The Chandigarh bench of the Income Tax Appellate Tribunal ( ITAT ) remanded the revision order for the re-examination of qualification as venture capital as there was no finding by the Commissioner of Income Tax (Appeals) [CIT(A)] against the claim of the assessee under Section 56(2)(viib) of the Income Tax Act, 1961.
In this case, the assessee, Authorgen Technologies Pvt. Ltd., had filed 2 appeals against the order passed by the Principal Commissioner of Income Tax (Pr. CIT) under Section 263 of the Income Tax Act, 1961, with reference to the Assessment Year 2015-16. The second appeal has been filed against the order passed by the Commissioner of Income Tax (Appeals), which dismissed the appeal filed by the assessee in respect of set aside proceedings.
Understanding Common Mode of Tax Evasion with Practical Scenarios, Click Here
Both the above-mentioned appeals were heard together by the ITAT bench and were disposed of by a consolidated order.
It was submitted by the assessee that the assessee’s appeal against the order passed by the Pr. CIT under Section 263, dated 23/03/2021, was delayed by 44 days, and the appeal was filed on 05/07/2021. The delay was due to the second wave of COVID-19 and the nationwide lockdown, which affected the timely filing. The assessee relied on the decision of the Supreme Court with respect to the extension of the limitation period and requested that the delay be condoned and the appeal be heard on its merits.
The Pr. CIT held that the Assessing Officer (AO) just accepted the assessee’s claim that Section 56(2)(viib) of the Income Tax Act, 1961, did not apply to them and did not conduct any further inquiries. It further held that as the assessee company is an education service provider and from the plain language of Section 56(2)(viib) of the Income Tax Act, 1961, indicates that the firm receiving the premium must likewise be a venture capital undertaking, but the assessee company is not.
The counsel on behalf of the assessee submitted that the AO had no reason to question the assessee’s explanation regarding the non-applicability of section 56(2)(viib) of the Income Tax Act, as this provision applies only to residents. In this case, Kaizen Domestic Scheme, being a venture capital fund, falls under the exclusion per the proviso to Section 56(2)(viib) of the Income Tax Act and does not apply to non-resident investors.
The ITAT bench disagreed with the AO’s claim that the assessee raised a new ground of appeal. From the original assessment, the assessee consistently argued that section 56(2)(viib) doesn’t apply to amounts received from Venture Capitalists.
The bench was of the opinion that the assessee must qualify as a venture capital undertaking and that relevant documentation was presented for the first time to the CIT(A), not to the AO, during set-aside proceedings.
Understanding Common Mode of Tax Evasion with Practical Scenarios, Click Here
Since there is no finding from either the AO or CIT(A) on this, the ITAT bench remanded the matter to the AO for verification of the assessee’s claim under section 56(2)(viib), ensuring due process.
The ITAT bench, comprising Mr. Vikram Singh Yadav and Mr.Aakash Deep Jain, allowed the appeal of the assessee for statistical purposes.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
