No "Pass Through" Status For Indeterminate Trusts Holds Tribunal

The Chennai Bench of the Income-tax Appellate Tribunal (Tribunal) in its recent ruling in TVS Investments iFund v ITO ([2017] 81 taxmann.com 296), while succinctly discussing the conditions that are required to be satisfied for a trust to be accorded "pass through" status in terms of Sections 161 and 164 of the (Indian) Income-tax Act, 1961 (IT Act), has held that no such status can be accorded to indeterminate trusts, subject to certain exceptions.

Background

TVS Investments iFund (Fund) was formed to receive unit contributions from high net worth individuals (HNIs) towards the capital amount committed by them in terms of the 'Contribution Agreement' and provide return on such investments. To this end, the Fund was able to mobilize over INR 400 million from 656 HNIs. In due course, another fund by the name of TVS Shriram Growth Fund (TSGF) was formed and was registered with the Securities and Exchange Board of India (SEBI) under the SEBI (Venture Capital Funds)