Q 21. Consider the following statements:
Statement-I: Interest income from the deposits in Infrastructure Investment Trusts (InvITs) distributed to their investors is exempted from tax, but the dividend is taxable.
Statement-II: InvITs are recognized as borrowers under the ‘Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002’.
Which one of the following is correct in respect of the above statements?
(a) Both Statement-I and Statement-II are correct and Statement- II is the correct explanation for Statement- I
(b) Both Statement-I and Statement-II are correct and Statement- II is not the correct explanation for Statement-I.
(c) Statement I is correct but Statement II is incorrect
(d) Statement I is incorrect but Statement II is correct
Correct Answer: Option (d)
- Interest income that InvIT gets from its underlying SPVs and passes on to unitholders is taxed. The dividends that InvIT pays also get taxed. Both interest and dividend are taxed per the income tax slab. This is applicable where the InvIT has opted for taxation under section 115BAA of the Act. Hence, statement 1 is not correct.
- InvITs are recognized as borrowers under the SARFAESI Act 2002. The SARFAESI Act and the Recovery of Debts Act have been amended. Now, a pooled investment vehicle can be considered a borrower under these laws. This means that a debenture trustee for listed secured debt securities issued by an InvIT or REIT can use the protections and enforcement mechanisms under the SARFAESI Act. Hence, statement 2 is correct.
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