Beta, a Real Estate Investment Trust (REIT), registered under relevant SEBI Regulations, holds 65% shares in H Ltd. Beta REIT provides the following…

Computation of total income in the hands of Beta, REIT and Mr. Arpan (unit-holder) Particulars Beta (REIT) Mr. Arpan (Unit-holder) (i) Interest income of 12crores from H Ltd. (SPV) Interest income from SPV would be exempt in the hands of REIT by virtue of section 10(23FC)(a). The component of such interest income distributed to unit holders would be deemed as income of the unit holders as per section 115UA(3). Accordingly,8.4 crores being 70% of 12 crores is taxable in the hands of the unitholder Mr. Arpan. Nil 8,40,00,000 (ii) Dividend income of 2crores from H Ltd. (SPV) The dividend distributed by the SPV to the REIT is exempt in the hands of REIT by virtue of section 10(23FC)(b). The component of such dividend income distributed to unitholders is taxable in the hands of unitholders by virtue of the exception contained in section 10(23FD), since H Ltd. (SPV) has exercised the option u/s 115BAA. Accordingly,1.40 crore, being 70% of 2 crores, would be taxable in the hands of the unitholder Mr. Arpan. Nil 1,40,00,000 (iii) Short-term capital gains of 1.2 crore on sale of developmental properties STCG on sale of development properties is taxable at maximum marginal rate in the hands of the REIT as per section 115UA(2). There would be no tax liability in the hands of the unit holders on the capital gain component of income distributed to them by virtue of exemption contained in section 10(23FD). 1,20,00,000 Nil (iv) Interest of 12lakh received in respect of investment in unlisted debentures of companies Such interest is taxable at maximum marginal rate in the hands of the REIT as per section 115UA(2). There would be no tax liability in the hands of the unit holders on the interest component of income distributed to them by virtue of section 10(23FD). 12,00,000 Nil (v) Rental income of 2crores from directly owned real estate assets Income by way of renting or leasing or letting out any real estate asset owned directly by REIT is exempt in the hands of the REIT as per section 10(23FCA). However, the component of such rental income distributed to unitholders is deemed as income of the unit holders as per section 115UA(3). Accordingly,1.4 crores, being 70% of 2crores would be taxable in the hands of Mr. Arpan. Nil 1,40,00,000 (vi) Other income distributed to unitholders As per section 115UA(3A), any sum other than interest and dividend received from SPV, rental income and income which are chargeable to tax in the hands of REIT, in the present case it is STCG on sale of developmental properties and interest on unlisted debentures, would be chargeable to tax under section 56(2) (xii) in the hands of unitholders as income from other sources. In the present case,37,60,000 [1.876, being 70% of 2.68 [20crores - 17.32 (12crores +2 crores +1.2 crores +12 lakhs +2 crores)] Less 1.5 crores, being the issue price of units held by Mr. Arpan} would be taxable as Income from other sources. - 37,60,000 Total income 1,32,00,000 11,57,60,000