Principal Commissioner Of Income Tax 6 v. Shri.gopalsrinivasan

Principal Commissioner of Income Tax 6No.121, Mahatma Gandhi Road,Chennai... AppellantVersusShri.GopalSrinivasan.. Respondent Prayer:- Tax Case Appeal filed under Section 260-A of the IncomeTax Act, 1961, against the order of the Income Tax AppellateTribunal, ''C'' Bench, Chennai dated 11.01.2018 inI.T.A.No.1423/Mds/2016. Appeal against the order dated 10.02.2016 made inITA.No.93/CIT(A)-15/14-15 on the file of the Commissioner ofIncome Tax (Appeals) -15, Chennai 600 034. for the Assessmentyear 2008-09. And as against the order dated 31.01.2014 made in PANAADPG9543P on the file of the Assistant Commissioner of IncomeTax, Company Circle VI (4), Chennai for the Assessment Year2008-09. And as against the order dated 16.12.2010 made inPAN/GIR.No. AADPG9543P/SSU50P1 on the file of the Assistantcommissioner of Income Tax, Company Circle VI(4), Chennai forthe Assessment Year 2008-09. This appeal, filed by the Revenue, under Section 260A ofthe Income Tax Act, 1961 ('the Act' for brevity) is directed https://hcservices.ecourts.gov.in/hcservices/ against the order dated 11.01.2018 passed by the Income TaxAppellate Tribunal Bench 'C' Chennai ('the Tribunal' forbrevity) in I.T.A.No.1423/Mds/2016, for the assessment year2008-09. The Revenue has raised the following substantialquestion of law: ''1.Whether the Appellate Tribunal is correctin holding that the assessee is entitled to theexemption u/s 10(23FB) despite the fact that (STT)Security Transaction Tax liability was borne by theVenture Capital Fund and not by the assessee?'' 2. We have elaborately heard Mr.J.Narayanasamy, learnedSenior Standing counsel for the appellant / assessee andMr.R.Vikram, learned counsel for the respondent / assessee. 3. The assessee is an individual and a Director of PublicLimited Company and filed the return of income for theAssessment Year under consideration ('AY 2008-09') on30.07.2008, admitting an income of Rs.3,56,05,420/-. The casewas selected for scrutiny and assessment was completed acceptingthe returned income declared by the assessee. Subsequently theassessment was reopened under Section 147 of the Act andcompleted by order dated 31.01.2014, assessing a total income atRs.5,50,10,269/-. The Assessing Officer while completing theassessmentpointedoutthattheassessee receivedRs.1,68,21,005/- as Distribution of income received from ICICIEmerging Sector Fund and there was a discrepancy between theincome of Rs.1,68,21,005/- received and Rs.2,22,54,099/- anddifferences amounting to Rs.54,33,094/- which was added by theAssessing Officer as 'Income From Other Sources'. The assesseeclaimed exemption on Long Term Capital Gain ('LTCG') ofRs.1,36,16,621/- as received from the ICICI Emerging Sector Fundas per Form 64 as Security Transaction Tax ('STT') was suffered.The Assessing Officer held that there is no exemption availablefor such transaction, more particularly, because the STTliability is borne by the Venture Capital Fund and not by theassessee and Section 115U of the Act is only a deeming provisionsupplement to Section 10(23FB), where any income is exempted inthe case of Venture Capital fund and hence the question ofapplication of Section 10(38) of the Act does not arise. 4. Aggrieved by such order, the assessee filed an appealbefore the Commissioner of Income Tax (Appeals)-15, Chennai['CIT(A)']. The CIT(A) confirmed the addition of Short TermCapital Gain (STCG) stating that the assumption made by theAssessing Officer regarding the share of profit on sale ofshares, had suffered STT. In doing so, followed certaindecisions of the Tribunal, Delhi. Aggrieved by such order, theRevenue filed Appeal before the Tribunal. The Tribunal by theImpugned Order remanded the matter to the Assessing Officer for 4. Aggrieved by such order, the assessee filed an appealbefore the Commissioner of Income Tax (Appeals)-15, Chennai['CIT(A)']. The CIT(A) confirmed the addition of Short TermCapital Gain (STCG) stating that the assumption made by theAssessing Officer regarding the share of profit on sale ofshares, had suffered STT. In doing so, followed certaindecisions of the Tribunal, Delhi. Aggrieved by such order, theRevenue filed Appeal before the Tribunal. The Tribunal by theImpugned Order remanded the matter to the Assessing Officer for considering the claim on STCG afresh, in the light of theconditions specified under Section 111A of the Act. Further theTribunal after noting the factual position agreed with thefinding of the CIT(A) and directed the Assessing Officer toconsider the claim of the assessee under Section 10(23FB) readwith Section 115U of the Act. 5. The Revenue is before us contenting that the Tribunalerred in holding that the assessee is entitled to exemptionunder Section 10(23FB) despite the fact that the STT liabilitywas borne by the Venture Capital Fund and not by the assessee. 6. During the course of argument, Mr.J.Narayanasamy,learned Senior Standing Counsel vehemently contended that thereare certain additional Substantial Questions of Law in theinstant case which needs to be considered by this Court, whiledeciding this appeal. One of such submission is on the groundthat Section 115U(1) commences with a non-obstante clause andother provision has been excluded and therefore seeks to arguecertain other issue relatable to the said point canvassed by thelearned Senior Standing Counsel. 7. In our considered view, no occasion has arisen beforethis Court to consider such question because what was projectedby the Revenue in this Appeal was with regard to the fact as towhether the STT liability has not been borne by the VentureCapital Fund? ; Whether the assessee would be entitled to thebenefit of the exemption under Section 10(23FB)?. This isentirely a factual issue which has been considered by the CIT(A)in a proper perspective. The assessee contented that underSection 10(23FB) of the Act, any income of the Venture CapitalFund is exempt from taxation, however under Section 115U(1) ofthe Act any income accruing by the Investor out of theinvestments made in Venture Capital Fund shall be chargeable totax in the same manner as if it were the income accruing to suchinvestor had he made investments directly in the VentureCapital Undertaking. Further it was contended that under Section115U(3) of the Act, the income credited by the Venture CapitalFund shall be deemed to be of the same nature and in the sameproportion in the hands of the investor, as it had been receivedor accrued to the Venture Capital Fund. Therefore it wascontended that the income from Venture Capital Fund, accrued tothe investor's share of same nature under Section 115U(1) of theAct and is chargeable to tax in the same manner as under Section115U(3) of the Act. Thus it was contended that they convertedthe said income in the same nature as LTGS - STT whichchargeable to tax in the same manner. 8. Further the assessee specifically stated that the STT 8. Further the assessee specifically stated that the STT paid on such transaction is borne by the assessee and wasdebited to the account of the assessee by the Venture CapitalFund as stated by the Assessing Officer in its order. Therefore,the assessee claimed that they are entitled for exemption underSection 10(38) of the Act. Further under Section 115U(5) of theAct, the income received by the Venture Capital Fund is taxableon accrual basis, whether distributable or not to the investorand therefore, the exemption under Section 10(38) is not claimedon the distribution as stated by the Assessing Officer in itsorder. This submission was taken note of and the CIT(A) hasrecorded the factual finding that STT paid on the transaction isborne by the assessee and the same was debited to the account ofthe assessee by the Venture Capital Fund as admitted by theAssessing Officer himself in the Assessment Order. Furthertaking note of the decision of the Delhi Tribunal in the case ofJapan International Cooperative Agency dated 29.01.2016, theissue was decided in favour of the assessee. The correctness ofthe factual finding recorded by the CIT(A) was tested by theTribunal as well as noting the provision of Section 10(23FB) andSection 115(U) of the Act. After taking note of the factualposition, the Tribunal affirmed the order passed by the CIT(A).Thus we find there is no Substantial Question of Law arises forconsideration in this appeal as the entire matter revolves onfactual aspects which was not only endorsed by the AssessingOfficer while denying the relief. This error was corrected bythe CIT(A) and affirmed by the Tribunal. Hence no ground is madeout by the Revenue to interfere with the order passed by theTribunal. 9. In the result, the Appeal filed by the Revenue isdismissed, as no Substantial Question of Law arises forconsideration. No costs. Sd/-Assistant Registrar (CCC) //True Copy// sk Sub Assistant Registrar To 1.The Income Tax Appellate Tribunal, “C” Bench, Chennai. “C” Bench, Chennai. 2.The Commissioner of Income Tax (Appeals)-15, Chennai 600 034. Chennai 600 034. 3.The Assistant commissioner of Income Tax, Company circle VI (4), Chennai. Company circle VI (4), Chennai. +1cc to Mr.Subbaraya Aiyar, Advocate, S.R.No. 29833 T.C.A.No.466 of 2018 LN(CO)GN(15/10/2020)