JAPAN INTERNATIONAL CO-OPERATION AGENCY (JICA), NEW DELHI V. ACIT(INTL. TAXATION), CIRCLE- 2(1)(2), NEW DELHI

ITA 3812/DEL/2017

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 3364 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 5 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-11-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2012-2013
• Appeal Filed On: 12-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: AGAINST DATED PASSED
• Keywords: Opportunity of being heard; Capital Gains
• Section: 143(3); 234B; 143(2); 153

Judgement Text

1 ITA NO. 3812/DEL/2017 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: D NEW DELHI BEFORE SHRI N. K. BILLAIYA, ACCOUNTANT MEMBER AND MS SUCHITRA KAMBLE, JUDI CIAL MEMBER I.T.A. NO. 3812/DEL/20 17 (A.Y 2012-13) (THROUGH VIDEO CON FERENCING) JAPAN INTERNATIONAL CO - OPERATION AGENCY (JICA) 2 ND FLOOR, DR. GOPAL DAS BHAWAN, 28, BARAKHAMBHA ROAD, CONNAUGHT PLACE, NEW DELHI-110001 PAN: AAAAJ1961C (APPELLANT) VS ACIT (INTL. TAXATION), CIRCLE-2(1)(2) ROOM NO. 310, 3 RD FLOOR, BLOCK-2, PRATYAKSH KAR BHAWAN, CIVIC CENTRE, NEW DELHI-110002 (RESPONDENT) ORDER PER SUCHITRA KAMBLE, JM THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER DATED 6/4/2017 PASSED BY CIT(A)- 43, FOR ASSESSMENT YEAR 2012-13. 2. THE GROUNDS OF APPEAL ARE AS UNDER:- BASED ON THE FACTS AND CIRCUMSTANCES OF THE CASE, T HE APPELLANT RESPECTFULLY SUBMITS: 1. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD C1T(A) HAS ERRED IN UPHOLDING THE ASSESSMENT ORDER PASSED BY L D AO UNDER SECTION 143(3) FOR THE SUBJECT YEAR WHEREIN THE INCOME WAS ASSESSED AT RS. 71,21,390 AS AGAINST NIL RETURNED INCOME DECLARED B Y THE APPELLANT AND IS APPELLANT BY SH. NAGESHWAR RAO, ADV RESPONDENT BY SH. SATPAL GULATI, CIT(DR) DATE OF HEARING 29.10.2020 DATE OF PRONOUNCEMENT 17.11.2020 2 ITA NO. 3812/DEL/2017 LIABLE TO BE QUASHED. 2. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) HAS ERRED IN HOLDING THAT THE BENEFIT OF SECTION 161 OF THE ACT IS NOT AVAILABLE TO THE APPELLANT BEING A BENEFICIARY IN SARA FUND, A VENTU RE CAPITAL FUND (VCF) . 3. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) HAS ERRED IN HOLDING THAT THE APPELLANT IS NOT ELIGIBLE FOR BENEFIT AS PER SECTION 115U OF THE ACT AS INVESTMENTS MADE BY SARA FUND AR E NOT IN SPECIFIED VENTURE CAPITAL UNDERTAKINGS (VCU) AS PER SECTION 10(23FB) OF THE ACT. 3.1 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, LD C1T(A) HAS ERRED IN DISALLOWING THE EXEMPTION CLAIMED BY THE A PPELLANT UNDER SECTION 10(34) OF THE ACT ON DIVIDEND INCOME FROM VCU EARNE D BY SARA FUND. 3.2 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, LD CIT(A) HAS ERRED IN DISALLOWING THE EXEMPTION CLAIMED BY THE A PPELLANT UNDER SECTION 10(38) OF THE ACT ON LONG TERM CAPITAL GAIN FROM SH ARE SALE OF VCU EARNED BY SARA FUND. 4. THAT THE LD CIT(A) HAS ERRED, IN LAW AND ON FACTS AND CIRCUMSTANCES OF THE CASE, BY NOT GRANTING AN OPPORTUNITY OF BEING HEARD TO ESTABLISH FACTS ABOUT VCU. 5. THE LD C1T(A) HAS ERRED, ON FACTS OF THE CASE AND IN LAW, IN UPHOLDING THE LEVY OF INTEREST U/S 234B OF THE ACT. 6. THE LD CIT(A) HAS ERRED, ON THE FACTS AND THE CIRCU MSTANCES OF THE CASE AND IN LAW, IN UPHOLDING THE INITIATING THE PENALTY PROCEE DINGS UNDER SECTION 271(L)(C) OF THE ACT AGAINST THE APPELLANT FOR FURNISHING INA CCURATE PARTICULARS AND CONCEALMENT OF INCOME. THE ABOVE GROUNDS ARE INDEPENDENT AND WITHOUT PREJ UDICE TO EACH OTHER. 3. JAPAN INTERNATIONAL COOPERATION AGENCY (HEREINAF TER REFERRED TO 'JICA') WAS ESTABLISHED AS AN INCORPORATED ADMINISTRATIVE A GENCY UNDER THE ACT OF THE INCORPORATED ADMINISTRATIVE AGENCY - JAPAN INTERNAT IONAL COOPERATION AGENCY (ACT NO. 136, 2002). JICA AIMS TO CONTRIBUTE TO THE PROMOTION OF INTERNATIONAL COOPERATION AS WELL AS THE SOUND DEVELOPMENT OF JAP ANESE AND GLOBAL ECONOMY 3 ITA NO. 3812/DEL/2017 BY SUPPORTING THE SOCIOECONOMIC DEVELOPMENT, RECOVE RY OR ECONOMIC STABILITY OF DEVELOPING REGIONS. JICA EXTENDS OFFICIAL DEVELO PMENT ASSISTANCE (ODA) TO MINISTRY OF FINANCE, DEPT OF ECONOMIC AFFAIRS, GOVE RNMENT OF INDIA FOR SOCIAL & INFRASTRUCTURE PROJECTS (LIKE THE WB & ADB). NEW JI CA WAS INAUGURATED ON OCTOBER 01, 2008 WITH A MERGER BETWEEN THE EXISTING JAPAN INTERNATIONAL COOPERATION AGENCY AND THE OVERSEAS ECONOMIC COOPER ATION SECTION OF THE JAPAN BANK FOR INTERNATIONAL COOPERATION (JBIC). JICA ONLY HAS A REPRESENTATIVE OFFICE IN INDIA AT 2 ND FLOOR, GOPAL DAS BHAWAN, 28, BARAKHAMBA ROAD, CONNAUGHT PLACE, NEW DELHI - 110 0 01 WHOSE ROLE IS OF A CO-COORDINATOR OF INVESTMENT IN SOUTH ASIAN REGIONA L APEX (SARA) WHICH WAS EARLIER COORDINATED BY OVERSEAS ECONOMIC COOPERATIO N SECTION OF JBIC. THE REPRESENTATIVE OFFICE OF JICA HAS NOT INVESTED DIRE CTLY IN THE SARA FUND AND ONLY ACTS AS A FRONT OFFICE OF JICA IN INDIA. FURTH ER, ALL LOANS ARE EVALUATED, GRANTED AND DISBURSED BY JICA TO GOVERNMENT OF INDI A (GOI)/PSUS DIRECTLY FROM JAPAN. AS ON MARCH 31, 2012, JICA HELD 27,500 UNITS OF SARA FUND @ RS 5,000 PER UNIT. SARA FUND IS A SEBI REGISTERED V ENTURE CAPITAL FUND (VCF) AS PER THE SEBI VENTURE CAPITAL FUND REGULA TIONS, 1996, WHOSE OBJECTIVE IS TO PROVIDE EQUITY ASSISTANCE TO VENTURE CAPITAL UNDERTAKINGS (VCU) IN INDIA. THE FUND WAS SET UP AS A TRUST WITH A MAIN O BJECTIVE OF PROVIDING EQUITY ASSISTANCE TO VENTURE CAPITAL UNDERTAKINGS (VCU) IN INDIA. SARA FUND HAS MADE INVESTMENTS IN BOTH NON-VCUS AND VCUS IN INDIA BY WAY OF DEBT CAPITAL OR SHARE CAPITAL. SARA FUND EARNS RETURNS ON ITS IN VESTMENTS BY WAY OF DIVIDENDS, INTEREST OR CAPITAL GAINS ON SALE OF INV ESTMENT. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE SUBJECT ASSESSMENT YEAR ON 31 JULY 2012 DECLARING INCOME OF NIL. THE RETURN WAS PICKED UP FOR SCRUTIN Y ASSESSMENT VIDE NOTICE DATED 18 SEPTEMBER 2013 ISSUED UNDER SECTION 143(2) OF THE ACT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSISTANT COM MISSIONER OF INCOME TAX, CIRCLE 2(1)(2), INTERNATIONAL TAXATION, NEW DELHI SOUGHT VARIOUS DETAILS, EXPLANATIONS AND CLARIFICATIONS WHICH WERE DULY FUR NISHED BY THE ASSESSEE FROM TIME TO TIME. THE ASSESSING OFFICER DISREGARDE D THE SUBMISSIONS MADE BY THE APPELLANT AND PASSED AN ASSESSMENT ORDER UNDER SECTION 143(3) R.W.S. 4 ITA NO. 3812/DEL/2017 144C(3) OF THE ACT ON 15 APRIL 2015 (RECEIVED ON 17 MARCH 2015) MAKING THE FOLLOWING ADDITIONS/ DISALLOWANCES: (I) DISALLOWANCE OF EXEMPTION CLAIMED UNDER SECTION 10(34) OF THE ACT ON DIVIDEND INCOME AMOUNTING TO RS. 1,31,404/-. (II) DISALLOWANCE OF EXEMPTION CLAIMED UNDER SECTI ON 10(38) OF THE ACT ON LONG TERM CAPITAL GAIN AMOUNTING TO RS 69,89,987/-. BASED ON THE ABOVE ADJUSTMENTS MADE BY THE ASSESSIN G OFFICER, THE TOTAL TAXABLE INCOME OF THE APPELLANT HAS BEEN RECOMPUTED AT RS. 71,21,390 AS AGAINST THE RETURNED INCOME OF NIL. AN ADDITIONAL D EMAND OF RS.19,91,255 HAS BEEN RAISED ON THE ASSESSEE INCLUDING INTEREST UNDE R SECTION 234B AND NOTICE UNDER SECTION 271(L)(C) WAS ISSUED FOR INITIATING T HE PENALTY PROCEEDINGS. | 4. BEING AGGRIEVED BY THE ASSESSMENT ORDER, THE ASS ESSEE FILED APPEAL BEFORE THE CIT(A). THE CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE. 5. THE LD. AR SUBMITTED THAT FOR ASSESSMENT YEAR 2 006-07, 2007-08, 2008-09 & 2010-11, THE ISSUES CONTESTED IN THE PRES ENT APPEAL ARE DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL IN ITA NOS. 3284/DEL/2012 AND 5705/DEL/2010 ORDER DATED 29.01.2016 FOR A.Y. 2006- 07 & 2007-08 AS WELL AS ITA NO. 5332/DEL/2011 AND 1249/DEL/2014 ORDER DATED 16.07.2020 FOR A.Y. 2008-09 & 2010-11. 6. THE LD. DR RELIED UPON THE ASSESSMENT ORDER AND THE ORDER OF THE CIT(A). 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. 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. THE T RIBUNAL VIDE ORDER DATED 29.01.2016 IN A.YS. 2006-07 AND 2007-08 HELD AS UND ER: 14.6 HOWEVER, WE ARE OF THE CONSIDERED VIEW THAT T HE A.O. AS WELL AS LD. 5 ITA NO. 3812/DEL/2017 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 115-0 A ND 115-R OF THE ACT AND AS SUCH THE EXEMPTION CLAIMED U/SS 10(34) AND 10(35) I S TO BE ALLOWED ONLY IF THE DIVIDEND INCOME DISTRIBUTED AS PER THE PROVISIO NS OF SECTIONS 115-0 AND 115-R WHEREAS, THE CONDITIONS LAID DOWN U/S 115-0 T O 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 ASSESSE E IN THIS CASE, RECEIVED THE DIVIDEND INCOME FROM VCF. SO, THE ASSESSEE IS ENTIT LED FOR EXEMPTION U/S 10(34) OF THE ACT AND ITS SHARE OF DIVIDEND INCOME IS OUT OF DIVIDEND INCOME RECEIVED BY SARA FUND. WHEN THE COMPANY WITH WHICH SARA FUND HAS BEEN INVESTED, HAD ALREADY PAID ADDITIONAL INCOME TAX ON THE EARNED DIVIDEND AS REQUIRED U/S 115-0 OF THE ACT, SARA FUND WAS NOT RE QUIRED TO PAY ADDITIONAL INCOME TAX SECOND TIME ON THE SAME INCOME. CONSEQUE NTLY, GROUNDS NO. 1(1) AND 1(11) OF I.T.A. NO. 3284/DEL/2012 AND GROUND NO . L OF I.T.A. NO. 5705/DEL/2010 ARE DETERMINED IN FAVOUR OF THE ASSES SEE. . 15.4 THE ISSUE IN CONTROVERSY IS AGAIN REQUIRED TO BE DETERMINED IN CONSONANCE WITH THE PROVISIONS CONTAINED U/S 115U D ISCUSSED IN THE PRECEDING PARAGRAPHS WHICH MANDATES THAT VENTURE CA PITAL COMPANY AND VENTURE CAPITAL FUND IS GIVEN THE STATUS OF PASS TH ROUGH VEHICLE FOR THE PURPOSE OF TREATMENT OF INCOME RECEIVED ON ACCOUNT OF INVESTMENT MADE IN THE VENTURE CAPITAL UNDERTAKING. A PERSON WHO MAKES INV ESTMENT IN THE VENTURE CAPITAL COMPANY OR VENTURE CAPITAL FUND, THE ASSESS EE IN THIS CASE, EARNED THE INCOME OUT OF SUCH INVESTMENT WHICH INCOME SHALL BE TREATED FIRSTLY AS INVESTMENT DIRECTLY IN THE VENTURE CAPITAL UNDERTAK ING AND VENTURE CAPITAL FUND OR VENTURE CAPITAL COMPANY IS ONLY A PASS THRO UGH VEHICLE. SO, IN THESE CIRCUMSTANCES, THE ASSESSEE-COMPANY IS ENTITLED TO BOOK EXPENDITURE INCURRED BY SARA FUND AS IF THE SAME HAS BEEN INCURRED BY TH E ASSESSEE DIRECTLY IN THE VENTURE CAPITAL FUND. SO, WE ARE OF THE VIEW TH AT THE EXPENSES OF RS. 1,13,11,955/- DISALLOWED BY LD. CIT(A) BY TAKING TH E SHARES OF THE ASSESSEE 6 ITA NO. 3812/DEL/2017 IN INTEREST INCOME FROM VCF UNDER THE HEAD OTHER SO URCES ON 185 11 GROSS BASIS AND NOT THE NET BASIS, WHICH REQUIRES TO BE D ETERMINED BY TREATING THE SAME NATURE OF INCOME LIKE LONG TERM CAPITAL GAIN, SHORT TERM CAPITAL GAIN, DIVIDEND AND OTHER INCOME SUCH AS INTEREST ETC. SO, GROUNDS NO. 2 OF BOTH THE APPEALS ARE DETERMINED IN FAVOUR OF THE ASSESSEE. THUS, GROUND NOS. 1 TO 3, 3.1 AND 3.2 ARE IDENTICAL IN THE PRESENT ASSESSMENT YEAR I.E. 2012-13 AS WELL TO THAT OF EAR LIER YEAR 2006-07, 2007-08 AND 2010-11. WE FIND THAT THE ASSESSEE HAS FURNISHE D 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 LON G TERM CAPITAL GAIN. GROUND NOS. 1 TO 3, 3.1 AND 3.2 ARE ALLOWED. AS REG ARDS TO GROUND NO. 4, THE SAME IS NOT REQUIRED FOR ADJUDICATION. AS REGARDS T O GROUND NOS. 5, THE SAME IS CONSEQUENTIAL, HENCE THE SAME IS ALLOWED IN VIEW OF THE FINDINGS ON GROUND NOS. 1 TO 3, 3.1 AND 3.2. AS REGARDS TO GROUND NO. 6, THE SAME IS ALLOWED. 8. IN RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 17 TH DAY OF NOVEMBER, 2020 SD/- SD/- (N. K. BILLAIYA) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEM BER DATED: 17/11/2020 R. NAHEED * COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT 7 ITA NO. 3812/DEL/2017 ASSISTANT REGISTRAR ITAT NEW DELHI DATE OF DICTATION 03.11.2020 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 05.11.2020 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK