2020 (11) TMI 522 - AT - Income Tax

Disallowance of exemption claimed under section 10(34) on Dividend income - Disallowance of exemption claimed under section 10(38) on long term capital gain - HELD THAT - From the perusal of the records, it can be seen that the issues contested by the assessee in the present assessment year 2013-14 are identical to that of A.Y. 2006-07 to 2008-09 2010-11 2016 (2) TMI 882 - ITAT DELHI wherein held 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-O 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-O and 115-R whereas, the conditions laid down u/s 115-O 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. As assessee has furnished complete details of computation which are exhibited at pages 153 to 154 of the paper book/appeal memo. The said computation was not disputed by the Revenue at any stage. Therefore, the Assessing Officer as well as the CIT(A) were not justified in making the said addition of dividend income and long term capital gain. - Decided in favour of assessee.

Issues:
1. Assessment order passed by CIT(A) under section 143(3) for Assessment Year 2012-13.
2. Eligibility for the benefit of section 161 of the Act as a beneficiary in SARA Fund, a Venture Capital Fund (VCF).
3. Eligibility for the benefit as per section 115U of the Act due to investments made by SARA Fund.
4. Disallowance of exemption claimed under sections 10(34) and 10(38) of the Act on dividend income and long-term capital gain from share sale of VCU earned by SARA Fund.
5. Denial of opportunity to establish facts about VCU.
6. Upholding the levy of interest under section 234B of the Act.
7. Initiating penalty proceedings under section 271(l)(c) of the Act for furnishing inaccurate particulars and concealment of income.

Analysis:
1. The appeal was filed against the order passed by CIT(A) for Assessment Year 2012-13. The appellant contested the assessment order under section 143(3) where the income was assessed at a specific amount, contrary to the NIL income declared by the appellant. The appellant argued that the assessment order should be quashed.
2. The appellant claimed the benefit of section 161 of the Act as a beneficiary in SARA Fund, a Venture Capital Fund. However, CIT(A) held that this benefit was not available to the appellant. The issue revolved around the interpretation and application of the relevant provisions.
3. CIT(A) also denied the appellant the benefit as per section 115U of the Act, citing that investments made by SARA Fund did not meet the criteria specified in section 10(23FB) of the Act. This decision was challenged by the appellant.
4. Disallowance of exemption claimed under sections 10(34) and 10(38) of the Act on dividend income and long-term capital gain from share sale of VCU earned by SARA Fund was a significant issue. The appellant contested these disallowances, arguing for the eligibility of the claimed exemptions.
5. The appellant raised concerns about not being granted an opportunity to establish facts about VCU, which was considered an error by the CIT(A). The denial of this opportunity was a pivotal point in the appeal.
6. The levy of interest under section 234B of the Act was upheld by CIT(A), which was challenged by the appellant. The issue involved the applicability and correctness of imposing such interest.
7. CIT(A) initiated penalty proceedings under section 271(l)(c) of the Act against the appellant for furnishing inaccurate particulars and concealing income. The appellant disputed this decision, leading to a crucial aspect of the appeal.

This comprehensive analysis of the judgment covers all the issues involved in the appeal, providing a detailed understanding of the legal arguments and decisions made by the authorities involved.

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