TaxTMI 
TaxTMI 
2026 (9) TMI 1338
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....(23FB) clearly states that the entire income of VCF is not exempt but only income from investments in Venture Capital Undertakings which are recognized by SEBI should be exempt from tax. In the Assessee's case no separate recognition has been provided to even contributory schemes even though all of them are separately auditable and maintain separate books of accounts. II. Whether, on the facts and in the circumstances of the case and in law, the ITAT has erred in ignoring the fact that Assessee has made investments in VCUs which are associated concerns in which trustees held shares exceeding 15% of the paid-up equity share capital either individually or collectively and as per sub-clause (c) of Regulation 12, all investments made or to be made by VCF shall not be in associated companies. 3. As the above questions proposed by the Assessing Officer do not clearly bring out the controversy in the matter, we propose to reframe the questions of law as under: a. Whether, on the facts and in the circumstances of the case and in law, the ITAT has erred in holding that the Assessee is eligible for exemption under Section 10(23FB) of the Act even though no separate recog....
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....ded. Income from each scheme is also separately determined. The details of the claim for exemption under Section 10(23FB) of the Act is also determined scheme-wise. As all seven separate schemes are floated by the Fund, the Return of Income is filed by the Fund in a consolidated manner, considering all the seven schemes which comprise the Fund. 7. The Assessing Officer in the Assessment Order dated 30th December 2016 for the Assessment Year 2014-15 disallowed the claim of exemption of Rs. 161,69,79,775/- made under Section 10(23FB) of the Act. The Assessing Officer inter alia held as under: a. The Assessee's claim that SEBI has inspected and has not found fault with the operation of the Assessee cannot be a ground for allowing exemption under Section 10(23FB) of the Act. Both the SEBI and Income-tax Department have an equal right to examine and interpret the provisions laid down in the statute for general public interest. If one department reads the provision in a particular manner, it does not mean that the other should also follow the same with blinkers. The Income-tax Department is independently entitled to look at the relevant provisions to see whether the condi....
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....vide order dated 26th December 2017, allowed the claim for exemption under Section 10(23FB) of the Act. The Commissioner of Income-tax (Appeals) inter alia held as under: a. The Commissioner of Income-tax (Appeals) referred to the definition of the term "unit" in Regulation 2(l) of the VCF Regulations, which defines "unit" to mean beneficial interests of the investors in the scheme or fund floated by a trust or shares issued by a company, including a body corporate. It further referred to Regulation 11.3 of the VCF Regulations, which provide that each scheme launched or fund set up by a Venture Capital Fund shall have firm commitment from the investors for contribution of an amount of at least Rs. 5 crores before the start of operation of the Venture Capital Fund. It further noted that SEBI permits the launch of a new scheme by filing a private placement memorandum of such scheme with SEBI. Regulation 23 of the VCF Regulations provides the mechanism for winding up of any scheme of the VCF. Further, the Assessee is required to file a quarterly report to SEBI, and therefore, each scheme is monitored and regulated by SEBI on an ongoing basis. b. The Commissioner of I....
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....emption under Section 10(23FB) of the Act, the Assessing Officer only needs to enquire whether the Assessee holds a valid certificate of registration. If the Assessee trust is registered with SEBI as per the Certificate granted under Regulation 7(3) of the VCF Regulations, then it should be accepted that such Certificate is granted after ensuring that the conditions laid down before granting such Certificate are fulfilled. In other words, conditions laid down in the Explanation-1(b) to Section 10(23FB) of the Act are deemed to be fulfilled, the moment relevant Certificates are produced before the Assessing Officer. Therefore, he is not required to go into alleged violation of any conditions, pertaining to the matter of grant of such Certificate. e. The Commissioner of Income-tax (Appeals) further held that the Venture Capital Undertaking is defined in Rule 2(3) read with Schedule III of the VCF Regulations. Schedule III provides a Negative List and prior to its amendment w.e.f. 5th April 2004, "real estate" was included in the Negative List. However, the same is excluded from Negative List post amendment w.e.f. 5th April 2004. The Fund has been granted recognition vide Reg....
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.... respect to the first question as reframed in the present appeal, we uphold with the finding of the Commissioner of Income-tax (Appeals) that as per the VCF Regulations, only the trust is required to be registered as a Venture Capital Fund and separate registration is not required for each scheme operated by the Fund. With reference to each Scheme, the only requirement is that the Trust or the Fund must submit a copy of the private placement memorandum for each scheme before SEBI. Regulation 3(1) of the VCF Regulations inter alia provides that a Trust proposing to carry on any activity as a Venture Capital Fund shall make an application to the Board for grant of a Certificate. Regulation 7 of the VCF Regulations provides for grant of registration. From these Regulations, it is clear that registration is granted to the trust and not for an individual scheme operated by the trust. We, therefore, uphold the findings of the Commissioner of Income-tax (Appeals) that what is contemplated under the VCF Regulations is the registration of the trust, which is then entitled to operate separate schemes. The said finding has been confirmed by ITAT by dismissing the Revenue's appeal. In this ....