INCOME TAX OFFICER-25.1.1, MUMBAI vs. J M FINANCIAL PROPERTY FUND II, MUMBAI
Facts
The assessee, a SEBI-registered venture capital fund, claimed exemption under Section 10(23FB) and Section 10(35) of the Income Tax Act on income from selling a compulsory convertible debenture and dividend income from mutual funds. The Assessing Officer denied this claim, alleging violation of SEBI regulations and trust deed provisions regarding investments.
Held
The Tribunal held that the assessee's investments in mutual funds and other temporary investments were within the ambit of its Trust Deed and SEBI (VCF) Regulations. The Tribunal followed its own previous decisions and the decision of a coordinate bench in similar cases, finding no violation. Therefore, the denial of exemption by the Assessing Officer was incorrect.
Key Issues
Whether the assessee, as a venture capital fund, is entitled to exemption under sections 10(23FB) and 10(35) for income earned from investments in mutual funds and sale of debentures, when the Assessing Officer alleged violations of SEBI regulations and the trust deed.
Sections Cited
10(23FB), 115U, 10(35), 10(34)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI BENCH “F” MUMBAI
Before: SHRI OM PRAKASH KANT & MS. KAVITHA RAJAGOPAL
PER OM PRAKASH KANT, AM
These appeals by the Revenue are directed against separate orders, both dated 09.02.2024, passed by the Ld. Commissioner of Income-tax (Appeals) – National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2016-17 and 2017-18 respectively.
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As identical issue in dispute are involved in both these As identical issue in dispute are involved in both these As identical issue in dispute are involved in both these appeals, therefore, same were heard together and disposed off by therefore, same were heard together and disposed off by therefore, same were heard together and disposed off by way of this consolidated order for convenience. The Revenue has way of this consolidated order for convenience. The Revenue has way of this consolidated order for convenience. The Revenue has raised identical grounds in both the assessment years and raised identical grounds in both the assessment years and raised identical grounds in both the assessment years and therefore, for the sake of brevity, the grounds raised by the Revenue therefore, for the sake of brevity, the grounds raised by the Revenu therefore, for the sake of brevity, the grounds raised by the Revenu in assessment year 2016 in assessment year 2016-17 are reproduced as under: 17 are reproduced as under:
"Whether on the facts and circumstances of the case and in law, the 1. "Whether on the facts and circumstances of the case and in law, the 1. "Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) erred in allowing the exemption u/s 10(23FB) of the I.T. Act, Ld.CIT(A) erred in allowing the exemption u/s 10(23FB) of the I.T. Act, Ld.CIT(A) erred in allowing the exemption u/s 10(23FB) of the I.T. Act, notwithstanding that the assessee has not only invested in notwithstanding that the assessee has not only invested in notwithstanding that the assessee has not only invested in portfolio investments, but also in mutual fund units, which are not mandated in investments, but also in mutual fund units, which are not mandated in investments, but also in mutual fund units, which are not mandated in the Trust deed and violates the basic objects of the trust deed?" the Trust deed and violates the basic objects of the trust deed?" the Trust deed and violates the basic objects of the trust deed?" 2. "Whether on the facts and. circumstances of the case and in law, the 2. "Whether on the facts and. circumstances of the case and in law, the 2. "Whether on the facts and. circumstances of the case and in law, the Ld.CIT(A) erred in allowing the exempt Ld.CIT(A) erred in allowing the exemption u/s 10(23FB) of the I.T. Act, ion u/s 10(23FB) of the I.T. Act, without appreciating that the investments made by the assessee in without appreciating that the investments made by the assessee in without appreciating that the investments made by the assessee in portfolio investment and in mutual fund units is in clear violation of portfolio investment and in mutual fund units is in clear violation of portfolio investment and in mutual fund units is in clear violation of Regulation 8(b) of the SEBI(VCF) Regulations, 1996?" Regulation 8(b) of the SEBI(VCF) Regulations, 1996?" 3. "Whether on the facts and cir 3. "Whether on the facts and circumstances of the case and in law, the cumstances of the case and in law, the Ld.CIT(A) erred in allowing the exemption u/s 10(23FB) of the I.T. Act, Ld.CIT(A) erred in allowing the exemption u/s 10(23FB) of the I.T. Act, Ld.CIT(A) erred in allowing the exemption u/s 10(23FB) of the I.T. Act, without appreciating that the assessee has invested in an associate without appreciating that the assessee has invested in an associate without appreciating that the assessee has invested in an associate company namely M/s JM Financial Mutual Fund, which is in clear company namely M/s JM Financial Mutual Fund, which is in clear company namely M/s JM Financial Mutual Fund, which is in clear violation of clause 12(c) of the SEBI(VCF) Regulations, 1996?" lause 12(c) of the SEBI(VCF) Regulations, 1996?" lause 12(c) of the SEBI(VCF) Regulations, 1996?" 4. "Whether on the facts and circumstances of the case and in law, the 4. "Whether on the facts and circumstances of the case and in law, the 4. "Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in allowing the exemption u/s 10(35) of the I.T.Act, Ld. CIT(A) erred in allowing the exemption u/s 10(35) of the I.T.Act, Ld. CIT(A) erred in allowing the exemption u/s 10(35) of the I.T.Act, without appreciating that the income of the assessee cannot be spl without appreciating that the income of the assessee cannot be spl without appreciating that the income of the assessee cannot be split taking the income partly for computation u/s 10(23FB) and taking out taking the income partly for computation u/s 10(23FB) and taking out taking the income partly for computation u/s 10(23FB) and taking out partly for computation/exemption u/s 10(35) of the Act, in effect allowing partly for computation/exemption u/s 10(35) of the Act, in effect allowing partly for computation/exemption u/s 10(35) of the Act, in effect allowing and granting two status for the same year?" and granting two status for the same year?" 3. The assessee is registered with the Security Exchange Board of The assessee is registered with the Security Exchange Board of The assessee is registered with the Security Exchange Board of India (SEBI) as venture capital fund (VCF). The assessee filed its India (SEBI) as venture capital fund (VCF). The assessee filed its India (SEBI) as venture capital fund (VCF). The assessee filed its return of income in the status of association of person the status of association of person the status of association of person(AOP). During the year under consideration, the assessee had sold compulsory the year under consideration, the assessee had sold compulsory the year under consideration, the assessee had sold compulsory convertible debenture held in the capital venture undertaking convertible debenture held in the capital venture undert convertible debenture held in the capital venture undert (CVU), the sale of which has resulted in short term capital gain of (CVU), the sale of which has resulted in short term capital gain of (CVU), the sale of which has resulted in short term capital gain of
J M Financial Property Fund II J M Financial Property Fund II 3 ITA Nos. 1628 & 1626/MUM/2024 ITA Nos. 1628 & 1626/MUM/2024
Rs.23,00,00,000/-. The assessee also earned interest income . The assessee also earned interest income . The assessee also earned interest income on debentures amounting to Rs.3,98,500/ amounting to Rs.3,98,500/- on its investment in VCU. on its investment in VCU. In view of investment in VCU exempt from tax in the hands of the In view of investment in VCU exempt from tax in the han In view of investment in VCU exempt from tax in the han VCF, the assessee claimed benefit of section assessee claimed benefit of section 10(23FB) r.w.s. 115U 10(23FB) r.w.s. 115U of the Act and filed returned income at Rs. filed returned income at Rs. Nil claiming Nil claiming income of Rs.23,03,98,500/- (23,00,00,000 + 3,98,500/ (23,00,00,000 + 3,98,500/-) as exempt u/s ) as exempt u/s 10(23FB) of the Act. In addition to the 10(23FB) of the Act. In addition to the income of Rs, 23,03,98,500/- , the assessee also received Rs.46,40,015/ assessee also received Rs.46,40,015/- on account of dividend on account of dividend from investment of Rs.2,16,62,805/- in mutual funds i.e. J.M. in mutual funds i.e. J.M. Money Manager Fund and J.M. High Liquidity Fund. The Assessing Money Manager Fund and J.M. High Liquidity Fund. The Assessing Money Manager Fund and J.M. High Liquidity Fund. The Assessing Officer relied on the assessment order in preceding assessment year Officer relied on the assessment order in preceding assessment year Officer relied on the assessment order in preceding assessment year i.e. AY 2015-16 wherein claim of exemption u/s 10(23FB) of the Act 16 wherein claim of exemption u/s 10(23FB) of the Act 16 wherein claim of exemption u/s 10(23FB) of the Act and section 10(35) of the Act was rejected due to violation of (35) of the Act was rejected due to violation of (35) of the Act was rejected due to violation of SEBI rules by way of investment in entities and instruments other than investment in entities and instruments other than investment in entities and instruments other than those prescribed under under regulations of VCF. The Ld. CIT(A) however, regulations of VCF. The Ld. CIT(A) however, following the finding of the Tribunal in earlier years allowed the following the finding of the Tribunal in earlier years allowed the following the finding of the Tribunal in earlier years allowed the claim of the assessee observing as under: aim of the assessee observing as under:
“6. I have duly considered the submissions of the appellant and material 6. I have duly considered the submissions of the appellant and material 6. I have duly considered the submissions of the appellant and material on record. Ground nos. 2, 4, 6, 7 and 10 are against denial of claim of on record. Ground nos. 2, 4, 6, 7 and 10 are against denial of claim of on record. Ground nos. 2, 4, 6, 7 and 10 are against denial of claim of exemption u/s 10(23FB) & 10(35) of the Act and denial status of the exemption u/s 10(23FB) & 10(35) of the Act and denial status of the exemption u/s 10(23FB) & 10(35) of the Act and denial status of the appellant as VCF are considered together. Perusal of the assessment order ellant as VCF are considered together. Perusal of the assessment order ellant as VCF are considered together. Perusal of the assessment order reveals that the AO kept entire thrust on the assessment order in the case reveals that the AO kept entire thrust on the assessment order in the case reveals that the AO kept entire thrust on the assessment order in the case of JM Financial India Fund of JM Financial India Fund - Scheme B for the A.Y. 2015-16 in denying the 16 in denying the claim of exemption u/s 10(23FB) and claim of exemption u/s 10(23FB) and 10(35) in the case of the appellant. It 10(35) in the case of the appellant. It has been submitted by the appellant, jurisdictional ITAT, i.e. Hon'ble ITAT, has been submitted by the appellant, jurisdictional ITAT, i.e. Hon'ble ITAT, has been submitted by the appellant, jurisdictional ITAT, i.e. Hon'ble ITAT, Mumbai in ITA No. 277/Mum/2019 in the case of JM Financial India Fund Mumbai in ITA No. 277/Mum/2019 in the case of JM Financial India Fund Mumbai in ITA No. 277/Mum/2019 in the case of JM Financial India Fund - Scheme B Vs ITO for the A.Y. 2015 Scheme B Vs ITO for the A.Y. 2015-16 passed an order on 20.08.2019 16 passed an order on 20.08.2019 wherein entirely same issues of denial the claim of exemption u/s wherein entirely same issues of denial the claim of exemption u/s wherein entirely same issues of denial the claim of exemption u/s 10(23FB), 10(34) and 10(35) were involved has been decided in favour of 10(23FB), 10(34) and 10(35) were involved has been decided in favour of 10(23FB), 10(34) and 10(35) were involved has been decided in favour of JM Financial India Fund JM Financial India Fund - Scheme B. The decision the jurisdictional ITAT is Scheme B. The decision the jurisdictional ITAT is on the case on the basis of which the AO p on the case on the basis of which the AO passed the order in the case of assed the order in the case of the same issues. the same issues. The decisions of the jurisdictional ITAT is binding on the The decisions of the jurisdictional ITAT is binding on the
J M Financial Property Fund II J M Financial Property Fund II 4 ITA Nos. 1628 & 1626/MUM/2024 ITA Nos. 1628 & 1626/MUM/2024
lower authorities and they have to follow the same in view of binding force lower authorities and they have to follow the same in view of binding force lower authorities and they have to follow the same in view of binding force of judicial precedence as enunciated by the Hon'ble Supreme Court in the of judicial precedence as enunciated by the Hon'ble Supreme Court in the of judicial precedence as enunciated by the Hon'ble Supreme Court in the case of UOl and others Vs. Kamlakshi Finance Corporation Ltd (AIR 1992 case of UOl and others Vs. Kamlakshi Finance Corporation Ltd (AIR 1992 case of UOl and others Vs. Kamlakshi Finance Corporation Ltd (AIR 1992 SUPREME COURT 711) wherein it has been held that the principles of SUPREME COURT 711) wherein it has been held that the principles of SUPREME COURT 711) wherein it has been held that the principles of judicial discipline require that the orders of the highest appellate authority judicial discipline require that the orders of the highest appellate authority judicial discipline require that the orders of the highest appellate authority should be followed unreservedly by the should be followed unreservedly by the subordinate authorities. Relevant subordinate authorities. Relevant extract of the order is under extract of the order is under - "8. We have dealt with this aspect at some length, because it has "8. We have dealt with this aspect at some length, because it has "8. We have dealt with this aspect at some length, because it has been suggested by the learned Additional Solicitor General that the been suggested by the learned Additional Solicitor General that the been suggested by the learned Additional Solicitor General that the observations made by the High Court, have been harsh on observations made by the High Court, have been harsh on observations made by the High Court, have been harsh on the officers. It is clear that the observations of the High Court, officers. It is clear that the observations of the High Court, officers. It is clear that the observations of the High Court, seemingly vehement, and apparently unpalatable to the Revenue, seemingly vehement, and apparently unpalatable to the Revenue, seemingly vehement, and apparently unpalatable to the Revenue, are only intended to curb a tendency in revenue matters which, if are only intended to curb a tendency in revenue matters which, if are only intended to curb a tendency in revenue matters which, if allowed to become widespread, could result in considerable allowed to become widespread, could result in considerable allowed to become widespread, could result in considerable harassment to the assesses arassment to the assesses-public without any benefit to the public without any benefit to the Revenue. We Revenue. We would like to say that the department should take would like to say that the department should take these observations in the proper spirit. The observations of the High these observations in the proper spirit. The observations of the High these observations in the proper spirit. The observations of the High Court should be kept in mind in future and the utmost regard Court should be kept in mind in future and the utmost regard Court should be kept in mind in future and the utmost regard should be paid by the adjudicating authorities and the appellate uld be paid by the adjudicating authorities and the appellate uld be paid by the adjudicating authorities and the appellate authorities to the requirements of judicial discipline and the need authorities to the requirements of judicial discipline and the need authorities to the requirements of judicial discipline and the need for giving effect to the orders of the higher appellate authorities for giving effect to the orders of the higher appellate authorities for giving effect to the orders of the higher appellate authorities which are binding on them." which are binding on them." The jurisdictional ITAT in the The jurisdictional ITAT in the case of JM Financial India Fund case of JM Financial India Fund - Scheme B (Supra) has allowed the claim of exemption u/ss 10(23FB)(, 10(34) and (Supra) has allowed the claim of exemption u/ss 10(23FB)(, 10(34) and (Supra) has allowed the claim of exemption u/ss 10(23FB)(, 10(34) and 10(35) of the Act. 10(35) of the Act. The facts of that case and the case of the appellant are The facts of that case and the case of the appellant are exactly the same. The issues involved in both the cases are also s exactly the same. The issues involved in both the cases are also s exactly the same. The issues involved in both the cases are also same. Therefore, respectfully following the judgement of the jurisdictional ITAT in Therefore, respectfully following the judgement of the jurisdictional ITAT in Therefore, respectfully following the judgement of the jurisdictional ITAT in the case of JM Financial India Fund the case of JM Financial India Fund - Scheme B (Supra), all the ground Scheme B (Supra), all the ground raised in this appeal are decided in favour of the appellant. raised in this appeal are decided in favour of the appellant. Therefore, both the addition i.e additio the addition i.e addition of Rs.23,03,98,500/- denying the claim of denying the claim of exemption u/s 10(23FB) of the Act and addition of Rs.46,10,015/ exemption u/s 10(23FB) of the Act and addition of Rs.46,10,015/ exemption u/s 10(23FB) of the Act and addition of Rs.46,10,015/- denying the claim of exemption u/s 10(35) of the Act are deleted. Accordingly, the claim of exemption u/s 10(35) of the Act are deleted. Accordingly, the claim of exemption u/s 10(35) of the Act are deleted. Accordingly, ground nos. 2, 4, 6, 7 and 10 are allowed. ground nos. 2, 4, 6, 7 and 10 are allowed.” 4. We have heard rival s We have heard rival submissions of the parties and perused ubmissions of the parties and perused the relevant material on record. We find that the assessee J.M. the relevant material on record. We find that the assessee J.M. the relevant material on record. We find that the assessee J.M. Financial Co-operation Fund operation Fund-II is a scheme of JM Investment a scheme of JM Investment Property Fund (Fund). The Fund was established Property Fund (Fund). The Fund was established in 1982 by way of trust deed dated 22.09.2006 trust deed dated 22.09.2006 and was registered with the SEBI as registered with the SEBI as venture capital fund under the SEBI (Venture Capital Funds) venture capital fund under the SEBI (Venture Capital Funds) venture capital fund under the SEBI (Venture Capital Funds) Regulation, 1996. The assessee was granted a certification of Regulation, 1996. The assessee was granted a certification Regulation, 1996. The assessee was granted a certification registration vide registration No. IN/VCF/06 registration vide registration No. IN/VCF/06-07/094 as venture 07/094 as venture
J M Financial Property Fund II J M Financial Property Fund II 5 ITA Nos. 1628 & 1626/MUM/2024 ITA Nos. 1628 & 1626/MUM/2024
capital fund by SEBI. The Assessing capital fund by SEBI. The Assessing Officer denied the claim of Officer denied the claim of income earned from investment in VCU which is eligible for income earned from investment in VCU which is eligible for income earned from investment in VCU which is eligible for exemption in the hands of the assessee u/s 10(23FB) of the Act exemption in the hands of the assessee u/s 10(23FB) of the Act exemption in the hands of the assessee u/s 10(23FB) of the Act r.w.s. 115U of the Act being a passed through entity. The Assessing r.w.s. 115U of the Act being a passed through entity. The Assessing r.w.s. 115U of the Act being a passed through entity. The Assessing Officer also denied benefit of exempte Officer also denied benefit of exempted dividend income of d dividend income of Rs.22,15,375/- earned on investment in mutual funds. We find that earned on investment in mutual funds. We find that earned on investment in mutual funds. We find that the Ld. CIT(A) has followed binding precedent in the case of the the Ld. CIT(A) has followed binding precedent in the case of the the Ld. CIT(A) has followed binding precedent in the case of the assessee itself. Further, we note that assessee itself. Further, we note that Coordinate bench of Coordinate bench of Tribunal in ITA No. 7472/Mum/2017 in ITA No. 7472/Mum/2017 in the case of M/s HDFC Property of M/s HDFC Property Fund has observed that the investment in portfolio for mutual has observed that the investment in portfolio for mutual has observed that the investment in portfolio for mutual funds was mandated as per the object of the trust and therefore, funds was mandated as per the object of the trust and therefore, funds was mandated as per the object of the trust and therefore, being not in violation of the object of the trust and t ion of the object of the trust and t ion of the object of the trust and temporarily investment made in the unit of the mutual investment made in the unit of the mutual fund was within the fund was within the ambit of the assessee trust deed. ambit of the assessee trust deed. Similarly, regarding the violation Similarly, regarding the violation of the Regulation of the SEBI (VCF Regulation, 1996) also the Ld. of the Regulation of the SEBI (VCF Regulation, 1996) al of the Regulation of the SEBI (VCF Regulation, 1996) al Assessing Officer had Assessing Officer had not pointed out any adverse observation not pointed out any adverse observation made by the SEBI, therefore deleted th , therefore deleted the disallowance for deduction e disallowance for deduction u/s 10(23FB) of the Act u/s 10(23FB) of the Act. The Tribunal in the said case accordingly The Tribunal in the said case accordingly found the temporary investment made in the units of the mutual found the temporary investment made in the units of the mutual found the temporary investment made in the units of the mutual fund within the ambit of the trust deed and also in the unit of VCF. fund within the ambit of the trust deed and also in the unit of VCF. fund within the ambit of the trust deed and also in the unit of VCF. The relevant finding of the The relevant finding of the Tribunal is reproduced as under : Tribunal is reproduced as under :
“12. We have carefully considered the rival submissions. Ostensibly, as our 12. We have carefully considered the rival submissions. Ostensibly, as our 12. We have carefully considered the rival submissions. Ostensibly, as our discussion in the earlier paras show, the sum and substance of the stand of discussion in the earlier paras show, the sum and substance of the stand of discussion in the earlier paras show, the sum and substance of the stand of Assessing Officer revolves around the manner in which assessee has made Assessing Officer revolves around the manner in which assessee has made Assessing Officer revolves around the manner in which assessee has made certain investments; firstly, in certain investments; firstly, in the units of Mutual funds; and, secondly, the units of Mutual funds; and, secondly, towards Debenture application monies. The first objection of the Assessing towards Debenture application monies. The first objection of the Assessing towards Debenture application monies. The first objection of the Assessing Officer is that such investments are not permitted in terms of the Trust Deed Officer is that such investments are not permitted in terms of the Trust Deed Officer is that such investments are not permitted in terms of the Trust Deed itself. In this context, we find that the appellant has been itself. In this context, we find that the appellant has been itself. In this context, we find that the appellant has been constituted in
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terms of the Trust Deed dated 06.11.2004 settled by Housing Development terms of the Trust Deed dated 06.11.2004 settled by Housing Development terms of the Trust Deed dated 06.11.2004 settled by Housing Development Finance Corporation Ltd. It has been constituted to pool together resources, Finance Corporation Ltd. It has been constituted to pool together resources, Finance Corporation Ltd. It has been constituted to pool together resources, both institutional and other investors, for making investment in high growth both institutional and other investors, for making investment in high growth both institutional and other investors, for making investment in high growth sectors including real estate sector in India. The objects of the Trust are sectors including real estate sector in India. The objects of the Trust are ng real estate sector in India. The objects of the Trust are contained in clause 6, a copy of which is placed in the Paper Book. Though contained in clause 6, a copy of which is placed in the Paper Book. Though contained in clause 6, a copy of which is placed in the Paper Book. Though we are not reproducing the contents of we are not reproducing the contents of the Trust Deed, its perusal shows the Trust Deed, its perusal shows that the investments by the appellant are requi that the investments by the appellant are required to be made in compliance red to be made in compliance with the requirements of VCF Regulations of SEBI. In terms of clause 4.1.27, with the requirements of VCF Regulations of SEBI. In terms of clause 4.1.27, with the requirements of VCF Regulations of SEBI. In terms of clause 4.1.27, the Trust Deed also envisages temporary investments which have been the Trust Deed also envisages temporary investments which have been the Trust Deed also envisages temporary investments which have been defined to mean, interalia, money market instruments, units of money defined to mean, interalia, money market instruments, units of money defined to mean, interalia, money market instruments, units of money market liquid mutual funds or other similar debt instruments. The said mutual funds or other similar debt instruments. The said clause also brings out that the temporary investments are also to be clause also brings out that the temporary investments are also to be clause also brings out that the temporary investments are also to be understood as referring to short term securities issued on guarantee by the understood as referring to short term securities issued on guarantee by the understood as referring to short term securities issued on guarantee by the Indian Government, or its agencies or instrumentaltie Indian Government, or its agencies or instrumentalties, overnight and short s, overnight and short term instruments, likebank deposits, etc. Though we are presently term instruments, likebank deposits, etc. Though we are presently term instruments, likebank deposits, etc. Though we are presently concerned with investments made in liquid mutual fund schemes, we are concerned with investments made in liquid mutual fund schemes, we are concerned with investments made in liquid mutual fund schemes, we are enumerating the other aspects of the expression „temporary investments enumerating the other aspects of the expression „temporary investments enumerating the other aspects of the expression „temporary investments‟ stated in the Trust Deed stated in the Trust Deed only to bring out that the Trust is entitled to make only to bring out that the Trust is entitled to make such-like investments of its available funds, awaiting regular investment in like investments of its available funds, awaiting regular investment in like investments of its available funds, awaiting regular investment in the stated purposes. In fact, clause 11.1 of the Trust Deed dealing with the stated purposes. In fact, clause 11.1 of the Trust Deed dealing with the stated purposes. In fact, clause 11.1 of the Trust Deed dealing with „Investment of Trust fund „Investment of Trust fund‟ specifically prescribes that the trust may invest at the trust may invest the available contributions awaiting investment or realised funds awaiting the available contributions awaiting investment or realised funds awaiting the available contributions awaiting investment or realised funds awaiting distribution in temporary investments. The aforesaid clearly brings out that distribution in temporary investments. The aforesaid clearly brings out that distribution in temporary investments. The aforesaid clearly brings out that the appellant is empowered by its Trust Deed to make temporary the appellant is empowered by its Trust Deed to make temporary the appellant is empowered by its Trust Deed to make temporary investments which investments which, inter-alia, would include within its purview the alia, would include within its purview the investments in question. Apart therefrom, we find enough potency in the investments in question. Apart therefrom, we find enough potency in the investments in question. Apart therefrom, we find enough potency in the pleadings of the appellant that there is an industry and trade practice pleadings of the appellant that there is an industry and trade practice pleadings of the appellant that there is an industry and trade practice whereby Venture Capital Funds retain certain amounts with the whereby Venture Capital Funds retain certain amounts with the whereby Venture Capital Funds retain certain amounts with them, pending regular investments in Venture Capital Undertakings for certain purposes, regular investments in Venture Capital Undertakings for certain purposes, regular investments in Venture Capital Undertakings for certain purposes, like disbursement of expenses, distribution to unit like disbursement of expenses, distribution to unit-holders, etc. Till such time holders, etc. Till such time the funds are not utilised for the main purposes, advisably the Venture the funds are not utilised for the main purposes, advisably the Venture the funds are not utilised for the main purposes, advisably the Venture Capital Fund would Capital Fund would make temporary investments to earn monies. The make temporary investments to earn monies. The course adopted by the assessee in this regard was by investing in units of course adopted by the assessee in this regard was by investing in units of course adopted by the assessee in this regard was by investing in units of mutual funds or even by way of fixed deposits with banks. Insofar as the mutual funds or even by way of fixed deposits with banks. Insofar as the mutual funds or even by way of fixed deposits with banks. Insofar as the objection of the Assessing Officer regarding non objection of the Assessing Officer regarding non-compliance compliance with the VCF Regulations of SEBI is concerned, here also we do not find any support for Regulations of SEBI is concerned, here also we do not find any support for Regulations of SEBI is concerned, here also we do not find any support for the stand taken by the Assessing Officer. In fact, our attention was drawn the stand taken by the Assessing Officer. In fact, our attention was drawn the stand taken by the Assessing Officer. In fact, our attention was drawn to SEBI (Informal Guidance) Scheme, 2003 issued by SEBI with regard to to SEBI (Informal Guidance) Scheme, 2003 issued by SEBI with regard to to SEBI (Informal Guidance) Scheme, 2003 issued by SEBI with regard to VCF Regulations where VCF Regulations where the temporary deployment of funds by a Venture the temporary deployment of funds by a Venture Capital Fund in liquid mutual funds or bank deposits or other liquid assets Capital Fund in liquid mutual funds or bank deposits or other liquid assets Capital Fund in liquid mutual funds or bank deposits or other liquid assets of high quality such as treasury bills, etc. were permissible. Moreover, we of high quality such as treasury bills, etc. were permissible. Moreover, we of high quality such as treasury bills, etc. were permissible. Moreover, we cannot lose sight of the fact that the Certificate of Reg cannot lose sight of the fact that the Certificate of Registration as a Venture istration as a Venture Capital Fund issued by SEBI continues to subsist during the period under Capital Fund issued by SEBI continues to subsist during the period under Capital Fund issued by SEBI continues to subsist during the period under consideration, which clearly belies the assertion of the Assessing Officer consideration, which clearly belies the assertion of the Assessing Officer consideration, which clearly belies the assertion of the Assessing Officer that there has been a violation of VCF Regulations of SEBI. Thus, on an that there has been a violation of VCF Regulations of SEBI. Thus, on an that there has been a violation of VCF Regulations of SEBI. Thus, on an overall analysis of the situation, we find that the temporary investment sis of the situation, we find that the temporary investment sis of the situation, we find that the temporary investment made in the units of mutual funds is within the ambit of appellant made in the units of mutual funds is within the ambit of appellant made in the units of mutual funds is within the ambit of appellant’s Trust Deed and also within the ambit of VCF Regulations of SEBI. Deed and also within the ambit of VCF Regulations of SEBI.” ”
J M Financial Property Fund II J M Financial Property Fund II 7 ITA Nos. 1628 & 1626/MUM/2024 ITA Nos. 1628 & 1626/MUM/2024
4.1 In view of the above, respectfully following the finding In view of the above, respectfully following the finding In view of the above, respectfully following the finding of the Tribunal in the case of the assessee in earlier as well as finding of Tribunal in the case of the assessee in earlier as well as finding of Tribunal in the case of the assessee in earlier as well as finding of the Tribunal in the case of HDFC Property Fund the Tribunal in the case of HDFC Property Fund (supra), (supra), we uphold the finding of the Ld. CIT(A) on the issue in dispute, therefore, the the finding of the Ld. CIT(A) on the issue in dispute the finding of the Ld. CIT(A) on the issue in dispute grounds raised by the Revenue are grounds raised by the Revenue are accordingly dismissed. The facts dismissed. The facts and circumstances and grounds raised in the assessment year and circumstances and grounds raised in the assessment year and circumstances and grounds raised in the assessment year 2017-18 being identical to assessment year 2016 18 being identical to assessment year 2016-1 17, the grounds raised in assessment year 2017 raised in assessment year 2017-18 are also dismissed. also dismissed.
In the result, both the appeals of the Revenue are In the result, both the appeals of the Revenue are In the result, both the appeals of the Revenue are dismissed.
Order pronounced in the open Court on nounced in the open Court on 31/07/2024. /07/2024. Sd/- - Sd/- (KAVITHA RAJAGOPAL) (KAVITHA RAJAGOPAL (OM PRAKASH KANT OM PRAKASH KANT) JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 31/07/2024 Rahul Sharma, Sr. P.S. Copy of the Order forwarded to Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. BY ORDER, BY ORDER, //True Copy// (Assistant Registrar) (Assistant Registrar) ITAT, Mumbai ITAT, Mumbai
