TaxTMI 
TaxTMI 
2017 (6) TMI 286
X X X X Extracts X X X X
X X X X Extracts X X X X
....ition made by AO by holding that the income earned by assessee on account of interest income on fixed deposits and short term capital gain on investments in mutual funds is exempt under section 10(23FB) of the Act. For this Revenue has raised following three grounds in AY 2007-08: - "1. The Ld. CIT(A) has erred in law as well as on fact by holding that income earned by the assessee on account of interest income earned from Fixed Deposit and STCG arising on investment in Mutual fund is exempt under section 10(23FB) as the same is not earned from Business activity. 2. On the facts and in the circumstances of the case and in the law the Ld. CIT(A) has erred in allowing exemption u/s 10(23FB) as the assessee has not earned any income from venture capital undertaking. 3. The Ld. CIT(A) erred in law as well as on fact by applying the Hon'ble ITAT Mumbai 'A' Bench decision in the case of Kshitij Venture Capital Fund [2011] 10 taxman.com 204 (Mum) wherein the facts are entirety different from the case under consideration." 3. Briefly stated facts are that the assessee, a venture capital fund, is a private trust registered under registration Act 1908. The trust was e....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... extent not arising from investment in a Venture Capital Undertaking is thus not eligible for exemption u/s 1 0(23FB) which in the instant case is the income of the assessee declared as interest amounting to Rs. 66,07,975/- which is to be disallowed from exemption under section 10(23FB) and brought it to tax tinder the head "Income from other sources. On similar grounds profit on sale of mutual fund units amounting to Rs. 1,45,84,010/- was unable to denied exemption under section 10(23DB) and brought to tax under the head short term capital gain." Accordingly, the AO disallowed the claim of deduction on interest income of Rs. 66,07,965/- and profit on sale of mutual fund being short term capital gain being Rs. 1,45,84,087/-. Aggrieved, assessee preferred the appeal before CIT(A). 4. The CIT(A) following the decision of Mumbai Bench of this Tribunal in the case of ITO vs. Kshitij Venture Capital Fund [2011] 10 taxman.com 204 (Mum) and also the Ahmedabad Bench decision of this Tribunal in ITO vs. Gujarat information Technology Fund (2011) 45 SOT 529 (Ahd) allowed the claim of the assessee and deleted the addition of interest income of Rs. 66,07,975/- and short term capital gain....
X X X X Extracts X X X X
X X X X Extracts X X X X
....abha while moving Finance Bill for the year 2000-01and which states as under: - "Venture Capital Fund shall enjoy a complete pas through status. There will be no tax on distributed or undistributed income of such funds. The income distributed by the funds will only be taxed in the hands of investors at the rates applicable to the nature of income." In the light of the above, we are of the view that the intention of the legislature is clear to treat any income of venture capital fund as exempt from tax u/s 10(23FB) of the Act irrespective of its nature. There is a reason for this that this income will be taxed in the hands of investors at the time of distribution u/s 115U of the Act on a pass through basis. Accordingly, we are of the view that the CIT(A) rightly deleted the addition. For this we are also relying on the co-ordinate Bench decision of Kshitij Venture Capital Fund (Supra) of Mumbai Tribunal. Accordingly, the appeal of Revenue for AY 2007-08 is dismissed. 8. As regards to the appeals of Revenue for AY 2008-09 and 2009-10 in ITA No. 4137 & 3259/Mum/2014, the learned Counsel for the assessee argued that in AY 2008-09 the assessee has earned the following income: -....
X X X X Extracts X X X X
X X X X Extracts X X X X
....acts and circumstance of the case. In view of the above given facts that there is an ammendment in section 10(23FB) of the Act and there are certain specified business eligible for exemption under this provision. Assessee's case does not fall under exemption category and hence, out of the purview of this provision of section 10(23FB) of the Act. Therefore, the assessee has to be assessed under normal provisions of law and hence, the business loss has to be set off against the other incomes. We find no infirmity in the orders of CIT(A) for both the years and hence the same are confirmed. This common issue of Revenue's appeal is dismissed. 10. Coming to assessee's appeal in ITA No. 2898 & 7636/MUM/2014 for AY 2009-10 and 2010-11, the only common issue in these two appeals of assessee is as regards to the disallowance made by AO of expenses relatable to exempt income by invoking the provision of section 14A of the Act read with section Rule 8D of the IT Rules, 1962 (hereinafter the 'Rules'). 11. Brief facts are that in AY 2009-10, the assessee has earned dividend income of Rs. 18,80,102/- and voluntarily disallowed the expenses relatable to exempt income at Rs. 18,80,102/- i.e. ....