TMI Blog2020 (7) TMI 521X X X X Extracts X X X X X X X X Extracts X X X X ..... already paid additional income tax on the earned dividend as required u/s 115-0 of the Act, SARA fund was not required to pay additional income tax second time on the same income. - Decided in favour of the assessee. Disallowing expenses by taxing the share of the appellant in interest income from VCF under the head Other Sources on gross basis and not on net basis in disregard of the fact that income of a VCF - HELD THAT:- A person who makes investment in the venture capital company or venture capital fund, the assessee in this case, earned the income out of such investment which income shall be treated firstly as investment directly in the venture capital undertaking and venture capital fund or venture capital company is only a pass through vehicle. So, in these circumstances, the assessee-company is entitled to book expenditure incurred by SARA fund as if the same has been incurred by the assessee directly in the venture capital fund. So, we are of the view that the expenses disallowed by Ld. CIT(A) by taking the shares of the assessee in interest income from VCF under the head other sources on gross basis and not the net basis, which requires to be determined by treating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /DEL/2010 and 3284/DEL/2012 reported in 158 ITD 62. 3. It is the say of the ld. counsel for the assessee that in earlier Assessment Years, similar additions were deleted by the Tribunal and since the Revenue has not approached the Hon'ble High Court u/s 260A of the Act, the order of the Tribunal has attained finality. 4. On the other hand, the ld. DR could not bring any distinguishing decision in favour of the Revenue. 5. We have given thoughtful consideration to the orders of the authorities below and have also perused the orders of the co-ordinate bench [supra]. We find force in the contentions of the ld. counsel for the assessee. In ITA No. 5332/DEL/2011 for Assessment Year 2008-09, the substantive grievances of the assessee are as under: Ground No. 1 Based on the facts and circumstances of the case, the learned AO has erred in law and on facts in not allowing the exemption under Section 10(34) of the Act claimed by the appellant on its share of dividend income of ₹ 34,47,414 out of dividend income received by SARA Fund (venture capital Fund -VCF). Ground No.2 Based on the facts and circumstances of the case, the learned Assessing Officer has erre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the case, the learned CIT(A) has erred in law and on facts and has failed to appreciate that out of the total distribution made in the previous year the income component in accordance with the statutory declaration u/s 11 5U(2) made by SARA Fund was alone assessable in the hands of the appellant. (iii) Based on the facts and circumstances of the case, the learned CIT(A) has erred in law and on facts in holding that the appellant's share in the payment of ₹ 56,261,546 [176,000,GOO- 119,738,454] @ 22.73% i.e. ₹ 12,788,250/ was assessable in the appellant's hands as Income from other sources . (iv) Based on the facts and circumstances of the case, the learned CIT(A) has erred in law and on facts, material evidence placed on record i.e. notes to the computation of income. Form 64 and audited Financial Statements of SARA Fund. (v) Based on the facts and circumstances of the case, the learned CIT(A) has erred in law and on facts in not appreciating that in terms of the provisions of Section 115U(2) of the Act, the appellant could not provide or furnish information different from and/or conflicting with the statutory declaration in Form 64 furnished to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quantum may differ. 9. Ground No. 1 is adjudicated as under. 10. This issue has been decided by the co-ordinate bench at para 14 to 14.6 of its order. The relevant findings of the co-ordinate bench read as under: However, we are of the considered view that the A.O. as well as Ld. CIT(A) have taken a wrong view by holding that the assessee cannot grow tax-free income u/ss 10(34) and 10(35) of the Acts unless additional tax has been paid as per the provisions of Sections 115-0 and 115-R of the Act and as such the exemption claimed u/ss 10(34) and 10(35) is to be allowed only if the dividend income distributed as per the provisions of Sections 115-0 and 115-R whereas, the conditions laid down u/s 115-0 to avail the exemption u/s 10(34), is to be complied with at the level of venture capital undertaking and not at the stage when the investor, the assessee in this case, received the dividend income from VCF. So, the assessee is entitled for exemption u/s 10(34) of the Act and its share of dividend income is out of dividend income received by SARA fund. When the company with which SARA Fund has been invested, had already paid additional income tax on the earned dividend as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Years, respectfully following the findings of the co-ordinate bench, Ground No. 2 is also decided in favour of the assessee and against the Revenue. 14. Grievance raised vide Ground No. 3 has also been considered by the co-ordinate bench in earlier Assessment Year at para 16 of its order [supra]. Relevant findings of the order read as under: 16.3 From the perusal of Form 64 and balance sheet / revenue account of SARA fund, it is proved that distribution of ₹ 17,60,00,000/- qua A.Y. 2006-07 and ₹ 11,72,890/- qua A.Y. 2007-08 was made to its beneficiaries as per the number of units purchased by each beneficiary, which fact is explained in the foot note 3 of Form 64 and it also appears in the balance sheet / revenue account of SARA fund and the assessee has rightly disclosed the income at ₹ 119738454/- by subtracting the amount of ₹ 56261546/- which is the amount of capital nature and as such not taxable in the hands of investor by treating the same nature of income like LTCG, STCG, Dividend and other income such as interest etc. and as such to be taxed as per the provisions as applicable under different heads of income meaning thereby a person who make ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
