As per General circular No 37/2014
a trust or a trustee representing a trust in the case of "Real Estate Investment Trust" (REIT) or
"infrastructure Investment Trust" (lnvlTs) or such other trusts set up under the regulations
prescribed under the Securities & Exchange Board of India Act, 1992, can become a partner in an
LLP.
It means that the trusts that are registered under the SEBI Regulations even though they are not
Real Estate Investment Trust" (REIT) or "infrastructure Investment Trust" (lnvlTs) or AIFs, can be
partner in a LLP.
As per Section 5 of LLP Act, 2008 only an individual or body corporate may be a partner in a
Limited Liability Partnership.
Section 5 of the Indian Trust Act, 1882
Trust of immoveable property.—No trust in relation to immoveable property is valid unless declared
by a non-testamentary instrument in writing signed by the author of the trust or the trustee and
registered, or by the will of the author of the trust or of the trustee.
Private trusts set up under the Trusts Act need to be registered under the Registration Act 1908 in
the event immovable property is devolved on such private trusts.
While Indian laws do not recognise trusts as a separate legal entity, they recognise trusts as an
obligation of the trustee to hold and own the property, not as an absolute owner (ie as both legal
and beneficial owner), but to use and manage the trust property for the benefit of the beneficiaries.
The IT Act does not recognise a trust as a separate taxable unit, since a trust does not fall under the
definition of person as laid down under Section 2(31) of the IT Act. The IT Act provides for the
concept of representative assessees where, in case of a trust, the trustee is deemed to be the
assessee for the purpose of the IT Act.
a trust is not a taxable entity but a pass-through structure where the trustee is taxed on the income
of the trust property in representative capacity for the beneficiaries.
. Is there in your jurisdiction a register of trusts and/or of beneficiaries of trusts? Which trusts should
be registered? What information should be provided? Who can access the information? What are
the consequences of failure to comply? India does not have a register of trusts. In case the trust
deed is registered, the same is not accessible to the general public. In this context, it is worth
mentioning that the government of India introduced the concept of ‘significant beneficial ownership’
by legislating Section 90 in Companies Act 2013 in order to ascertain the natural person owning the
shares of an Indian company. The Companies (Significant Beneficial Owners) Amendment Rules 2019
were notified on 8 February 2019 stipulating the thresholds and circumstances under which an
individual could be considered as a significant beneficial owner (‘SBO’) along with the various filings
that have to be undertaken. The threshold for identifying the SBO is 10% shareholding in the Indian
company (amongst other conditions like voting etc). In case a trust is an SBO, then the
trustee/beneficiaries/settlor (depending upon whether the trust is determinate, discretionary or
revocable) will have to make appropriate disclosures to the company which in turn will make such
disclosures to the Registrar of Companies.
Ramanlal Bhailal Patel v. State of Gujarat, (2008) 5 SCC 449, in which it was held that
an “association of persons/body of individuals” was one in which two or more persons join in a
common purpose and common action to achieve some common benefit. As per Section 3 of the NI Act,
the trustees do not get benefit out of the trust. Therefore, it could not be said that the trustees were
persons joined together for a common action to achieve some common benefit. Since, the common
purpose of the “Trust” was not to achieve benefit to the trustees, the “Trust” could not be said to be
an “association of persons/body of individuals”.
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The Ministry of Corporate Affairs (MCA) has recently issued General Circular No. 37/ 2014 dated
October 14, 2014, stating that a trustee (being a body corporate) of Real Estate Investment Trusts
(REITs), Infrastructure Investment Trust (InvITs), or any other trust set up under the regulations
prescribed under the Securities and Exchange Board of India (SEBI) Act, 1992, is not barred from
becoming a partner in an limited liability partnership (LLP).
