Consider the following statements:
Statement-1: 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 forStatement-1
(c) Statement-1 is correct but Statement-II is incorrect
(d) Statement-I is incorrect but Statement-II is correct
Answer: D
The answer is (d).
Statement-I is incorrect. Interest income from the deposits in Infrastructure Investment Trusts (InvITs) distributed to their investors is taxable. The dividend is also taxable.
Statement-II is correct. InvITs are recognized as borrowers under the ‘Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002’.
However, Statement-II is not the correct explanation for Statement-I. The interest income from the deposits in InvITs is taxable because it is considered as income from other sources. The dividend is also taxable because it is considered as income from capital gains.
The correct explanation for Statement-I is that the interest income from the deposits in InvITs is taxable because it is not specifically exempted from tax. The dividend is also taxable because it is not specifically exempted from tax.
