Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2020 (4) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2020 (4) TMI 295 - AT - Income TaxExemption u/s 10(23FB) - income earned on investments from VCUs [venture capital undertaking] - HELD THAT:- there is merit in the contentions of the assessee that the condition prescribed to the effect that the shares of venture capital undertaking should not have been listed in a recognized stock exchange shall apply only at the time of making investment. - the VCF Regulations do not prohibit cases where the initial investments made in unlisted shares of Venture Capital undertaking becomes listed shares due to corporate actions. Such kind of corporate actions are usually undertaken on commercial expediency, business exigencies and for the future welfare of the company. The income from Capital gains is not a “period cost/income” like interest income. Only period cost/income are amenable for split up on the basis of time period. Capital gains arises only on sale of shares and hence, the question of splitting up the same on the basis of time period cannot be made. Though the provisions of sec.61 to 63 and the provisions of sec.10(23FB) operate in different manner, yet the conclusion is that the assessee should not subjected to tax to capital gains and interest income. We also notice that the beneficiaries have offered their respective share of income in their hands, meaning thereby, the assessee also seeks to avail the benefits of sec. 61 to 63 of the Act. The assessee has also submitted that it is a pass through entity, meaning that the income from investments is taxable in the hands of beneficiaries. It is pertinent to note that the revenue has not challenged the observations of Ld CIT(A) in holding that the assessee cannot be assessed to tax the very same income which has been offered by the beneficiaries in their respective hands. This observation of Ld CIT(A) were, apparently, based on the fact that the assessee is a revocable trust and alternatively it is a pass through entity. Since we have held in the preceding paragraphs, that the assessee cannot be subjected to tax for capital gains, there was no necessity to examine the question of applicability of provisions of sec.10(38) of the Act to the capital gains earned by the assessee on sale of shares. Assessment of “accrued interest” on the loan given - The loan transactions are governed by the terms and conditions entered between the parties. The assessee has stated in its annual report that there was dispute between the parties with regard to the interpretation of terms and conditions and accordingly it has stated that interest income was not recognized. AO did not accept the above said reasoning and accordingly proceeded to compute notional interest. However, in our view, the AO is not entitled to give different treatment to the notional interest so computed by him, i.e., he has to give very same treatment that was given to the interest income earned from loans given to other Venture Capital Undertakings. The AO has allowed exemption to the interest income earned from other VCU, in which case, the notional interest income computed by him should also enjoy very same exemption. We order accordingly. Whether CIT(A) has exceeded his jurisdiction by making observation that income from capital gains out of investment in shares and interest income from Venture Capital Undertakings earned by the assessee need to be examined in the hands of ultimate beneficiaries? - We notice that the Ld CIT(A) has not given any directions and has only made observations, impliedly in support of his decision that the above said incomes are not taxable in the hands of the assessee.
|