Case Law Details
Japan International Co-operation Agency (JICA) Vs ACIT (ITAT Delhi)
A.O. as well as Ld. 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 and 115-R of the Act and as such the exemption claimed u/ss 10(34) and 10(35) is to be allowed only if the dividend income distributed as per the provisions of Sections 115-0 and 115-R whereas, the conditions laid down u/s 115-0 to 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 assessee in this case, received the dividend income from VCF. So, the assessee is entitled 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 required to pay additional income tax second time on the same income. Consequently, 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 assessee.
The issue in controversy is again required to be determined in consonance with the provisions contained u/s 115U discussed in the preceding paragraphs which mandates that venture capital company and venture capital fund is given the status of pass through vehicle for the purpose of treatment of income received on account of investment made in the venture capital undertaking. A person who makes investment in the venture capital company or venture capital fund, the assessee in this case, earned the income out of such investment which income shall be treated firstly as investment directly in the venture capital undertaking and venture capital fund or venture capital company is only a pass through 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 the assessee directly in the venture capital fund. So, we are of the view that the expenses of Rs. 1,13,11,955/- disallowed by Ld. CIT(A) by taking the shares of the assessee in interest income from VCF under the head other sources on 185 11 gross basis and not the net basis, which requires to be determined 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.
FULL TEXT OF THE ITAT JUDGEMENT
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