The Commissioner (Appeals) has directed the Assessing Officer to allow my fund's section 10(23FB) exemption only if it proves it is not an investment fund under Explanation 1 to section 115UB, without ever hearing us. Has anyone decided whether a SEBI venture capital fund registered under the 1996 Regulations is inside section 115UB?
Not in this order, and that is the point to take from it. The Mumbai Tribunal set the Commissioner (Appeals)' order aside and restored the appeal for de novo adjudication because a request for a personal hearing through video conferencing had been made and not granted, which clause 12 of the Faceless Appeal Scheme, 2021 does not permit — the Commissioner (Appeals) "shall allow such request". Having remitted on that ground the Tribunal expressly held that the assessee's other grievances did not call for adjudication at that stage. So the substantive question — whether a fund holding a certificate under the SEBI (Venture Capital Funds) Regulations, 1996 that has not migrated to the SEBI (Alternative Investment Funds) Regulations, 2012 is an "investment fund" within clause (a) of Explanation 1 to section 115UB, and so loses section 10(23FB) by the proviso inserted with effect from 1 April 2016 — remains undecided.
Decided by the ITAT (Shri Om Prakash Kant (Accountant Member) and Shri Sandeep Singh Karhail (Judicial Member), Income Tax Appellate Tribunal, "E" Bench, Mumbai) on 2025-11-27, reported as ITA No. 3752/MUM/2025, Assessment Year 2020-21 (ITAT Mumbai); order pronounced 27 November 2025. It bears on section 10(23FB), section 115U, section 115UB, section 10(35), section 154, section 143(1), section 250, section 234C, section 139(5) of the Income Tax Act 1961, in Faceless Assessment & Appeals, Appeals and Capital Gains Exemptions matters.
This is the cleanest available record of a dispute that a great many older funds are going to face, and it shows exactly how the two vocabularies come apart. The fund's registration was as a Venture Capital Fund under the SEBI (Venture Capital Funds) Regulations, 1996, and on the assessee's own pleading it was a close-ended domestic fund whose certificate was granted on 27 July 2011 — that is, before 21 May 2012. The Commissioner (Appeals) did not decide whether it was an investment fund under Explanation 1 to section 115UB; he directed the Assessing Officer to allow section 10(23FB) only if the fund proved it was not, which puts the burden on the fund and leaves it with an unappealable direction rather than a finding. On the assessee's pleading, the Assessing Officer, giving effect to that order, went further and relied on a SEBI circular of 19 August 2024 and on an amendment to the AIF Regulations notified on 20 July 2024 permitting 1996-Regulations funds to migrate, to hold that the 1996 Regulations had been replaced altogether. The fund's answer, recorded in its grounds, was that migration is permissive and not mandatory, and that in any event the 2024 amendment cannot govern the assessment year 2020-21. None of that has been adjudicated. Two practical warnings follow. First, do not cite this order for the proposition that a 1996-Regulations fund is outside section 115UB, or inside it: the Tribunal decided nothing about it. Second, the procedural ground on which the appeal actually succeeded is worth having in its own right — where a request for personal hearing is made in writing before the National Faceless Appeal Centre and not granted, clause 12(3) of the Faceless Appeal Scheme, 2021 says the concerned Commissioner (Appeals) shall allow it, and the resulting order is liable to be set aside for de novo adjudication.
Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere.
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The assessee is a fund registered with SEBI as a Venture Capital Fund under the SEBI (Venture Capital Funds) Regulations, 1996 — that much the Tribunal records as a finding at paragraph 3. The remaining details of its status come from the grounds of appeal reproduced at paragraph 2 and are the assessee's own assertions, not findings: that the certificate was granted on 27 July 2011, that it is a close-ended Domestic Venture Capital Fund, and that it is validly set up as an irrevocable and determinate trust under the Indian Trusts Act, 1882 by way of a trust deed. For the assessment year 2020-21 it filed a return on 14 December 2020 claiming dividend on mutual fund units exempt under section 10(35) and its venture capital income exempt under section 10(23FB). In Schedule BP it correctly showed dividend of Rs.10,08,399 as exempt under section 10(35) and profit of Rs.1,55,51,062 as exempt under section 10(23FB), but in Schedule EI it reported only the dividend, omitting the section 10(23FB) figure; a revised return filed the next day repeated the error, reporting exempt income of Rs.1,35,16,769 instead of Rs.1,65,59,461. The revised return was processed on 26 December 2021 computing total income at Rs.30,42,690 against nil returned — the difference between the two exempt-income figures. A rectification application under section 154 produced an order dated 23 December 2022 which denied the whole exemption of Rs.1,65,59,460 and added it. The Commissioner (Appeals) held that section 10(35) was not available for the year and that section 10(23FB) would cease to be operational from the assessment year 2016-17 if the fund were an investment fund specified in clause (a) of Explanation 1 to section 115UB, and — the fund not having stated categorically whether it fell in that category — directed the Assessing Officer to allow the exemption only if it were proved that the fund was not in that category, after due opportunity. The assessee had requested a personal hearing through video conferencing before the Commissioner (Appeals) in writing; none was granted. The assessee's grounds 4.2 to 4.5, reproduced at paragraph 2, assert that the order giving effect dated 24 April 2025 relied on SEBI Circular No. SEBI/HO/AFD/AFD-POD-1/P/CIR/2024/111 dated 19 August 2024 and on an amendment to the AIF Regulations notified on 20 July 2024 to hold that the 1996 Regulations had been replaced and that registration under the AIF Regulations was mandatory. Neither that order nor the circular was before this Tribunal for decision, and nothing in the order is a finding about either; the account here is the appellant's, taken from its pleading.
The appeal was allowed for statistical purposes. The Tribunal held that it was evident from the record that the assessee had requested a personal hearing before the Commissioner (Appeals) through the National Faceless Appeal Centre and had not been granted one, and that under clause 12 of the Faceless Appeal Scheme, 2021 the concerned Commissioner (Appeals) shall allow such a request and communicate the date and time of hearing. It set aside the impugned order and restored the appeal to the Commissioner (Appeals) for de novo adjudication after granting the assessee an opportunity of personal hearing, with liberty to the assessee to make a fresh request under clause 12 (para 7). Because the matter was being restored, the Tribunal held expressly that the other grievances raised in the appeal did not call for adjudication at that stage — so the section 10(23FB) and section 115UB question, the section 10(35) question and the section 234C question were all left undecided. On the assessee's request, and noting that it had exited all its investments and had informed SEBI of the winding up, the Tribunal directed the Commissioner (Appeals) to decide the appeal as expeditiously as possible and preferably within six months (para 8).
The Tribunal set out clause 12 of the Faceless Appeal Scheme, 2021, framed under sub-sections (6B) and (6C) of section 250, which provides that the appellant or his authorised representative may request a personal hearing so as to make oral submissions and that the concerned Commissioner (Appeals) shall allow the request and communicate the date and time through the National Faceless Appeal Centre, such hearing to be conducted through video conferencing to the extent technologically feasible (para 6). It then found on the record that the request had been made and not granted, and that the Commissioner (Appeals) had rejected the assessee's plea 'in the absence of requisite information' — that is, without hearing the assessee on the very information he found missing (paras 5 and 7). That was enough to set the order aside, and the Tribunal declined to go further into the merits.
As, it is evident from the record that the assessee, though made the request to the learned CIT(A) for grant of opportunity for personal hearing through the National Faceless Appeal Centre, the same was not granted to the assessee.
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Handle my notice → Ask a CA on WhatsAppNot in this order, and that is the point to take from it. The Mumbai Tribunal set the Commissioner (Appeals)' order aside and restored the appeal for de novo adjudication because a request for a personal hearing through video conferencing had been made and not granted, which clause 12 of the Faceless Appeal Scheme, 2021 does not permit — the Commissioner (Appeals) "shall allow such request". Having remitted on that ground the Tribunal expressly held that the assessee's other grievances did not call for adjudication at that stage. So the substantive question — whether a fund holding a certificate under the SEBI (Venture Capital Funds) Regulations, 1996 that has not migrated to the SEBI (Alternative Investment Funds) Regulations, 2012 is an "investment fund" within clause (a) of Explanation 1 to section 115UB, and so loses section 10(23FB) by the proviso inserted with effect from 1 April 2016 — remains undecided. This was decided by the ITAT (Shri Om Prakash Kant (Accountant Member) and Shri Sandeep Singh Karhail (Judicial Member), Income Tax Appellate Tribunal, "E" Bench, Mumbai) and bears on section 10(23FB), section 115U, section 115UB, section 10(35), section 154, section 143(1), section 250, section 234C, section 139(5) of the Income Tax Act 1961. It is reported as ITA No. 3752/MUM/2025, Assessment Year 2020-21 (ITAT Mumbai); order pronounced 27 November 2025. This is the cleanest available record of a dispute that a great many older funds are going to face, and it shows exactly how the two vocabularies come apart. The fund's registration was as a Venture Capital Fund under the SEBI (Venture Capital Funds) Regulations, 1996, and on the assessee's own pleading it was a close-ended domestic fund whose certificate was granted on 27 July 2011 — that is, before 21 May 2012. The Commissioner (Appeals) did not decide whether it was an investment fund under Explanation 1 to section 115UB; he directed the Assessing Officer to allow section 10(23FB) only if the fund proved it was not, which puts the burden on the fund and leaves it with an unappealable direction rather than a finding. On the assessee's pleading, the Assessing Officer, giving effect to that order, went further and relied on a SEBI circular of 19 August 2024 and on an amendment to the AIF Regulations notified on 20 July 2024 permitting 1996-Regulations funds to migrate, to hold that the 1996 Regulations had been replaced altogether. The fund's answer, recorded in its grounds, was that migration is permissive and not mandatory, and that in any event the 2024 amendment cannot govern the assessment year 2020-21. None of that has been adjudicated. Two practical warnings follow. First, do not cite this order for the proposition that a 1996-Regulations fund is outside section 115UB, or inside it: the Tribunal decided nothing about it. Second, the procedural ground on which the appeal actually succeeded is worth having in its own right — where a request for personal hearing is made in writing before the National Faceless Appeal Centre and not granted, clause 12(3) of the Faceless Appeal Scheme, 2021 says the concerned Commissioner (Appeals) shall allow it, and the resulting order is liable to be set aside for de novo adjudication. If it applies to you, the first step is this: Ask for the personal hearing in writing, in the appeal submissions themselves, and keep the record of the request; that written request is what carried this appeal, because the Tribunal could see it on the record and could see that no hearing was given.
The assessee is a fund registered with SEBI as a Venture Capital Fund under the SEBI (Venture Capital Funds) Regulations, 1996 — that much the Tribunal records as a finding at paragraph 3. The remaining details of its status come from the grounds of appeal reproduced at paragraph 2 and are the assessee's own assertions, not findings: that the certificate was granted on 27 July 2011, that it is a close-ended Domestic Venture Capital Fund, and that it is validly set up as an irrevocable and determinate trust under the Indian Trusts Act, 1882 by way of a trust deed. For the assessment year 2020-21 it filed a return on 14 December 2020 claiming dividend on mutual fund units exempt under section 10(35) and its venture capital income exempt under section 10(23FB). In Schedule BP it correctly showed dividend of Rs.10,08,399 as exempt under section 10(35) and profit of Rs.1,55,51,062 as exempt under section 10(23FB), but in Schedule EI it reported only the dividend, omitting the section 10(23FB) figure; a revised return filed the next day repeated the error, reporting exempt income of Rs.1,35,16,769 instead of Rs.1,65,59,461. The revised return was processed on 26 December 2021 computing total income at Rs.30,42,690 against nil returned — the difference between the two exempt-income figures. A rectification application under section 154 produced an order dated 23 December 2022 which denied the whole exemption of Rs.1,65,59,460 and added it. The Commissioner (Appeals) held that section 10(35) was not available for the year and that section 10(23FB) would cease to be operational from the assessment year 2016-17 if the fund were an investment fund specified in clause (a) of Explanation 1 to section 115UB, and — the fund not having stated categorically whether it fell in that category — directed the Assessing Officer to allow the exemption only if it were proved that the fund was not in that category, after due opportunity. The assessee had requested a personal hearing through video conferencing before the Commissioner (Appeals) in writing; none was granted. The assessee's grounds 4.2 to 4.5, reproduced at paragraph 2, assert that the order giving effect dated 24 April 2025 relied on SEBI Circular No. SEBI/HO/AFD/AFD-POD-1/P/CIR/2024/111 dated 19 August 2024 and on an amendment to the AIF Regulations notified on 20 July 2024 to hold that the 1996 Regulations had been replaced and that registration under the AIF Regulations was mandatory. Neither that order nor the circular was before this Tribunal for decision, and nothing in the order is a finding about either; the account here is the appellant's, taken from its pleading. The matter was decided on 2025-11-27 by the ITAT (Shri Om Prakash Kant (Accountant Member) and Shri Sandeep Singh Karhail (Judicial Member), Income Tax Appellate Tribunal, "E" Bench, Mumbai). On those facts the ITAT held as follows. The appeal was allowed for statistical purposes. The Tribunal held that it was evident from the record that the assessee had requested a personal hearing before the Commissioner (Appeals) through the National Faceless Appeal Centre and had not been granted one, and that under clause 12 of the Faceless Appeal Scheme, 2021 the concerned Commissioner (Appeals) shall allow such a request and communicate the date and time of hearing. It set aside the impugned order and restored the appeal to the Commissioner (Appeals) for de novo adjudication after granting the assessee an opportunity of personal hearing, with liberty to the assessee to make a fresh request under clause 12 (para 7). Because the matter was being restored, the Tribunal held expressly that the other grievances raised in the appeal did not call for adjudication at that stage — so the section 10(23FB) and section 115UB question, the section 10(35) question and the section 234C question were all left undecided. On the assessee's request, and noting that it had exited all its investments and had informed SEBI of the winding up, the Tribunal directed the Commissioner (Appeals) to decide the appeal as expeditiously as possible and preferably within six months (para 8).
The Tribunal set out clause 12 of the Faceless Appeal Scheme, 2021, framed under sub-sections (6B) and (6C) of section 250, which provides that the appellant or his authorised representative may request a personal hearing so as to make oral submissions and that the concerned Commissioner (Appeals) shall allow the request and communicate the date and time through the National Faceless Appeal Centre, such hearing to be conducted through video conferencing to the extent technologically feasible (para 6). It then found on the record that the request had been made and not granted, and that the Commissioner (Appeals) had rejected the assessee's plea 'in the absence of requisite information' — that is, without hearing the assessee on the very information he found missing (paras 5 and 7). That was enough to set the order aside, and the Tribunal declined to go further into the merits. In the words reproduced by the source cited on this page: "As, it is evident from the record that the assessee, though made the request to the learned CIT(A) for grant of opportunity for personal hearing through the National Faceless Appeal Centre, the same was not granted to the assessee."
It was decided by the ITAT on 2025-11-27 and is reported as ITA No. 3752/MUM/2025, Assessment Year 2020-21 (ITAT Mumbai); order pronounced 27 November 2025. Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere. A Tribunal decision binds the assessing officer and the Commissioner (Appeals) within that Tribunal's jurisdiction, and is persuasive before other benches. It is not binding on a High Court, and a contrary co-ordinate bench decision will be argued against you, so check whether the point has been taken the other way before you build a reply around it. On section 10(23FB), section 115U, section 115UB, section 10(35), section 154, section 143(1), section 250, section 234C, section 139(5), the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The appeal was allowed for statistical purposes. The Tribunal held that it was evident from the record that the assessee had requested a personal hearing before the Commissioner (Appeals) through the National Faceless Appeal Centre and had not been granted one, and that under clause 12 of the Faceless Appeal Scheme, 2021 the concerned Commissioner (Appeals) shall allow such a request and communicate the date and time of hearing. It set aside the impugned order and restored the appeal to the Commissioner (Appeals) for de novo adjudication after granting the assessee an opportunity of personal hearing, with liberty to the assessee to make a fresh request under clause 12 (para 7). Because the matter was being restored, the Tribunal held expressly that the other grievances raised in the appeal did not call for adjudication at that stage — so the section 10(23FB) and section 115UB question, the section 10(35) question and the section 234C question were all left undecided. On the assessee's request, and noting that it had exited all its investments and had informed SEBI of the winding up, the Tribunal directed the Commissioner (Appeals) to decide the appeal as expeditiously as possible and preferably within six months (para 8). It arises in Faceless Assessment & Appeals, Appeals and Capital Gains Exemptions matters, on section 10(23FB), section 115U, section 115UB, section 10(35), section 154, section 143(1), section 250, section 234C, section 139(5) of the Income Tax Act 1961, and was decided by Shri Om Prakash Kant (Accountant Member) and Shri Sandeep Singh Karhail (Judicial Member), Income Tax Appellate Tribunal, "E" Bench, Mumbai. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. When an appellate order directs the Assessing Officer to 'verify' a status question rather than deciding it, treat that as a ground of appeal in its own right — the fund here was left with a conditional direction and no finding, which is what forced a second round. For any fund still on a SEBI (Venture Capital Funds) Regulations, 1996 registration, settle the section 115UB question deliberately rather than by default: fix the date of the SEBI certificate, whether it was granted before 21 May 2012, and whether the fund has been registered as a Category I or Category II Alternative Investment Fund. Explanation 1(a) to section 115UB turns on the certificate, not on the fund's strategy. Do not let an Assessing Officer apply a 2024 SEBI amendment or circular to an earlier assessment year. The fund's ground here was that the migration facility was introduced only in 2024 and was in any event optional; whatever the merits, the temporal objection has to be taken expressly. Where both section 10(23FB) and section 115UB are in play, plead them in the right order and do not claim them together for the same year: the proviso to clause (23FB) inserted by the Finance Act, 2015 shuts that clause for a fund that is an investment fund under Explanation 1(a) to section 115UB from the assessment year 2016-17.
Validity check could not be completed. Validity check could not be completed. No search for later treatment of this order was carried out, and none is claimed. The order decides a natural justice point and nothing else; the substantive question it records — whether a fund registered under the SEBI (Venture Capital Funds) Regulations, 1996 and not migrated to the Alternative Investment Funds Regulations is an investment fund within Explanation 1(a) to section 115UB — was expressly left undecided and remains open. This order must not be cited either way on that question. The same two members, sitting as the ITAT Mumbai "F" Bench, had earlier reached the same proviso question and also declined to decide it: in JM Financial Property Fund I v. ITO, Ward 25(1)(1), ITA Nos. 1689 and 1691/Mum/2024 (assessment years 2012-13 and 2016-17), order of 24 July 2024, paragraph 11 restores the 2016-17 year to the Assessing Officer "for examining the applicability of the proviso" to section 10(23FB), the appeal being allowed for statistical purposes. So there are now two Mumbai Tribunal orders that reach this question and remit it, and none that decides it (https://indiankanoon.org/doc/140874372/). No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The order was read in full through indiankanoon with ?type=print, on a request opening with the government-work point under s.52(1)(q) of the Copyright Act 1957 and demanding a verbatim transcription from paragraph 1 to the final disposal. The transcription runs from the header through paragraphs 1 to 9 and ends with the signature block and the forwarding endorsement, so the disposal was reached; the last numbered paragraph is 9. A large part of the order — paragraph 2 — is the assessee's grounds of appeal reproduced verbatim, and paragraph 4 reproduces the Commissioner (Appeals)' findings. Neither is the Tribunal speaking, and nothing from either is used here as a holding. In particular the text of clause (b) of section 10(23FB) reproduced at the assessee's ground 3.4 is the ASSESSEE'S rendering of the clause and is not relied on in this library as the statutory text. The report contains obvious transcription noise: the dividend figure appears as "Rs.10,08,99/-" in paragraph 3 and as Rs.10,08,399 in the grounds, and a currency symbol is rendered as "#" and "R" in places. The figures used above are those that reconcile — Rs.10,08,399 of dividend, exemption of Rs.1,65,59,461 in total against Rs.1,35,16,769 reported in the exempt-income schedule, and the resulting addition of Rs.30,42,690 in the section 143(1) intimation. The date 21 May 2012, used above as the dividing line, is not taken from this order — in the order it appears only inside the assessee's own rendering of clause (23FB)(b) at ground 3.4, which is not relied on here. It is taken instead from section 5(IV) of the Finance Act, 2013, read verbatim at https://indiankanoon.org/doc/17335851/, which substituted the Explanation to clause (23FB) with effect from 1 April 2014 and defines a venture capital fund as one that "has been granted a certificate of registration, before the 21st day of May, 2012, as a Venture Capital Fund and is regulated under the Venture Capital Funds Regulations", the alternative limb being a certificate as a Venture Capital Fund as a sub-category of Category I Alternative Investment Fund under the Alternative Investment Funds Regulations. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The appeal was allowed for statistical purposes. The Tribunal held that it was evident from the record that the assessee had requested a personal hearing before the Commissioner (Appeals) through the National Faceless Appeal Centre and had not been granted one, and that under clause 12 of the Faceless Appeal Scheme, 2021 the concerned Commissioner (Appeals) shall allow such a request and communicate the date and time of hearing. It set aside the impugned order and restored the appeal to the Commissioner (Appeals) for de novo adjudication after granting the assessee an opportunity of personal hearing, with liberty to the assessee to make a fresh request under clause 12 (para 7). Because the matter was being restored, the Tribunal held expressly that the other grievances raised in the appeal did not call for adjudication at that stage — so the section 10(23FB) and section 115UB question, the section 10(35) question and the section 234C question were all left undecided. On the assessee's request, and noting that it had exited all its investments and had informed SEBI of the winding up, the Tribunal directed the Commissioner (Appeals) to decide the appeal as expeditiously as possible and preferably within six months (para 8).
Every entry in this library links to where it was found, so you can check it yourself rather than take our word for it.
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