PCIT Vs Mile Stone Real Estate Fund (Bombay High Court)
Summary: Bombay High Court dismissed the Revenue’s appeal against the ITAT order confirming the assessee’s entitlement to exemption under Section 10(23FB) of the Income-tax Act, 1961. The assessee, Milestone Real Estate Fund, was a trust registered with SEBI as a Venture Capital Fund (“VCF”) under the SEBI (Venture Capital Funds) Regulations, 1996 and operated seven separate schemes. For AY 2014-15, it claimed exemption of Rs. 161,69,79,775/- on income earned from investments in Venture Capital Undertakings. The Assessing Officer denied the exemption, inter alia, on the grounds that each scheme required separate SEBI registration and that investments were made in associated concerns in which trustees held shares exceeding the prescribed 15% threshold.
The High Court upheld the concurrent findings of the CIT(A) and ITAT. On the first issue, it held that under the VCF Regulations registration is granted to the trust as a Venture Capital Fund and not separately to each scheme operated by it. For each scheme, the requirement is to submit the relevant private placement memorandum to SEBI. Accordingly, once the trust is registered as a VCF, it can operate separate schemes without obtaining independent registration for every scheme. The Court therefore held that this issue did not give rise to any substantial question of law.
