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2011 (5) TMI 572 - AT - Income TaxInterest income earned from Bank Deposits - Whether the assessee is entitled to exemption under section 10(23FB) - Held that:- Exemption in the case of Venture Capital Fund was in respect of any income. There is no restriction or requirement regarding the source of income for grant of exemption under section 10(23FB). It is only by Finance Act, 2007, w.e.f. 1st April, 2008, an amendment to section 10(23FB) was brought about restricting the exemption under that section to income from Investment by the Venture Capital Fund in a venture capital undertaking. For this purpose, the said clause (c) of Explanation 1 has also been amended to define "Venture Capital Undertaking". This amendment was made effective from 1-4-2008. By no stretch of imagination can this amendment can be considered as clarificatory applicable to earlier Assessment Year. The memorandum explaining the amendment to the Finance Bill, 2007 as well as the CBDT circular explaining the provisions of the Finance Act, 2007 clarify that the amendment proposed to section 10(23FB) was to restrict the scope of income for which exemption under that section was available. Hence this amendment cannot be considered as clarificatory but must be considered as prospective in effect. It is not in dispute that the assessee is otherwise eligible for exemption under section 10(23FB). Hence for the year under appeal, as per the provisions of section 10(23FB) as applicable to the assessment year, any income of the venture capital Fund is exempt. Hence the order of the CIT(A) confirmed that interest on temporary investments and profit on sale Units of Mutual fund of is entitled to exemption under section 10(23FB). The trust deed has clearly empowered the assessee to invest surplus into the fixed deposits. Going through regulation 12(d) of SEBI Regulations it provides a target of 75% upto 5-4-2004 and 66.67% thereafter of the investible fund to be invested in specified undertaking and upto 33.33% in other avenues as per clause (ii) of regulation 12(d). Thus there is likelihood of some surplus, if 33.33% is not invested in other avenues. Such surplus or surpluses arising out of working capital of 20% of investible funds can be parked in the F.D. as provided in the trust deed. thus the investment in F.D. does not violate any of the provisions either under SEBI guidelines or of the trust-deed - Decided in favor of the assessee
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