Background
Recently, the Bengaluru Bench of the Customs, Excise and Service
Tax Appellate Tribunal (Tribunal) passed a ruling in the case of
M/S. ICICI Econet Internet And Technology Fund And Others (Trusts)
Versus Commissioner Of Central Tax, Bangalore North1.
This has unnerved the entire VCF/AIF sector, inducing a sense of
panic. Rippling effects of the said ruling are expected to continue
and spread around on all such structures currently operating in
India.
In India, the Venture Capital Funds (VCF) and Alternative
Investment Fund (AIF) work under the regulations laid down by the
Securities and Exchange Board of India (SEBI). As per the SEBI
regulations, VCF/AIF has to be set up in the form of a Trust,
Company, Limited Liability Partnership (LLP), or a body corporate.
This being the case, most of the VCFs/AIFs incorporated in India
are in the form of a Trust, where contributors pool in funds for
investing through the Trust and returns are distributed to
