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2020 (10) TMI 189 - AT - Income TaxEntitlement for TDS credit - venture capital undertakings - proportionate share of contributors - deduction of TDS by the deductors on behalf of the assessee or not? - HELD THAT - In the present case, the credit for TDS appearing in Form No. 26AS of the assessee, the assessee is entitled for TDS credit - assessee had furnished the details of income accrued/distributed to each of the contributors as per Form 64, therefore it was the responsibility of each of the contributors to include the income in their tax returns as reported in Form-64 by the assessee and pay the tax on the same. Since, all the details of the contributors were available with the AO, he could have verified the same. CIT (A) has rightly pointed out that the deduction of TDS by the deductors was on behalf of the assessee. Since, the information furnished by the deductors to Income Tax authorities refers to the assessee only and not to the investors, the AO was required to give credit to the assessee. - Decided in favour of assessee. Exemption u/s 10(23FB) - investments have been made by assessee in VCUs engaged in real estate activities which is neither a service nor activity involved in production and manufacture of article or things and therefore, will not be eligible to be claimed as VCUs as per the VCF regulation - HELD THAT - As decided in own case 2018 (8) TMI 1046 - ITAT MUMBAI after the assessee came into existence and started investing fund in Venture Capital Undertakings, real estate sector was not in the negative list of Securities and Exchange Board of India (Venture Capital Funds) Regulations, 1996. That being the case, the reasoning of the learned Principal Commissioner that the assessee is not eligible for exemption under section 10(23FB) of the Act is unsustainable. In this regard, it needs to be observed, the learned Principal Commissioner has stated that the amendment to section 10(23FB) by Finance Act, 2012, is prospective and will apply to assessment year 2013 14. There cannot be any dispute with the aforesaid observations of the learned Principal Commissioner.- undisputed fact is, the assessee has claimed exemption under section 10(23FB) of the Act for assessment year 2013 14. Hence, the provisions applicable to such assessment year would govern all issues relating to assessee s claim of exemption. Applying the conditions of section 10(23FB) applicable to assessment year 2013 14, assessee s claim of exemption under section 10(23FB) of the Act is allowable.- Decided in favour of assessee,
Issues Involved
1. Credit for Tax Deducted at Source (TDS) on income claimed as pass-through by the assessee. 2. Eligibility for exemption under Section 10(23FB) of the Income Tax Act, 1961. Detailed Analysis 1. Credit for Tax Deducted at Source (TDS) on Income Claimed as Pass-Through by the Assessee Facts and Contentions: - The assessee, a SEBI-registered venture capital trust, filed returns for AY 2013-14 and 2014-15, claiming TDS credit on income from venture capital undertakings. - The Assessing Officer (AO) denied TDS credit, arguing that the assessee did not offer the income in its return and failed to comply with Rule 37BA(2) of the Income Tax Rules, which requires the deductor to be informed about the persons to whom the income is assessable. - The assessee contended that it complied with Section 115U of the Act by providing Form 64 to contributors, and thus, the TDS credit should be allowed. Tribunal's Findings: - The Tribunal upheld the CIT(A)'s decision, which directed the AO to verify Form 26AS and grant appropriate TDS credit. - The Tribunal noted that Rule 37BA applies only if the assessee had informed the deductors about the beneficial owners, which was not the case here. - The Tribunal emphasized that since the TDS credit appears in the assessee's Form 26AS, and the assessee provided the necessary details to contributors, the AO should have given the credit. - The Tribunal cited various judicial precedents, including the Hon’ble Telangana and Andhra Pradesh High Court and the Hon’ble Delhi High Court, supporting the assessee’s entitlement to TDS credit when the deductor reports the TDS in the name of the assessee. 2. Eligibility for Exemption under Section 10(23FB) of the Income Tax Act, 1961 Facts and Contentions: - For AY 2014-15, the AO denied exemption under Section 10(23FB), arguing that the assessee's investments were not in SEBI-recognized venture capital undertakings and included investments in associated concerns and real estate, which are not eligible. - The CIT(A) allowed the exemption, noting that the assessee complied with SEBI regulations and past assessments had allowed similar claims. Tribunal's Findings: - The Tribunal referred to its earlier decision in the assessee's case for AY 2013-14, where it was held that the assessee, being a SEBI-registered venture capital fund, is eligible for exemption under Section 10(23FB). - The Tribunal emphasized that the legislative intent behind Section 10(23FB) and Section 115U was to provide a pass-through status to venture capital funds, taxing the income in the hands of the investors. - The Tribunal dismissed the revenue's appeal, affirming that the assessee's investments in real estate were permissible as real estate was removed from the negative list by SEBI in 2004. - The Tribunal also noted that there was no evidence of any SEBI action against the assessee for violating SEBI regulations, and thus, the AO's denial based on alleged SEBI violations was unfounded. Conclusion The Tribunal dismissed the revenue's appeals for both AY 2013-14 and 2014-15, upholding the CIT(A)'s decisions to allow TDS credit and exemption under Section 10(23FB) to the assessee. The Tribunal's decisions were based on compliance with statutory provisions, judicial precedents, and the absence of any regulatory violations by the assessee.
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