IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH MUMBAI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER &

SHRI MAKARAND VASANT MAHADEOKAR, ACCOUNTANT MEMBER

1. ITA No. 5715/Mum/2025 (Assessment Year: 2016-17) 2. ITA No. 5676/Mum/2025 (Assessment Year: 2017-18)

&

3. ITA No. 5677/Mum/2025 (Assessment Year: 2018-19)

3. ITA No. 5677/Mum/2025 (Assessment Year: 2018-19)

3. ITA No. 5677/Mum/2025 (Assessment Year: 2018-19)

3. ITA No. 5677/Mum/2025 (Assessment Year: 2018-19)

3. ITA No. 5677/Mum/2025 (Assessment Year: 2018-19)

3. ITA No. 5677/Mum/2025 (Assessment Year: 2018-19)

3. ITA No. 5677/Mum/2025 (Assessment Year: 2018-19)

3. ITA No. 5677/Mum/2025 (Assessment Year: 2018-19)

3. ITA No. 5677/Mum/2025 (Assessment Year: 2018-19)

3. ITA No. 5677/Mum/2025 (Assessment Year: 2018-19)

3. ITA No. 5677/Mum/2025 (Assessment Year: 2018-19)

Date of Hearing 14.01.2026 Date of Pronouncement 30.01.2026

आदेश / ORDER

PER MAKARAND VASANT MAHADEOKAR, AM:

These appeals are directed against the separate orders

passed by the Commissioner of Income Tax (Appeals), National

Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as “CIT(A)”], arising out of the separate assessment orders passed by the Income Tax Officer under section 143(3) of the Income-tax Act, 1961 [hereinafter referred to as “the Act”] for Assessment Year 2016–17,2017–18 and 2018–19.

Facts of the Case

2. The assessee is a trust registered with the Securities and Exchange Board of India (SEBI) as a Venture Capital Fund (VCF) under the SEBI (Venture Capital Funds) Regulations, 1996. For the years under consideration, the assessee filed its returns of income declaring nominal taxable income after claiming exemption in respect of income earned from investments made in portfolio companies treated as Venture Capital Undertakings (VCUs) under section 10(23FB) of the Income-tax Act, 1961. The assessee also claimed exemption in respect of dividend income received from units of mutual funds under section 10(35) of the Act.

3. The cases were selected for scrutiny and notices under section 143(2) and section 142(1) of the Act were issued. During the course of assessment proceedings, the assessee furnished details of investments made in portfolio companies, nature of income earned therefrom and the basis for claiming exemption under section 10(23FB) and section 10(35) of the Act. It was explained that the interest income was earned on Optionally Fully Convertible Debentures and other instruments issued by portfolio companies and that the dividend income was received from liquid schemes of mutual funds.

4. The Assessing Officer, however, did not accept the assessee’s claim of exemption in respect of interest income earned from certain portfolio companies, holding that the investee entities did not qualify as eligible Venture Capital Undertakings in terms of SEBI Regulations and that the income was in the nature of fixed return akin to interest. The Assessing Officer further held that the assessee, being a VCF governed by a special provision under section 10(23FB), was not entitled to claim exemption under section 10(35) in respect of dividend income from mutual funds. Accordingly, additions were made by disallowing the exemptions claimed and the assessed income was determined at higher figures for the respective assessment years.

Assessment year wise details are tabulated as under:

5. Aggrieved, the assessee carried the matter in appeal before the CIT (A), who upheld the disallowance u/s 10(23FB) of the Act and deleted the additions u/s 10(35) of the Act. Against the orders of the CIT(A), the assessee is in further appeal before us raising following grounds of appeal:

For A.Y. 2016-17 in ITA No. 5715/MUM/2025 Disallowance of exemption of Rs. Rs. 1,77,38,985/- under section 10(23FB) on the ground that the fund used by the Venture Capital Undertaking (VCU) was used for the purpose other than the purpose of providing services, production or manufacture of article or things for which the company was incorporated.

The appellant crave