TaxTMI 
TaxTMI 
2026 (2) TMI 356
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.... in the status of Trust using PAN AAATE8456C. The trust registered with SEBI as Category II Alternative Investment Fund bears a different PAN, namely AAATE8412E. The return was processed under section 143(1) on 13.11.2023 accepting the returned income at Rs. 0/- and refund of Rs. 57,82,920/- was determined and issued on 15.11.2023. The case was selected for scrutiny under the Computer Aided Scrutiny Selection scheme. 3. During the course of assessment proceedings, the Assessing Officer noticed that the SEBI registration certificate as Category II AIF stood in the name of Edelweiss Alternative Investment Opportunities Trust and not in the name of the assessee scheme. The assessee had claimed exemption under section 10(23FBA) of the Act on income passed through to investors under section 115UB.The Assessing Officer further noticed from the Profit and Loss Account that the assessee had worked out a surplus of Rs. 4,68,22,29,447/- and had passed on income of Rs. 4,51,59,13,961/- to the investors. The difference of Rs. 16,63,15,486/- was treated by the Assessing Officer as taxable business income. 4. Before the Assessing Officer, the assessee submitted that it is a scheme launched....
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.... as a Category II AIF and that separate registration of each scheme with SEBI is not required under the SEBI Regulations. It was submitted that denial of exemption under section 10(23FBA) results in double taxation since the same income has already been taxed in the hands of investors under section 115UB.The assessee further submitted that another scheme of the same Trust, namely Edelweiss Crossover Opportunities Fund - Series II, had been granted exemption under section 10(23FBA) in scrutiny assessment on identical facts. 10. The CIT(A) upheld the action of the Assessing Officer. It was held that the assessee scheme did not itself possess SEBI registration as an Alternative Investment Fund and, therefore, was not eligible for exemption under section 10(23FBA) of the Act. The CIT(A) further held that the surplus reflected in the accounts was rightly treated as business income and that the difference of Rs. 16,63,15,486/- was taxable in the hands of the assessee. Grounds relating to penalty and interest were held to be consequential. The appeal of the assessee was accordingly dismissed. 11. Aggrieved by the order of the CIT(A), the assessee is in appeal before us raising follo....
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.... time of hearing of this appeal. 12. During the course of hearing before us, the learned Authorised Representative (AR)reiterated the facts and submitted that the assessee is a scheme launched under the said Trust. As per the SEBI guidelines governing Alternative Investment Funds, each scheme can onboard a maximum of 1,000 investors. In order to onboard investors exceeding the said limit, a new scheme is required to be launched under the same Trust, which, in the present case, is M/s. Edelweiss Alternative Investment Opportunities Trust. It was further submitted that launching of multiple schemes within the same Trust registered as an AIF is expressly permitted under Regulation 12 of the SEBI (Alternative Investment Funds) Regulations, 2012 and the assessee, being a scheme of the Trust, is inextricably linked with the Trust and, therefore, the exemption available to the Trust under the Act should flow to the assessee scheme as well. 13. To substantiate the aforesaid contentions, the learned AR placed reliance on the registration certificate issued by SEBI in favour of the Trust, which was filed at page 237 of the paper book. Reliance was also placed on the relevant provisions....
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....he Fund itself characterises the assessee as a scheme of a SEBI registered Category II AIF, the claim of the assessee that it is entitled to be treated as part of the same AIF structure for the purposes of section 115UB and section 10(23FBA) of the Act cannot be rejected merely on the ground that the scheme is holding a separate Permanent Account Number for administrative and regulatory purposes. It was thus contended that the regulatory framework itself recognises the existence of multiple schemes under a single AIF registration and the obtaining of separate PANs for such schemes is not a deviation but a regulatory and administrative necessity. 17. The learned AR also placed reliance on the decision of the coordinate Bench of the Tribunal in the case of M/s. UTI India Fund Unit Scheme 1986 in ITA Nos. 1859 to 1862/Mum/2023 and C.O. No. 92/Mum/2023, order dated 24.11.2023. It was submitted that though the said decision pertains to section 10(23D) of the Act, the factual matrix involved therein is identical, inasmuch as the issue in that case also related to denial of statutory exemption on the ground that the scheme had a separate PAN and the SEBI registration stood in the name ....
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....ctural position that the Trust is the AIF vehicle and schemes can be floated thereunder. 22. The Assessing Officer denied exemption primarily on the premise that because the scheme has a separate PAN, it becomes a separate trust/legal entity which must independently obtain AIF registration. In our considered view, this approach proceeds on an assumption. A separate PAN, by itself, is not determinative of the existence of a separate trust. PAN is an identifier for tax administration. Whether an arrangement constitutes a separate "fund established in the form of a trust" (as contemplated for the purpose of section 115UB) is a matter of substance and governing documents, not PAN alone. 23. Significantly, the Assessing Officer also noticed the assessee's reliance on the statutory language in Explanation 1 to section 115UB, and, in that context, recorded that "unit" means beneficial interest of an investor in the investment fund or a scheme of the investment fund. This statutory recognition of a "scheme of the investment fund" fortifies the assessee's plea that the Act contemplates schemes operating under an investment fund framework, and does not, by that recognition alone, requi....
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....e context of section 115UB.Accordingly, the addition of Rs. 4,51,59,13,961/- u/s 10(23FBA) is directed to be deleted. 28. Once the exemption is held allowable, the assessee's plea of double taxation becomes academic. Nevertheless, we observe that the CIT(A) rejected the double taxation argument on the reasoning that taxation in the investors' hands under section 115UB presupposes that the fund qualifies as a registered investment fund. Since we have accepted the assessee's foundational claim on eligibility for exemption under section 10(23FBA) read with section 115UB of the Act, this objection of the CIT(A) does not survive. Accordingly, Ground Nos. 1.1 and 1.2 raised by the assessee are allowed. 29. Regarding addition of Rs. 16,63,15,486/- taxed as business income, the assessee's contention is that the difference represents indexation benefit on long-term capital gains on sale of unlisted equity shares and, therefore, does not constitute taxable income. The assessee also stated during the course of assessment proceedings that it had earned long-term capital gains on unlisted equity shares and that indexation benefit under section 48 of the Act was considered while passing on....