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TMI Blog2018 (1) TMI 1607X X X X Extracts X X X X X X X X Extracts X X X X ..... clause (b) of Explanation 1. By virtue of the deeming provisions (1) of Sec. 115U of the Act income accruing to a person out of investments made in a Venture Capital Fund also gets the exemption u/s.10(23FB) of the Act. Though the grounds of the Revenue say that compliance with Securities and Exchange Board of India (Venture Capital Funds) Regulations, 1996 has not been established, what we find is that form No.64 specified in Rule 12C which is to be furnished by the Venture Capital Fund was filed by the assessee. Said Form 64 by necessary implication means that at the Venture Capital Fund had complied with the conditions set out in Explanation (1) to Section 10(23FB). Assessing Officer did not find anything wrong in the said form No.64 which is the Form set out by the Rules under sub-section 2 of Section 115U of the Act. We cannot also say that the income which is exempt u/s.10(23FB) of the Act had to be considered on receipt basis and not on accrual basis since Section 115U of the act takes within its ambit accrued income also. Ld. Commissioner of Income Tax (Appeals) in our opinion was justified in allowing the claim of the assessee u/s.10(23FB) of the Act read alongwith Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... normal rate of 30% on such amount. 4. Aggrieved, assessee moved in appeal before the ld. Commissioner of Income Tax (Appeals). However this did not meet with any success. According to ld. Commissioner of Income Tax (Appeals), assessee did not give any details regarding actual delivery of the shares which were sold by it giving rise to the claim of short term capital gains. 5. Now before us, ld. Authorised Representative strongly assailing the orders of the lower authorities submitted that the sale of the shares which gave rise to short term capital gains arose out of transactions which were charged to Securities Transaction Tax (SET). According to him, Sec. 111A of the Act clearly applied for such transactions and assessee was eligible for lower rate of tax of 10% on the capital gains arising from transfer of such shares. Further, according to him, none of the lower authorities had found the claim to be wrong but had went by mere surmises. 6. Per contra, ld. Departmental Representative strongly supporting the orders of the authorities below submitted that assessee could not show the genuineness of the claim of short term capital gains. 7. We have considered the rival c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of shares claimed by the assessee satisfied the conditions set out in Sec. 111A of the Act. Though the ld. Assessing Officer has stated in the assessment order that assessee could not prove the actual delivery of shares to it, how he came to such a conclusion is not clear. We are therefore of the opinion that the issue requires a fresh look by the ld. Assessing Officer. We set aside the orders of the authorities below on this issue and remit it back to the ld. Assessing Officer to consider the claim afresh, in the light of the conditions specified Sec.111A of the Act. Ground No.2 is allowed for statistical purpose. 8. Now we take up the appeal of the Revenue. 9. Grievance of the Revenue is that ld. Commissioner of Income Tax (Appeals) allowed the exemption claimed by the assessee on the income earned by it from transactions relating to units in M/s. ICICI emerging sector fund. 10. Facts apropos are that assessee had claimed exemption u/s.10(38) of the Act in respect of long term capital gains amounting to @1,36,16,621/-. As per the assessee the gains were on purchase and sale of units in ICICI emerging sector fund and in accordance with Form 64 issued by the fund manage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Fund and not by the assessee. Further, according to him, whether investments were made by the Venture Capital Fund in accordance with SEBI regulations and whether they had excluded the investments in listed securities had to be verified before allowing the claim. As per the ld. Departmental Representative, ld. Commissioner of Income Tax (Appeals) fell in error in allowing the claim. 13. Per contra, ld. Authorised Representative strongly supported the orders of the authorities below. 14. We have considered the rival contentions and perused the orders of the authorities below. It is not disputed that long term capital gains of @1,36,16,621/-, on which assessee had claimed exemption, arose from its investments in a Venture Capital Fund called ICICI Emerging Sector Fund. Sec. 115U of the Act which deals with income accruing or arising or received by a person out of investments made in a Venture Capital Fund is reproduced hereunder:- Section 115U:- 1) Notwithstanding anything contained in any other provisions of this Act, any income received by a person out of investment made in venture capital company or venture capital fund shall be chargeable to income-tax in the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... undertaking. Explanation 1.- For the purposes of this clause, (a) venture capital company means such company (i) which has been granted a certificate of registration under the Securities and Exchange Board of India Act, 1992 (15 of 1992), and regulations made thereunder ; (ii) which fulfils the conditions as may be specified, with the approval of the Central Government, by the Securities and Exchange Board of India, by notification in the Official Gazette, in this behalf ; (b) venture capital fund means such fund (i) operating under a trust deed registered under the provisions of the Registration Act, 1908 (16 of 1908), or operating as a venture capital scheme made by the Unit Trust of India established under the Unit Trust of India Act, 1963 (52 of 1963) ; (ii) which has been granted a certificate of registration under the Securities and Exchange Board of India Act, 1992 (15 of 1992), and regulations made thereunder ; (iii) which fulfils the conditions as may be specified, with the approval of the Central Government, by the Securities and Exchange Board of India, by notification in the Official Gazette, in this behalf ; and (c) venture capital undertaking ..... 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