TaxTMI 
TaxTMI 
TaxTMI 
2024 (3) TMI 1450
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....he case and in law, the Hon'ble CIT(A) erred in deleting the addition made by the AO and allowing the exemption of Rs. 6,13,38,080/- u/s 10(23FB) of the Act. 2 Whether on the facts and circumstances of the case and in law, the Hon'ble CIT(A) erred in not upholding the status of three investee companies of the assessee as NON VCU for the reasons discussed in detail in the assessment order 3 Whether on the facts and circumstances of the case and in law, the Hon'ble CIT(A) erred in deleting the addition made by the Assessing Officer and allowing the exemption of Rs. 6,13,38,680 u/s 10(23FB) of the Act in spite of fact that the said M/s Startech Infra-projects Pvt Ltd. and M/s Ozone Projects Private Limited, both companies VCU has not carried any business and derived any income during the year under consideration, where the chapter -III specially mentioned that income of any clause u/s 10 shall not be included total income of a previous year 4 Whether in the facts and circumstances of the case and in law, the Hon'ble CIT(A) has erred in deleting the addition when CSN Estate Pvt Ltd in which the Assessee has invested which return has lent the money to third party, ....
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....which was accompanied with the draft assessment order. However, at the same time he has stated that the assessee has made submissions in response to the notices issued u/s 142(1) in the e filling portal from time to time. After incorporating the provisions of section 10(23FB) of the Act and definition of Venture Capital Undertakings as per the Securities and Exchange Board of India (Venture Capital Fund) Regulations, 1996 and after examining the facts of the case in the light of the aforesaid provisions, AO observed that in order to avail exemptions u/s 10(23FB), the VCF has to cumulatively fulfill all the conditions laid down in clause (b)(A) & (B) of Explanation to section 10(23FB) of the Act. 4. During the course of assessment proceedings, the AO had asked the assessee to submit the financials of VCUs in which it has made portfolio investments and has received income during the year. From the details submitted by the assessee, the AO found that 4 out of 11 VCUs failed to fulfill the necessary criteria to qualify as VCUs. The list of the ineligible VCUs and their incomes are as under: Sl. No. Venture Capital Undertakings VCU Income (In Rs. ) 1. CSN Estates Pvt. Ltd. - 2. ....
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....5) of the Act. He also held that the assessee is not a person defined u/s 2[31] of the Act. The benefit of section 10(35) of the Act is not available to VCF and therefore, the AO withdrew exemption of Rs. 76,18,730/- claimed u/s.10(35) of the Act. In the result, he treated the above ineligible exempt incomes claimed u/s 10(23FB) of Rs. 6,13,38,680/- and u/s.10(35) of Rs. 76,18,730/- as income from other sources and determined the total income at Rs. 6,89,57,410/ as against Rs. Nil declared by the assessee in the return of income. He also initiated the penalty proceedings u/s 270A of the Act separately for inaccurate particulars of Income. 7. In the first appeal, the ld. CIT(A) after discussing the facts and observations made by the AO and the submissions by the assessee, held that similar issue was involved in the immediately preceding A.Y.2016-17 wherein, the ld. CIT(A) has decided this identical issue in favour of the assessee. He further observed that identical disallowance was made in respect of income from VCUs in the A.Y. 2016-17 which was the disallowance pertained to Amrapali Smart City Developers Pvt. Ltd., CSN Estates Pvt. Ltd. and Startek Infraprojects Pvt. Ltd, aggrega....
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....d to various observations of the Assessing Officer and strongly relied upon his findings. 10. On the other hand, ld. AR first of all referred to the earlier order of the CIT(A) and the Tribunal and also drew our attention to financials of four VCU's and pointed out that in so far as CSN Estates Pvt. Ltd. and Amrapali Smart City Development Pvt. Ltd., since there is no income shown, therefore, the issue of Section 10(23FB) becomes purely academic in this case. In so far as other VCU's are concerned i.e. M/s Startech Infra-projects Pvt Ltd. and M/s Ozone Projects Private Limited he pointed out from the financials that the observation and finding of the AO is incorrect and had not carried out any business operations or away from their activities appearing in the negative list. 11. After considering relevant finding given in the impugned orders as well as material referred to by the ld. AR in the paper book, first of all we find that similar issue had come up before the Tribunal in A.Y.2016-17 and 2017-18 supra wherein the appeal of the Revenue was dismissed. In the latest order passed by it on 01.03.2023 for A.Y. 2017-18, the ITAT dismissed the grounds of the subject issue by holdin....
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.... Act and Income of VCF is exempt only if it is from investment in VCUs and all other incomes are liable for taxation. We find that similar issue was also before the ld. CIT(A) for AYs 2016-17 and 2017-18. After considering the arguments of both sides on the issue in dispute and the relevant materials, this ground of revenue was dismissed by the ld. CIT(A), The order of the Ld. CIT(A) was upheld by the ITAT. It would be relevant to reproduce the findings of the ITAT for A.Y. 2017-18 in its order dated 01.03.2024(supra) for ready reference: "5.1 We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. We find that the Ld. CIT(A) has followed the finding of the Tribunal in assessment year 2016-17 on the issue in dispute. The relevant finding of the Ld. CIT(A) is reproduced as under: "1. As can be seen from the submissions made and the assessment order for A.Y. 2016-17 placed on record, the exemption in respect of dividend income from the mutual funds of Rs. 6,64,92,670/- was denied by the Assessing Officer on the identical ground that the appellant being VCF was only eligible for exemption u/s 10/23FB) of the Act if the con....