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TMI Blog2014 (7) TMI 634X X X X Extracts X X X X X X X X Extracts X X X X ..... n favour of Assessee. Exemption u/s. 10(23EA) of the Act - Held that:- The assessee trust has received contribution in terms of SEBI guidelines from NSCIL that should suffice for the claim of exemption – there was no merit in the findings of the CIT(A) for declining the exemption – there was no prohibition in the act denying the claim of exemption u/s 10 for the Trust who claimed exemption u/s. 11 of the Act - the assessee trust is a notified trust u/s. 10(23)(c)(iv) of the Act vide Notification dt. 15.12.2003 - though this claim was not made before the AO, relying upon CIT Vs Pruthvi Brokers & Share Holders Pvt. Ltd. [2012 (7) TMI 158 - BOMBAY HIGH COURT] – the AO is directed to entertain the claim of the assessee – Decided in favour of Assessee. Double addition - Capital gain already added and considered – Held that:- The issue needs re-verification as it is a question of fact – thus, the matter is remitted back to the AO - The assessee is directed to demonstrate how capital gain have been considered twice by bringing cogent material evidence on record – Decided in favour of Assessee. - I.T.A. No. 1021/Mum/2014 - - - Dated:- 23-5-2014 - Shri N. K. Billaiya, AM And Shri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the practices followed by Stock Exchanges with respect to constitution, management and the utilization of the TPF/CPF at the Stock Exchange issued a comprehensive guidelines alongwith Annexure vide letter no. MRD/DoPISE/Cir-8/2004 dated October 28,2004. In terms of the said guidelines the Investor Protection Fund / Customer Fund shall be administered by way of Trust. 1.2 Accordingly, under the said direction given by Ministry of Finance, the National Stock Exchange Investor Protection Fund Trust (NSEIPFT) was set up on 11.07.1995 in terms of Rules and Bye-laws of National Stock Exchange of India Ltd. (NSEJL) (which Rules Bye-laws are SEBI approved) and Guidelines issued by SEBI to all Stock Exchange vide letter no. SMD/RCG/PJ/268/96 dated January 19, 1996 with an object for safeguarding the interest of the small investors and promotion of the healthier and transparent stock market. The main object and purpose of the appellant trust have been described in Clause 10 and 1OA of the Trust Deed dated 11.07.1995 which reads as under: a. To compensate for any loss which may be suffered by any person including a trading member or a constituent arising from a trading member being de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions of clause (b) of Sec. 13(3) of the Act squarely apply on the facts of the case read with clause of Deed of Trust mentioned hereinabove. 4.3. Considering these facts in the light of the Deed of Trust, the AO was of the strong belief that under the terms of the Trust or the Rules governing the institution, income of trust ensures directly or indirectly for the benefit of trading members of NSE. Thus, assessee s case is hit by provisions of Sec. 13(1)(c)(i) of the Act. The assessee was show caused to justify its claim. The assessee filed a detailed reply stating that the trust was formed as per the directions of the Central Govt. and SEBI. The directions and the guidelines of the SEBI clearly says that no part of the income will be utilized for members of Stock Exchange. It was further pointed out that the objects of the Trust clearly states that income of trust cannot be utilized for trading members. It was explained that the income of the trust is utilized for payment of investors only and that too only when the assets of the defaulted members could not make up for it. There is no benefit to the trading members and to the National Stock Exchange. The compensation paid is to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... person whose liabilities are met out/paid and in effect subsequently to the investor who gets his due. Thus, it can be seen that the contributions made by trading member(brokers) individually or contributed collectively and routed through the concerned stock exchange to the appellant are directed utilized for meeting the individual liabilities of one or many from themselves (brokers) only. Apparently the investor receives the amount but it is something due to him from the defaulting stock member(broker) and in fact what he gets is due to him (investor) as part of his profits/capital utilized and resulting from regular business transaction of the stock exchange; through its members(broker). Therefore, it is definite and clear that the payments made by appellant trust to the investors are for and on behalf of the defaulting member(broker) and since it is the liability of defaulting member, hence, the beneficiary is the defaulting member individually and members collectively , who are also contributors to the fund/income of the trust. The arguments and submissions of the appellant on this issue by referring to the benefit of stock market, investor and mandate of regulatory bodies is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder the head eligible claims which reads as under: The claims of the investors/clients shall be eligible for compensation from the IPF/CPF and in no case the claims of a borker or an associate of the member broker of the Stock Exchange shall be eligible for compensation out of the IPF/CPF. 6.1. The Ld. Counsel further pointed out to Clause-24 of the said guidelines which states that the Stock Exchange shall ensure that the amount realized by the auction/close out of the card/realization of assets of the defaulter members are credited to the IPF/CPF after satisfying the claims of the Stock Exchange and the SBEI in accordance with the byelaws of the Stock Exchange. The Ld. Counsel vehemently submitted that no benefit directly or indirectly has ensured to any person referred to in Sec. 13(3) clause (b) of the Act. Further no compensation has been paid directly or indirectly for the benefits of the NSE or any of its trading members. The Ld. Counsel further drew our attention to the notification issued by the Under Secretary to the Govt. of India dt. 15.12.2003 by which the Central Government has notified the assessee for the purposes of sub-clause (iv) of 23(C) of Sec. 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s with the relevant material evidence brought on record before us. From the objects of the trust and in terms of directions of Central Government and SEBI, it is clear that the income of the trust/property of the trust is to be applied for compensating losses if any arising out of defaults of the trading members of the Stock Exchange, to promote, educate and spread awareness among the general public at large about the securities and the trading market and to apply the income of the trust on such other purpose of public utility as it may deem fit. 8.1. The NSE has formed a defaulter s committee which is a statutory committee of the exchange set up to administer the assets in respect of the defaulters/expelled members vesting in the exchange. The defaulters committee distributes the amount available in the defaulter s account to the admitted claims on pro-rate basis. In the event of defaulter s assets not being sufficient to meet the admitted claims of investors , the Investor Protection Fund Trust (assessee) based on the recommendations of the Defaulter s Committee and subject to the guidelines issued in this behalf by SEBI, compensates the investors to the extent of funds found ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is an additional evidence) before the AO and demonstrate its claim by bringing cogent material evidence on record. The AO is directed to verify the correctness or otherwise of the facts stated in the certificate and decide this issue afresh in the light of the facts arising out of the certificate. Needless to mention, the AO would give a reasonable and sufficient opportunity of being heard to the assessee. With these observations, ground No. 1, 2 and 3 are allowed for statistical purpose. 10. The next grievance of the assessee relates to the denial exemption claimed u/s. 10(23EA) of the Act. This claim was made before the Ld. CIT(A). The Ld. CIT(A) has declined to entertain this claim firstly it was never claimed in the Income tax return filed for the year under consideration. Secondly, Sec. 10 exemptions are not available to Trust who claimed the benefit of Sec. 11 to 13 of the Act and lastly the contribution is out of auction difference received from recognized stock exchanges and its members thereon. The section nowhere provides for the examination of the source of the source. The Ld. CIT(A) has declined to allow the exemption holding that the contributions received from Nati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accordingly allowed. 11. The next grievance of the assessee relates to the double addition of ₹ 30 lakhs being capital gain. The issue needs reverification as it is a question of fact. We, therefore, restore this issue to the file of the AO. The assessee is directed to demonstrate how capital gain of ₹ 30.00 lacs have been considered twice by bringing cogent material evidence on record. The AO is directed to verify the claim in the light of the relevant provisions of the law. Ground No. 4 is accordingly allowed for statistical purpose. 12. Next issue is charging of interest u/s. 234 B and 234C which is mandatory but consequential, in the present case. The AO is directed to levy interest u/s. 234B and 234C of the Act as per the provisions of the law. 13. Before closing, in so far as the grievance relating to the claim of expenses and the rate of charging of tax in respect of capital gain are concerned, these are consequential to the claim of exemption u/s. 11 of the Act. As we have restored this issue back to the files of the AO to be decided afresh, these grievances will automatically be taken care by the AO while deciding the main issue. 14. In the result, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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