ADITYA BIRLA PRIVATE EQUITY TRUST ,MUMBAI vs. NATIONAL FACELESS ASSESSMENT CENTRE, DELHI (INCOME TAX OFFICER 20(1)(1), MUMBAI), MUMBAI

ITA 91/MUM/2024Status: DisposedITAT Mumbai29 February 2024AY 2016-1731 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal quashed the reassessment proceedings as bad in law ab initio. The Tribunal observed that the original assessment was completed under Section 143(3) after verification of exemptions claimed under Section 10. The reassessment was initiated to verify the same issues, and the AO was aware of the coordinate bench decision in favour of the assessee for AY 2017-18. The AO's stated reason for reopening was to 'keep the matter alive', which the Tribunal found to be an abuse of power and a clear change of opinion, demonstrating an unwillingness to accept the decision of a higher body. Therefore, the ground raised by the assessee regarding the reassessment being bad in law was allowed. Consequently, the appeal filed by the assessee was allowed. The Tribunal did not explicitly decide on the merits of the denial of exemptions under Sections 10(23FB), 10(34), and 10(35), or the issue of double taxation, as the entire reassessment proceedings were quashed.

What were the facts?

The assessee, Aditya Birla Private Equity Trust, a Venture Capital Fund registered with SEBI, filed its return for AY 2016-17 declaring NIL income after claiming exemptions of ₹47,76,75,319/- under Sections 10(35), 10(34), and 10(23FB) of the Income Tax Act, 1961. The original assessment under Section 143(3) was completed accepting the returned income. Subsequently, the case was reopened under Section 148 on 31.03.2021. The Assessing Officer (AO) disallowed the exemptions, citing violations of SEBI VCF Regulations 8(b) and 12(c) by investing in mutual funds and associate companies, and also that the investments were not permitted by the trust deed. The CIT(A) upheld the AO's action. The assessee appealed to the ITAT, arguing that an identical issue for AY 2017-18 was decided in its favour by a coordinate bench.

What were the issues?

1. Whether the reassessment proceedings initiated under Section 147 of the Act are bad in law, considering the AO's prior assessment and the fact that the reopening was primarily to keep the issue alive despite a coordinate bench decision in favour of the assessee for AY 2017-18? (Question of law and fact, concerning Section 147). 2. Whether the denial of exemption under Section 10(23FB) of the Act is justified on the alleged grounds of violation of the Trust Deed and SEBI VCF Regulations, especially when the AO has no power to determine such violations and the issue was decided in favour of the assessee for AY 2017-18? (Question of law, concerning Section 10(23FB)). 3. Whether the income received from a Venture Capital Undertaking (VCU) can be taxed twice in the hands of the assessee when Form 64 has been issued to investors, making the income taxable in their hands as per Section 115U(2)? (Question of law, concerning Section 10(23FB) read with Section 115U). 4. Whether the denial of exemption under Sections 10(34) and 10(35) of the Act is justified on the ground that the assessee, being a VCF, is a status 'beyond a person' as defined under Section 2(31)? (Question of law, concerning Sections 10(34) and 10(35)). Assessee's contentions: The reassessment is bad in law as it's a change of opinion and an abuse of power, especially when a coordinate bench ruled in its favour for AY 2017-18. The AO cannot determine violations of SEBI regulations; only SEBI can. Investments in mutual funds are not violations of Regulation 12(c) as mutual funds are not 'companies' and issue 'units', not 'equity shares'. SEBI's interpretative letter permits deployment in liquid mutual funds. The AO's previous order for AY 2017-18, which was before the Tribunal, did not find violations. The income from VCU is not taxable twice due to the pass-through status under Section 10(23FB) read with Section 115U. The assessee is eligible for exemptions under Sections 10(34) and 10(35). Revenue's contentions: The Ld. DR relied on the orders of the lower authorities.

Which sections of the Income-tax Act were involved?

Section 10(35),Section 10(34),Section 10(23FB),Section 139(1),Section 143(3),Section 147,Section 148,Section 115U,Section 2(31),Section 234A,Section 234B

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCH “A”, MUMBAI

Before: SHRI NARENDRA KUMAR CHOUDHRY, HONBLEAND

For Appellant: Shri Yogesh Thar, Ms. Sukanya Jayaram &, Shri Urvish Shah
For Respondent: Shri Ajay Chandra
Pronounced: 29.02.2024

PER S. RIFAUR RAHMAN (AM)

1.

This appeal is filed by the assessee against order of Learned

Commissioner of Income-Tax (Appeals),

National Faceless Appeal

Centre, Delhi [hereinafter in short “Ld. CIT(A)”] dated 28.11.2023 for the A.Y.2016-17. Aditya Birla Private Equity Trust

2.

Brief facts of the case are, Assessee is a trust established under the Indian Trust Act, 1882 on 03.12.2008. Further, Assessee is also registered as a Venture Capi

The order continues below.

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