TMI Blog2013 (8) TMI 809X X X X Extracts X X X X X X X X Extracts X X X X ..... t of exemption u/s. 10(23FB) - Held that:- There is no restriction or requirement regarding the source of income for grant of exemption u/s. 10(23FB). It is only by Finance Act, 2007, w.e.f. 1 s t 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. - Decided against the revenue. Disallowance of Trusteeship and Management Fees - Non fulfillment of Venture Capital Fund Regulations - CIT deleted addition - Held that:- assessee has incurred expenditure as per the terms of the Deed and the AO has not brought out any material on record to prove that the assessee has not incurred genuine expenditure - Decided against Revenue. - ITA Nos. 1004 & 1005/HYD/2012 - - - Dated:- 4-7-2013 - Shri Chandra Poojari And Smt. Asha Vijayaraghavan,JJ. For the Appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ench in the case of ITO Vs. Gujarat Information Technology Fund in ITA No. 2264/Ahd/2007, 245-246-247/Ahd/2009 and 2773/Ahd/2008 dt. 27/05/2011 and pleaded that there is no infringement by the assessee of any regulations of SEBI and is, therefore, entitled to exemption u/s 10(23FB). 5. The CIT(A) observed that for the AY 2007-08, the AO had denied the claim of exemption u/s 10(23FB) in the reassessment order on the only ground that the assessee had violated the provisions of section 12, Chapter III of SEBI Venture Capital Fund Regulations, 1996, which prescribe the investment conditions and restrictions regarding investments. He further observed that even in AY 2007-08, the AO felt that there were violations of the provisions of sec. 12(c) thereof, opining that the assessee had invested in 'Associated Companies' and besides she also felt that there were violations of sec. 12(d). The CIT(A) was of the opinion that the claim of exemption u/s 10(23FB) could not have been denied on the basis of the findings of the AO. The CIT(A) further observed that from the facts of the assessee's case, it clearly emerges that the assessee is a contributory trust under the Indian Trust Act, 1882, r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O, it is clear that in the light of the decision of the Hon. ITAT, Ahmedabad Bench referred to above, such view of the AO alone cannot be a basis for denying the claim of exemption u/s 10(23FB), as the registration granted by the SEBI still continues to exist and as submitted by the AO, information regarding violation of investment guidelines has been communicated to the SEBI. The CIT(A) observed that till date the registration so granted has not been withdrawn by them. Accordingly, the CIT(A) held that until the registration granted by SEBI after taking a particular view of the facts of the appellant's case is withdrawn, and any final view regarding the alleged contraventions of conditions is expressed by SEBI, the appellant is to be considered as eligible for exemption u/s 10(23FB) of the Act. 9. Aggrieved the revenue is in appeal before us and has raised the following substantive ground: "The learned CIT(A) erred in holding that the assessee is eligible for exemption u/s 10(23FB) till it is not revoked by SEBI, though the assessee does not fulfill the conditions stipulated by the SEBI while granting the approval." 10. The learned counsel for the assessee reiterated the sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the basis of monthly salary as well as commission and credited them into individual account of these sales-men in P.F. maintained and recognized by the Commissioner. A part of such commission and consequently provident fund on such commission was sought to be disallowed. The matter went up to the Hon. Supreme Court. It observed as under :- "It would be conducive to judicial discipline and the maintaining of certainty and uniformity in administering the law that the taxing authorities should proceed on the basis that the recognition granted and available for any particular assessment year implies that the provident fund satisfies all the conditions under rule 4 of Part A of the Fourth Schedule to the Act, and not sit in judgment over it." Thus it was held that it was not open to the AO to take the view contrary to the registration already granted by the CIT and therefore disallow a part of the contribution. It was pointed out that when recognition continues in operation it would be implied that the conditions laid down there-under are satisfied and any part of disallowance would tantamount to questioning the recognition. In other words entries made in the register of indepen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clause (b) is limited to the extent as described above." 12. The ITAT Ahmedabad Bench in the said case of Gujrat Information Technology Fund (supra) followed the decision of ITAT Mumbai 'A' Bench in the case of ITAO vs. M/s Kshitij Venture Capital Fund in ITA No.2147/Mum/2010 Asst. Year 2006-07 pronounced on 9thMarch, 2011 wherein on similar facts held as under :- "13. We heard both the parties. The issue is whether interest on temporary investments of Rs. 16,09,900/- and profit on sale Units of Mutual fund of Rs 1,00,91,000/- is entitled to exemption u/s. 10(23FB). Section 10(23FB) as applicable to the year under appeal is as under: 'Any income of venture capital company or venture capital fund set up to raise funds for investment in a venture capital undertaking.' 14. Thus the 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 u/s. 10(23FB). It is only by Finance Act, 2007, w.e.f. 1 s t 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 vent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from investment in a venture capital undertaking.................................... 14.3. Applicability : This amendment will take effect from the 1st day of April, 2008, and will accordingly apply in relation to the assessment year 2008-09 and subsequent assessment years." 14. Respectfully following the said decisions, we dismiss the ground of appeal of the revenue. 15. In the result, appeal being ITA No. 1004/Hyd/12 is dismissed. ITA NO. 1005/HYD/12 for AY 2007-08 16. Ground No. 1 4 are general in nature. 17. Ground No. 2 is as follows: "The learned CIT(A) erred in holding that the assessee is eligible for exemption u/s 10(23FB) till it is not revoked by SEBI, though the assessee does not fulfill the conditions stipulated by the SEBI while granting the approval" 18. Similar ground has been decided by us in ITA No. 1004/Hyd/12, therefore, following the conclusions drawn therein, we dismiss this ground of appeal of the revenue. 19. Ground No. 3 is as follows: "The learned CIT(A) erred in deleting the addition of Rs. 1,50,71,080/- being Trusteeship and Management Fees, though the assessee did not fulfill the Venture Capital Fund Regulations." 20. The AO dis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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