 2013, it showed “the legislature did not intend the mutual funds who are investors in the trust as taxable entity.” Cited as direct context for the legislative purpose of the section.

Status: ITAT Mumbai (‘I’ Bench: Rajendra Singh, AM, and Amit Shukla, JM). Interim stay order, not a decision on the merits — flagged as such; valuable for its articulation of the controversy and the legislative-purpose observation, not as a binding merits ruling.

ITO v. Arcil Retail Loan Portfolio-001-F Trust (ITAT Mumbai, AY 2016-17; reported 2026).

Principle: A securitisation trust constituted by an asset reconstruction company (ARCIL) under the SARFAESI Act, 2002 to acquire and resolve non-performing assets, funded by security-receipt (SR) holders, is a revocable trust within the meaning of sections 61 to 63; its income is therefore taxable in the hands of the SR holders/contributors and not in the hands of the trust. The Assessing Officer's treatment of the trust as an AOP — a non-revocable trust with indeterminate beneficiaries attracting section 164 — was rejected, there being no inter se agreement among the contributors to carry on a joint enterprise; section 164 had no application; the additions (income of Rs. 16.30 crore taxed in the trust's hands) were deleted.

Application to s.115TA: The most developed recent statement of the pass-through/AOP question for SARFAESI securitisation trusts. It confirms the legal premise on which section 115TA rested — that the trust is a conduit and the investors are the real owners of the income — and shows how, outside the section's 2013–16 window, that premise is vindicated through the revocable-transfer route of sections 61–63 rather than through Chapter XII-EA.

Status: ITAT Mumbai; Revenue's appeal dismissed, CIT(A) order upheld. Tribunal-level merits decision on the trust-taxability question (sections 61–63/164), not a decision construing section 115TA.

ITO v. Indian Corporate Loan Securities Trust 2008 Series 14 (ITAT Mumbai, ITA No. 4789/Mum./2017).

Principle: Income arising from a revocable securitisation trust is taxable in the hands of the investor, not the trust. A trust deed making revocation of the contributions conditional on the consent of contributors holding a stated percentage of units does not render the trust irrevocable; conditional or collective revocability is still revocability, and the pass-through consequence under sections 61–63 follows.

Application to s.115TA: Confirms, on the merits, the conduit characterisation underlying the Chapter XII-EA scheme — the income belongs to the investors. Cited to show the settled judicial position on who bears tax on securitisation-trust income, the position the distribution tax briefly displaced and the pass-through (section 115TCA) restored.

Status: ITAT Mumbai. Tribunal-level merits decision on sections 61–63; not a decision on section 115TA.

ITO v. Scheme A1 of Arcil CPS XI Trust (ITAT Mumbai, ITA No. 2293/Mum./2018).

Principle: Merely because a trust deed specifies that revocation of contributions is conditional on the consent of contributors holding 75 per cent of the units, it does not follow that the trust is irrevocable or that the benefit of pass-through is lost. Adopting Behramji Sorabji Lalkaka v. CIT, “revocable transfer” is well understood in law, and a transfer does not cease to be revocable because the settlor cannot revoke without the consent of named persons. The trust is revocable; the pass-through applies.

Application to s.115TA: Reinforces that securitisation trusts are conduits whose income is the investors' — the foundation of the Chapter XII-EA exemption-plus-distribution-tax design. Cited as part of the consistent ITAT Mumbai line on the revocability of securitisation trusts.

Status: ITAT Mumbai. Tribunal-level merits decision on sections 61–63; not a decision on section 115TA.

Cluster C-2 : Foundational principles relied on — ‘revocable transfer’, determinate trust ≠ AOP, investor exemption

Behramji Sorabji Lalkaka v. CIT, (1948) 16 ITR 301 (Bombay High Court).

Principle: The words “revocable transfer” are well understood in law: a transfer does not cease to be revocable merely because the settlor cannot exercise the power of revocation without the consent of the named individuals, or any of them. Conditional revocability is still revocability.

Application to s.115TA: The doctrinal root drawn on by the ITAT Mumbai securitisation-trust line (Arcil CPS XI Trust; ICLS Trust 2008 Series 14) to hold these trusts revocable, and hence pass-through, under sections 61–63 — the legal premise on which Chapter XII-EA's conduit treatment of the trust rests. Cited on principle only.

Status: Bombay High Court (1948); long-standing authority on the meaning of “revocable transfer.” Not a securitisation or section 115TA decision.

CIT v. Marsons Beneficiaries Trust, (1991) 188 ITR 224 (Bombay High Court).

Principle: A determinate trust, where the beneficiaries and their shares are known, cannot be assessed in the status of an association of persons; the trustees are assessable in a representative capacity in the like manner and to the same extent as the beneficiaries. The mere coming-together of beneficiaries under a trust instrument is not an ‘association’ formed with the object of producing income.

Application to s.115TA: The authority invoked to resist AOP assessment of securitisation trusts — the assessment device that section 115TA's exemption-plus-distribution-tax model was designed to render unnecessary. Cited on principle for the proposition that a determinate securitisation trust is not an AOP.

Status: Bombay High Court. Authority on trust-versus-AOP status; relied on in the securitisation-trust cases, not itself a section 115TA decision.

L.R. Patel Family Trust v. ITO, (2003) 262 ITR 520 (Bombay High Court).

Principle: Trustees of a validly constituted trust are not, by reason only of the trust, an association of persons; assessment must follow the representative-assessee scheme of sections 160–164, taxing the trustees as the beneficiaries would be taxed. There must be a real association for a common purpose of producing income before AOP status can be fastened.

Application to s.115TA: A companion authority to Marsons, cited in the securitisation-trust litigation to displace AOP assessment of the trust. Establishes the representative-assessee analysis that section 115TA short-circuited for the 2013–16 window. Cited on principle only.

Status: Bombay High Court. Authority on trust-versus-AOP status; not a section 115TA decision.

UTI Mutual Fund v. ITO, W.P. No. 523 of 2013, judgment dated 6 March 2013 (Bombay High Court) [investor-side stay].

Principle: Where the income of a securitisation/loan trust is sought to be taxed but the investor mutual fund is exempt under section 10(23D), the issues are complex and the assessee has a strong prima facie case; recovery of the demand was stayed. The decision was relied on by the Tribunal in the ICLS Trust 2008 stay order (Cluster C-1).

Application to s.115TA: Illustrates the investor-exemption dimension (section 10(23D) mutual funds) that made AOP assessment of securitisation trusts so contentious, and which the section 115TA exempt-investor proviso and the section 10(35A) exemption were calibrated to respect. Cited as context.

Status: Bombay High Court; interim/stay relief — flagged as such. Not a merits decision on section 115TA.

Cluster C-3 : The wider securitisation tax architecture — timing of the originator's gain (context)

Section 115TA taxed the trust's distribution to investors. A related but distinct body of case law governs the originator — the entity that sells its receivables into the trust — and the year in which its securitisation gain is taxed. These decisions are not on section 115TA, but they complete the picture of how the Act taxes a securitisation transaction end-to-end, and are catalogued for that reason.

CIT v. L&T Finance Ltd (Bombay High Court, ITA Nos. 256 & 267 of 2016).

Principle: Gain arising to the originator on securitisation of lease receivables, once realised and credited to the profit and loss account, is a taxable revenue receipt in the year of transfer. The assessee's attempt to spread the gain over the tenure of the underlying receivables on the “matching concept” was rejected: a realised gain is taxed when realised, not deferred.

Application to s.115TA: Marks the originator-side boundary of securitisation taxation — the upfront, realised gain is taxed in the originator's hands in the year of transfer, independently of the trust-level distribution tax under section 115TA. Cited for the architecture of the transaction.

Status: Bombay High Court. Authority on originator's securitisation gain (timing); not a section 115TA decision.

CIT v. Shriram Investments Ltd (Madras High Court, Tax Case Appeal No. 328 of 2011).

Principle: Where securitised receivables, if not securitised, would have been taxed over a period, recognising the securitisation income spread over that period is revenue-neutral and does not warrant disturbance; the spreading of income, in that situation, was accepted.

Application to s.115TA: The counter-pole to L&T Finance on the originator's timing question — included to show the spread of judicial opinion on securitisation-gain recognition that frames the wider tax treatment within which section 115TA operated. Cited as context.

Status: Madras High Court. Authority on the originator's securitisation income (timing); not a section 115TA decision.

Axis Bank Ltd v. Addl. CIT (ITAT Ahmedabad, ITA Nos. 577, 691, 1015 & 1129/Ahd./2011 and 250/Ahd./2012).

Principle: Although the relevant test for income-tax is real income, the gain booked by the originator on securitisation is not taxable upfront where the RBI directive requires the gain on securitisation to be recognised over the period of the securities issued by the SPV; recognition follows the regulatory directive rather than upfronting the estimated future spread.

Application to s.115TA: A leading statement of the originator's recognition rule under the RBI framework, demonstrating how the real-income doctrine and regulatory accounting shape securitisation taxation around the Chapter XII-EA charge. Cited as context.

Status: ITAT Ahmedabad. Tribunal-level authority on originator recognition; not a section 115TA decision.

Asmitha Microfin Ltd v. ACIT (ITAT Hyderabad, ITA No. 137/Hyd./2013).

Principle: Where the gain on a securitisation transaction — in the form of the discounted value of future interest — is already realised at the time of the transaction as part of the sale consideration, it is taxable in that year; the real-income objection does not save a gain that has in fact been received.

Application to s.115TA: Confirms that a realised originator gain is taxed when received, completing the L&T Finance/Axis Bank picture of securitisation-gain timing that surrounds the trust-level charge. Cited as context.

Status: ITAT Hyderabad. Tribunal-level authority on originator gain; not a section 115TA decision.

CIT v. Bokaro Steel Ltd, (1999) 236 ITR 315 : 102 Taxman 94 (Supreme Court).

Principle: Income-tax is a levy on real income — income that has actually accrued or been received on commercial principles — and not on hypothetical or merely book entries; the substance of the transaction governs.

Application to s.115TA: The real-income doctrine invoked across the originator-recognition cases (Axis Bank, Asmitha Microfin) and the conceptual backstop for the whole securitisation-taxation enquiry. Cited on principle only.

Status: Supreme Court. Foundational authority on the real-income concept; not a securitisation or section 115TA decision.

Cluster C-4 : Governing administrative explanation

CBDT Circular No. 3/2014 dated 24 January 2014 — Explanatory Notes to the Provisions of the Finance Act, 2013 (F. No. 142/24/2013-TPL).

Principle: The Circular explains the insertion of Chapter XII-EA (sections 115TA–115TC): income distributed by a securitisation trust to its investors is subjected to a levy of additional tax, payable by the trust within fourteen days of distribution, at 25 per cent for distributions to an individual or HUF and 30 per cent for others; no distribution tax is levied where the distribution is to an exempt entity; the additional tax is increased by surcharge; and, consequentially, the investor's income is exempt under section 10(35A) and the trust's income under section 10(23DA). The stated object is to provide a special tax regime to facilitate the securitisation process.

Application to s.115TA: The authoritative contemporaneous exposition of the section's scheme, rates, machinery and object. Being a Board circular explaining the charging provision, it is the primary administrative aid to construction for the 2013–16 window and binds the Department.

Status: CBDT Explanatory Notes (Circular No. 3/2014). Administrative; binding on the Revenue and a recognised aid to construction. The directly governing exposition of section 115TA.

Compiled for the bharattax.co Treatise on the Income-tax Act, 1961 (as amended by the Finance Act, 2026). Statutory text reproduced verbatim from the Income-tax Act, 1961. Citations stated as reported; tribunal and stay-stage orders are flagged as such. This material is for professional reference and is not legal advice.