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TMI Blog2024 (6) TMI 411X X X X Extracts X X X X X X X X Extracts X X X X ..... nds can be considered as part of assessee s operation. The income accrued out of funds in the control of ICCL is chargeable to tax in their hands and ICCL has already submitted a letter indicating that this income was duly declared by them as their income and they have claimed that as exempt. That being so, the Ld PCIT has not brought on record how the share of income earned by the ICCL are chargeable to tax in the hands of the assessee We observe from the record that Assessing Officer has collected the information from the assessee and as per the assessment records there is no evidences to show that Assessing Officer has not verified the same in detail. However, the assessee has submitted all the relevant information, the basis of allocation and adjustment of exempt income before the Assessing Officer. Even otherwise if we consider that Assessing Officer has not verified the adjustment of exempt income claim made by the assessee it can be considered as erroneous order. However, in order to invoke provisions of section 263 of the Act, both conditions has to be satisfied, not just erroneous, even the condition, prejudicial to the revenue. But, we do not agree with the Ld. Pr.CIT tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessee before allowing its application in the accounts. The Ld. PCIT set aside the assessment order dated 30.12.2018 passed u/s. 143(3) of the Act and directed the AO to reframe the order. The Ld. Pr.CIT in Para Nos. 3 and 4 of his order made the following observations: 3. On examination of records, it is observed that the order dated 30.12.2018, passed by Assessing Officer is erroneous in so far as it is prejudicial to the interest of the revenue due to the following reasons: The assessment records of assessee for AY 2016-17 were perused. It is seen that SEBI vide circular dated 27.08.2014 issued instructions and norms for setting up core Settlement Guarantee Fund (SGF) by the Clearing Corporations (CC) with the objective to guard against any contingent liability arising from the default by the clearing member. The contributions were to be made by CC (50%) and Stock Exchange (25%) and clearing members. In the assessment order passed u/s. 143(3) of the Act dated 30-12-2018, the deduction claimed on account of assessee's contribution to Core Settlement Guarantee Fund of Rs. 68.84 crores was disallowed. The basis of disallowance is that the assessee has no information wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the interest earned on contributions made by the assessee to the Core Settlement Guarantee Fund is not the income of the assessee and, hence, not liable for tax. 7. In support of the above propositions, Ld.AR of the assessee filed his written submissions, for the sake of clarity it is reproduced below: - (i) The issue has already been examined by the A.O. 11) The appellant submits that the issue of taxability of contribution and income thereon was raised by the Assessing Officer in his notices u/s. 143(2) and 142(1) of the Act and had been examined by the AO in every aspect before completion of the assessment. The assessee had submitted detailed notes along with Annexure dated 07.12.2018 (PBP 11) vide Acknowledgement No. 07121810936561 as a response to the issues raised by the AO. 12) The appellant states that the Assessing Officer was made aware that BSE was required to contribute to Core Settlement Guarantee Fund and interest on cash contribution to Core SGF shall also accrued to the Core SGF. Further, an explanation on implementation by BSE of its provisions by Circular (CIR/MRD/DRMNP/25/2014) dated 27.08.2014 (PBP 18A), w.e.f. 01.12.2014, was also pointed out to the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, on merits, the interest received by Indian Clearing Corporation Limited (ICCL) would not be liable to be taxed in the hands of the assessee, Ld.AR of the assessee submitted as under: - 16) The Appellant submits that the assessee has made contribution to Core Settlement Guarantee Fund from time to time. The said contributions are mandatory as per Regulation 33 of the Securities Contracts (Regulations) (SECC) Regulations, 2012 and the assessee accordingly made such contributions from F.Y. 2012-13 onwards. 17) As per S. 10(23EE) of the Act, w.e.f. A.Y. 2016-17, any specified income to Core Settlement Guarantee Fund, set up by a recognized clearing corporation in accordance with the regulations and notified by Central government in official Gazette is exempt provided that where any amount standing to the credit of the said fund is shared, either wholly or partly, the whole amount shared then shall become the income of that particular year in the hands of the specified persons. Specified income means the income by way of contribution received from specified persons, the income by way of penalties imposed by the recognized clearing corporation and credited to the Core SGF or the inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see to Core Settlement Guarantee Fund and asked the explanation regarding allowability of the same (PBP 49). The assessee vide letter dated 21.12.2018 (PBP 50 to 58) referred and clarified that the amount contributed to Core Settlement Guarantee Fund is an allowable deduction. The circular issued by the SEBI has been referred to and the objective of the Core Settlement Guarantee Fund was explained (PBP 52). Further, reference was made to S. 10(23EE) of the Act and it was pointed out that the specified income is taxable in the hands of Core Settlement Guarantee Fund and such income includes income from investment made by the Fund (PBP 54). It was pointed out that such income has been held to be exempt from the tax and the Indian Clearing Corporation Ltd. has been recognized for the said purpose. 23) The appellant contends that, in assessee's own case, the contribution to Core SGF is allowed as a deduction for A.Y. 2015-16 vide above referred ITAT order dated 04.10.2019. It has been held therein (para 12 on page no. 19) that the contribution made by the assessee to the Core Settlement Guarantee Fund has not remained with the assessee. The amount transferred will be utilized by IC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee submitted that the order passed by the Ld. Pr.CIT under section 263 of the Act is unsustainable, and prayed to quash the same. 10. On the other hand, Ld. DR supported the findings of the Ld. Pr.CIT and submitted that the assessment order passed by the Assessing Officer is erroneous and prejudicial to the interest of the revenue . Further, he submitted that the issue under consideration is disputable and the revenue is in appeal before the Hon ble High Court on the order passed by the ITAT. Further, he submitted that the additional income received by the assessee is adjusted against the contribution based on SEBI guidelines. Therefore, the Ld. Pr.CIT is right in invoking the provisions of section 263 of the Act. 11. Considered the rival submissions and material placed on record, we observe from the record that the assessment order passed u/s. 143(3) is reviewed by Ld PCIT which was passed after due scrutiny by the Assessing Officer after collecting information through various notices issued to the assessee. The Assessing Officer has verified the issue of contributions to Core Settlement Guarantee Fund (Core SGF) set upon the direction of SEBI. This issue was under dispute i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the contribution net of exempt income. It is brought to our notice that the contribution made by the assessee to the Core SGF is held to be allowable as expense in the hands of the assessee by the coordinate bench in the previous assessment year. The above decision was under challenge before Hon ble High Court, therefore, in our view there is no prejudice caused to the revenue in this transaction of contribution to the funds after adjusting the share of exempt income. 13. After considering the above discussion, we observe from the record that Assessing Officer has collected the information from the assessee and as per the assessment records there is no evidences to show that Assessing Officer has not verified the same in detail. However, the assessee has submitted all the relevant information, the basis of allocation and adjustment of exempt income before the Assessing Officer. Even otherwise if we consider that Assessing Officer has not verified the adjustment of exempt income claim made by the assessee it can be considered as erroneous order. However, in order to invoke provisions of section 263 of the Act, both conditions has to be satisfied, not just erroneous, even the condit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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