The ACIT, Circle-10, Ahmedabad V. Gujarat Information Technology Fund, Ahmedabad

ITA 2928/AHD/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 89293 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 4 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-04-2015
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 01-04-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 25-11-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DINESH SINGH
• Assessee Lawyers: P M MEHTA; G L THAKOR
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD (BEFORE SHRI RAJPALYADAV, J.M. & SHRI ANIL CHATURV EDI, A.M.) I.T. A. NO. 2928/AHD/2011 (ASSESS MENT YEAR: 2008-09) ASST. COMMISSIONER OF INCOME-TAX, CIRCLE-10, AHMEDABAD V/S GUJARAT INFORMATION TECHNOLOGY FUND 1 ST FLOOR, PREMCHAND HOUSE ANNEXE ASHRAM ROAD, AHMEDABAD (APPELLANT) (RESPONDENT) PAN: AAAAG1037A APPELLANT BY : SHRI DINESH SINGH, SR. D.R . RESPONDENT BY : SHRI P.M. MEHTA & G.L. THAKOR , A.R. ( )/ ORDER DATE OF HEARING : 01-04-201 5 DATE OF PRONOUNCEMENT : 24 -04-2015 PER SHRI ANIL CHATURVEDI,A.M. 1. THIS APPEAL FILED BY THE REVENUE IS AGAINST THE ORD ER OF CIT(A)-XVI, AHMEDABAD DATED 12.09.2011 FOR A.Y. 2008-09. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER. 3. ASSESSEE IS A FUND ENGAGED IN THE ACTIVITY OF PROVI DING VENTURE FINANCE ASSISTANCE TO INFORMATION TECHNOLOGY/SOFTWARE UNITS LOCATED WITHIN THE STATE OF GUJARAT. ASSESSEE FILED ITS RETURN OF INCO ME FOR A.Y. 2008-09 ON ITA NO 292 8/AHD/2011 . A.Y. 2008-09 2 17.09.2008 DECLARING TOTAL INCOME OF RS. 95,16,660/ -. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER THE ASSESSMENT WAS FRAM ED UNDER SECTION 143(3) VIDE ORDER DATED 23.12.2010 AND THE TOTAL INCOME WA S DETERMINED AT RS. 96,65,796/-. AGGRIEVED BY THE ORDER OF A.O., ASSES SEE CARRIED THE MATTER BEFORE LD. CIT(A) WHO VIDE ORDER DATED 12.09.2011 A LLOWED THE APPEAL OF THE ASSESSEE. AGGRIEVED BY THE AFORESAID ORDER OF LD. CIT(A), REVENUE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GR OUND;- 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIR ECTING TO ALLOW EXEMPTION U/S. 10(23FB) OF THE ACT. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A.O NO TICED THAT THE MAIN OBJECTIVE OF THE FUND WAS TO OBTAIN CAPITAL GROWTH BY MAKING INVESTMENTS IN CONCERNS ENGAGED IN INFORMATION TECHNOLOGY SECTOR O R RELATED BUSINESS. ON PERUSING THE PROFIT AND LOSS ACCOUNT, HE NOTICED TH AT ASSESSEE HAD SHOWN RECEIPTS OF RS. 1,49,136/- BEING INCOME FROM VENTUR E FINANCE ASSISTANCE AND THE SAME WAS CLAIMED AS EXEMPT U/S. 10(23FB) OF THE ACT. A.O WAS OF THE VIEW THAT AS PER EXPLANATION (1) (B)(II) AND 1( B)(III) CONTAINED IN SECTION 10(23FB) A VENTURE CAPITAL FUND HAS TO FULFILL THE CONDITIONS SPECIFIED BY THE SEBI AS WELL AS THE REGULATIONS MADE THEREUNDER . A.O WAS OF THE VIEW THAT SINCE THE FUND HAS FAILED TO ADHERE TO THE CON DITIONS AND REGULATIONS MENTIONED IN SEBI REGULATION, THE ASSESSEE CANNOT B E TREATED AS VENTURE CAPITAL FUND AND THEREFORE NOT ENTITLED TO EXEMPTIO N U/S. 10(23FB) AND THEREFORE THE RECEIPTS OF RS. 1,49,136/- EARNED BY THE ASSESSEE WERE TO BE TAXED AS INCOME FROM OTHER SOURCES. HE ACCORDINGL Y REJECTED THE CLAIM OF ASSESSEE TO TREAT INCOME RECEIVED FROM VENTURE FINA NCE AS BEING EXEMPT U/S. 10(23FB) OF THE ACT. AGGRIEVED BY THE ORDER OF A. O., ASSESSEE CARRIED THE ITA NO 292 8/AHD/2011 . A.Y. 2008-09 3 MATTER BEFORE LD. CIT(A) WHO ALLOWED THE APPEAL OF THE ASSESSEE BY HOLDING AS UNDER:- 2.1 I HAVE CAREFULLY CONSIDERED THE DETAILED SUBMIS SION OF THE APPELLANT GIVEN IN THE STATEMENT OF FACTS RUNNING INTO 48 PAGES AND THE FA CTS OF THE CASE. THE LD. COUNSEL, APART FROM RELYING ON THE STATEMENT OF FACTS, HAS B ROUGHT TO MY NOTICE THAT THE ISSUE INVOLVED IN THE APPEAL REGARDING THE CLAIM OF EXEMP TION U/S. 10(23FB) OF THE ACT HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE CIT(A ) FOR THE A.Y. 2006-07 AND FOR THE A.Y. 2007-08. IT WAS ALSO SUBMITTED BY THE LD. COUNSEL T HAT THE SAME ISSUE FOR THE A.YS. 2001- 02, 2002-03, 2003-04, 2004-05 & 2005-06 HAD ALREADY BEEN DECIDED IN FAVOUR OF THE APPELLANT. ON THE BASIS OF EARLIER ORDERS, THE CIT( A) HAS ALLOWED THE CLAIM OF THE ASSESSEE FOR THE A.Y. 2006-07 VIDE HIS APPELLATE OR DER DATED 20-4-2009 IN APPEAL NO. CIT(A)XVI/WD.10(2)/123/2008-09. AGAIN, THE ISSUE CA ME FOR CONSIDERATION FOR THE A.Y. 2007-08 AND THE SAME WAS DECIDED IN FAVOUR OF THE A PPELLANT BY MY PREDECESSOR VIDE HIS APPELLATE ORDER DATED 27-11-2009 IN APPEAL NO. CIT( A)XVI/WD.10(2)/064/2009-10. SINCE, THE FACTS OF THE CASE ARE EXACTLY SIMILAR TO THE FACTS OF THE CASES OF EARLIER YEARS AND THEREFORE, I HAVE NO REASON TO DEVIATE FROM THE STAND TAKEN BY MY PREDECESSOR. FOLLOWING THE APPELLATE ORDERS OF MY PREDECESSOR FO R THE A.Y. 2006-07 AND 2007-08, IT IS HELD THAT THE APPELLANT WAS ENTITLED TO THE EXEMPTI ON U/S. 10(23FB) OF THE ACT. THE ASSESSING OFFICER WAS THUS NOT AT ALL JUSTIFIED IN DISALLOWING THE CLAIM OF EXEMPTION U/S. 10(23FB) OF THE ACT. THE DISALLOWANCE SO MADE FOR R S. 1,49,136/- IS THEREBY DELETED. THE FIRST, SECOND, THIRD, FOURTH AND SEVENTH GROUNDS AR E ACCORDINGLY ALLOWED. 5. AGGRIEVED BY THE AFORESAID ORDER OF LD. CIT(A), REV ENUE IS NOW IN APPEAL BEFORE US. 6. BEFORE US, LD. D.R. STRONGLY SUPPORTED THE ORDER OF A.O AND SUBMITTED THAT THE A.O AFTER MAKING A DETAILED INQUIRY AND EXAMINA TION OF THE FACTS HAS COME TO THE CONCLUSION THAT ASSESSEE WAS NOT ELIGIB LE TO DEDUCTION U/S. 10(23FB) AND THEREFORE THE ORDER OF THE A.O NEEDS T O BE UPHELD. HE FURTHER ITA NO 292 8/AHD/2011 . A.Y. 2008-09 4 SUBMITTED THAT LD. CIT(A) HAS FOLLOWED THE ORDER OF HIS PREDECESSOR FOR EARLIER YEARS, BUT AFTER THE AMENDMENT MADE BY FINA NCE ACT 2007 WHICH IS WITH EFFECT FROM 01.04.2007, THE ASSESSEE WILL NOT BE ELIGIBLE FOR DEDUCTION. HE THUS SUPPORTED THE ORDER OF A.O. LD. A.R. ON THE OTHER HAND FIRSTLY SUBMITTED THAT THE AMOUNT INVOLVED IN THE DEPARTMEN T APPEAL IS ONLY RS. 1,49,136/- AND IN VIEW OF INSTRUCTION NO. 3/2011 DA TED 09.02.2011, THE AMOUNT INVOLVED BEING LESS THAN RS. 3 LACS, BEING T HE MONETARY LIMIT PRESCRIBED BY CBDT, THE DEPARTMENT APPEAL REQUIRES TO BE DISMISSED IN LIMINE. ON THE MERITS, HE SUBMITTED THAT THE INCOME OF RS. 1,49,136/- COMPRISES OF INTEREST ON INCOME NOTE RS. 1,33,183/- AND ROYALTY ON INCOME NOTE OF RS. 15,953/- AND IT IS THE INCOME EARNED FR OM THE VENTURE FINANCE ASSISTANCE BY THE ASSESSEE AND IS THEREFORE INCOME ON VENTURE FINANCE ASSISTANCE AND THEREFORE THE EXEMPTION U/S. 10(23FB ) WAS RIGHTLY GRANTED BY LD. CIT(A). HE FURTHER SUBMITTED THAT IN ASSESSEES OWN CASE FOR A.Y. 2006- 07 & 2007-08, THE ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY HONBLE TRIBUNAL. HE FURTHER SUBMITTED THAT THE AME NDMENT MADE TO SECTION BY FINANCE ACT 2007 HAS ALSO BEEN CONSIDERED BY HON BLE TRIBUNAL AND POINTED TO THE RELEVANT PARA OF THE HONBLE TRIBUNA L ORDER. HE ALSO PLACED ON RECORD THE COPY OF THE AFORESAID ORDER OF TRIBUN AL DATED 27.05.2011 IN ITA NO. 2264/AHD/2007& ORS. HE THUS SUPPORTED THE O RDER OF LD. CIT(A). LD. D.R. IN THE REJOINDER SUBMITTED THAT THE MONETA RY LIMIT OF RS. 3 LAC WOULD NOT BE APPLICABLE TO THE PRESENT CASE, AS THE ISSUE BEING REPETITIVE IN NATURE. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS DENIAL OF DEDUCTION U/ S. 10(23FB) OF THE ACT. WE FIND THAT THE A.O HAS DENIED THE DEDUCTION U/S. 10( 23FB) OF THE ACT BY ITA NO 292 8/AHD/2011 . A.Y. 2008-09 5 HOLDING THAT THE ASSESSEE IS NOT A VENTURE CAPITAL FUND WITHIN THE MEANING OF SECTION 10(23FB) OF THE ACT AS IT VIOLATED THE P ROVISIONS OF SEBI REGULATIONS AS WELL AS THE PROVISIONS OF THE TRUST DEED. WE FURTHER FIND THAT AMENDMENT TO SECTION 10(23FB) HAS BEEN MADE BY FINA NCE ACT, 2007 WITH EFFECT FROM 01.04.2008 AND THE EFFECT OF AMENDMENT BY FINANCE ACT, 2007 HAS BEEN DISCUSSED BY THE CO-ORDINATE BENCH OF TRIB UNAL IN ASSESSEES OWN CASE DATED 27.05.2011 FOR A.Y. 2003-04 IN ITA NO. 2 264/AHD/2007 AND ORS. AT PARA 31 PAGE 37 OF THE ORDER WHEREIN IT HAS NOTED THAT AFTER THE AMENDMENT, EXEMPTION IS RESTRICTED TO ONLY THE INCO ME FROM THE INVESTMENTS IN SPECIFIED UNDERTAKINGS. BEFORE US, IT IS ASSESSE ES SUBMISSIONS THAT THE AMOUNT OF RS. 1,49,136/- WHICH HAS BEEN EARNED BY A SSESSEE IS OUT OF VENTURE FINANCE ASSISTANCE PROVIDED BY IT. WE HOWEV ER FIND THAT A.O HAS NOT GIVEN ANY FINDING ON THIS ASPECT AND HAS PROCEE DED ON THE BASIS THAT ASSESSEE IS NOT A VENTURE CAPITAL FUND AND IT HAS V IOLATED THE PROVISIONS OF SEBI REGULATIONS AND THE TRUST DEED. WE ALSO FIND T HAT LD. CIT(A) HAS ALLOWED THE APPEAL OF THE ASSESSEE BY FOLLOWING THE ORDER OF HIS PREDECESSOR FOR A.Y. 2006-07 & 2007-08. IN VIEW OF THE AFORESA ID FACTS, WE ARE OF THE VIEW THAT THE ISSUE NEEDS TO BE RE-EXAMINED AT THE END OF A.O. WE THEREFORE REMIT THE ISSUE BACK TO THE FILE OF A.O TO DECIDE T HE ISSUE AFRESH AFTER CONSIDERING THE OBSERVATION MADE BY THE CO-ORDINATE BENCH OF TRIBUNAL IN ASSESSEES OWN CASE, THE SUBMISSIONS OF ASSESSEE AN D IN ACCORDANCE WITH LAW. THE A.O SHALL ALSO GIVE A FINDING ON THE INCOM E OF RS. 1,49,136/- WHICH HAS BEEN EARNED AND CLAIMED TO BE EXEMPT BY THE ASS ESSEE AS TO WHETHER THE ASSESSEE IS ENTITLED TO EXEMPTION ON THE SAME OR NO T. NEEDLESS TO STATE THAT A.O SHALL GRANT ADEQUATE OPPORTUNITY OF HEARING TO THE ASSESSEE. IN THE RESULT, THE GROUND OF REVENUE IS ALLOWED FOR STATIS TICAL PURPOSES. ITA NO 292 8/AHD/2011 . A.Y. 2008-09 6 8. IN THE RESULT, THE APPEAL OF REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON 24 - 04 - 2015. SD/- SD/- (RAJPAL YADAV) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHM EDABAD