The Court proceeded to find merit in an argument made by the appellant (various VCFs represented through its investment manager, ICICI Venture Funds) that these VCFs held a pass-through status, meaning that there was no need to tax the VCF itself as they operated through their investment manager.
It may be noted that the pass-through principle in taxation is generally invoked to avoid double taxation.
In the present case, the Court held,
“The assessee (VCFs) acts as a ‘pass through’, wherein funds from contributors are consolidated and invested by the investment manager. It acts as a trustee holding the money belonging to contributors to be invested as per the advice of the investment manager. Accordingly, we answer the second question in the affirmative and in favour of the assessee.”
Source: Barandbench
