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?

1. A

   Both Statement-I and Statement-II are correct and Statement- II is the correct explanation for Statement-I

   Both correct and II explains I. Statement-I gets the tax treatment backwards.

2. B

   Both Statement-I and Statement-II are correct and Statement- II is not the correct explanation for Statement-I

   Both correct but II does not explain I. I is still false.

3. C

   Statement-I is correct but Statement- II is incorrect

   I correct, II incorrect. Dividends / interest from InvITs are not in that exempt-vs-taxable split.

4. D

   Statement-I is incorrect but Statement-II is correct

   I incorrect, II correct. InvITs are treated as borrowers under SARFAESI; the tax sentence in I is wrong.

Summary. Official key is (d). Interest distributed by InvITs is generally taxable in investors’ hands; the ‘interest exempt, dividend taxable’ split in Statement-I is not the law. InvITs are notified as borrowers under SARFAESI, so Statement-II stands and does not need I.