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TMI Blog2019 (5) TMI 279X X X X Extracts X X X X X X X X Extracts X X X X ..... . Exemption u/s. 10(23FB) - income received from Venture Capital Fund - provisions of section 115U - HELD THAT:- We found that the income received from the Venture Capital Fund is exempted. We found that the assessee has made investments into the Venture Capital fund and received profits which are exempted. CIT(A) though considered the aspects of Joint venture but dealt only on the findings of the AO by treating the same as income of the assessee and the observations of the CIT(A) that the assessee could not satisfy with evidence i.e. how the assessee is entitled to claim exemption; Even before us the assessee has not filed any information in respect of investment made in Joint Venture and no material filed, we found that this issue has to be verified and examined and accordingly we restore this issue for limited purpose to the file of Assessing Officer and allow the ground of appeal for statistical purposes. Disallowance u/s. 14A r.w. Rule 8D - HELD THAT:- As decided in PRAGATHI KRISHNA GRAMIN BANK VERSUS THE JOINT COMMISSIONER OF INCOME TAX, BELLARY RANGE [ 2018 (6) TMI 1283 - KARNATAKA HIGH COURT] shall be on a reasonable proportion to exempted income and we restore this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions on 29.01.2014 and on 13.03.2014 referred at page nos. 2 to 5 of the assessment order. The AO was not satisfied with the submissions for non-deduction of tax and referred to the provisions of section 195 of the Act and DTAA and other relevant provisions and made disallowance of fees. Similarly the assessee has received ₹ 5,47,627/- from investment made in Venture Capital Fund viz. Indiareit Fund and claimed exempt u/s. 10(23FB) and the assessee has filed the letter dated 29.01.2014. Whereas the Assessing Officer is not satisfied with the explanations and dealt on the provisions and brought to tax ₹ 5,47,627/-. 4. In the course of hearing, the assessee filed letter dated 13.03.2014 and explanations that there are no borrowed funds used for the purpose of investments. But the Assessing Officer is of the considered opinion that investments cannot be made without expenditure and applying the provisions u/s. 14A Rule 8D worked out the disallowance of ₹ 1,95,493/- and with other addition of ₹ 1,917/- due to difference in the reconciliation of details furnished in connection with interest receipts as per 26AS and the interest accounted in the Bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irst disputed issue of disallowance u/s. 40(a)(ia) for non-deduction of TDS, the ld. AR of assessee made submissions that the assessee company has selected Intelliquip LLC to develop software for selection of pumps and the nonresident company has developed similar software for US and other European companies which are working satisfactorily. The software takes into consideration all the variables and gives many options for final selection based on parameters and usage of the software help the assessee company able to select the pump which is faster, accurate and optimum and payment of ₹ 4,86,000/- to Intelliquip LLC is towards quarterly subscription fees of USD 2700 per quarter for accessing the server of Intelliqip for the pump data as explained. The ld. AR of assessee demonstrated his stand by referring to the invoices at page nos. 37 to 40 of the paper book where the payments are in the nature of subscription fee by Intelliquip in its bills and cannot be categorized as fees and such payment paid for accessing and using the software developed by the said party for selecting the pump data which could have been done manually by the as on its own but the manual selection of da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the venture capital company or venture capital fund shall furnish, within such time as may be prescribed, to the person who is liable to tax in respect of such income and to the prescribed income-tax authority, a statement in the prescribed form and verified in the prescribed manner, giving details of the nature of the income paid or credited during the previous year and such other relevant details as may be prescribed. (3) The income paid or credited by the venture capital company and the venture capital fund shall be deemed to be of the same nature and in the same proportion in the hands of the person referred to in subsection (1) as it had been received by, or had accrued or arisen to, the venture capital company or the venture capital fund, as the case may be, during the previous year. (4) The provisions of Chapter XII-D or Chapter XII-E or Chapter XVIIB shall not apply to the income paid by a venture capital company or venture capital fund under this Chapter. (5) The income accruing or arising to or received by the venture capital company or venture capital fund, during a previous year, from investments made in venture capit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ia Act, 1992 (15 of 1992); or (B) has been granted a certificate of registration as Venture Capital Fund as a sub-category of Category I Alternative Investment Fund and is regulated under the Securities and Exchange Board of India (Alternative Investment Funds) Regulations, 2012 (hereinafter referred to as the Alternative Investment Funds Regulations) made under the Securities and Exchange Board of India Act, 1992 (15 of 1992), and which fulfils the following conditions, namely:- (i) it is not listed on a recognised stock exchange; (ii) it has invested not less than two-thirds of its investible funds in unlisted equity shares or equity linked instruments of venture capital undertaking; and (iii) it has not invested in any venture capital undertaking in which its director or a substantial shareholder (being a beneficial owner of equity shares exceeding ten per cent of its equity share capital) holds, either individually or collectively, equity shares in excess of fifteen per cent of the paid-up equity share capital of such venture capital undertaking; (b) venture capital fund means a fund- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Fund is exempted. We found that the assessee has made investments into the Venture Capital fund and received profits which are exempted. The ld. CIT(A) though considered the aspects of Joint venture but dealt only on the findings of the Assessing Officer by treating the same as income of the assessee and the observations of the ld. CIT(A) that the assessee could not satisfy with evidence i.e. how the assessee is entitled to claim exemption; Even before us the assessee has not filed any information in respect of investment made in Joint Venture and no material filed, we found that this issue has to be verified and examined and accordingly we restore this issue for limited purpose to the file of Assessing Officer and allow the ground of appeal for statistical purposes. 10. In respect of disallowance u/s. 14A of the Act, the ld. AR of assessee submitted that the assessee has total investments of ₹ 4,89,18,387/- out of which ₹ 4,89,07,787/- are investments which yielded dividend income and exempted from tax. The assessee has made investment in shares in Flowserve Microfinish Pumps Pvt Ltd. The assessee has not borrowed the funds for making investments and su ..... X X X X Extracts X X X X X X X X Extracts X X X X
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