MULTI COMMODITY EXCHANGE INVESTOR (CLIENT) PROTECTION FUND, MUMBAI V. DIT (E),

ITA 5759/MUM/2013

• Counselvise Citation: 575919914 RSA 2013
• Duration Of Justice: 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-04-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 26-03-2014
• Assessment Year: 2013-2014
• Appeal Filed On: 23-09-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P SINGH
• Assessee Lawyers: CHATAN A KARIA
• Keywords: Charitable institution
• Section: 12; 11; 12A; 12AA

Judgement Text

, VKBZ VKBZ VKBZ VKBZ INCOME TAX APPELLATE TRIBUNAL,MUMBAI - I BENCH. .. , ! , BEFORE S/SH.I.P.BANSAL, JUDICIAL M EMBER & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO.5759/MUM/2013, ' ' ' ' # # # # / ASSESSMENT YEAR-2013-14 MULTI COMMODITY EXCHANGE INVESTOR (CLIENT) PROTECTION FUND, EXCHANGE SQUARE,CTS NO.255, SUREN ROAD, CHAKALA,ANDHERI(E), MUMBAI-400093 V/S. DIRECTOR OF INCOME TAX (EXEMPTION) MUMBAI, 6 TH FLOOR,PIRAMAL CHAMBERS, PAREL,MUMBAI-12 PAN: AADTM1169M ( $% / APPELLANT) ( &'$% / RESPONDENT) ' ' ' '() () () () * * * * / ASSESSEE BY : SHRI CHATAN A. KARIA + * / REVENUE BY : SHRI O P SINGH ' ' ' ' + ++ + ), ), ), ), / DATE OF HEARING : 08-04-2014 -.# + ), / DATE OF PRONOUNCEMENT : 08-04-2014 ' ' ' ' , 1961 + ++ + 254 )1( )/) )/) )/) )/) 0 0 0 0 ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA,AM ! ! ! ! ' ' ' ' : CHALLENGING THE ORDER DATED 28.08.2013 OF THE DIREC TOR EXEMPTION (DIT-E),MUMBAI PASSED U/S. 12AA R.W.SECTION 12A OF THE ACT,ASSESSEE - TRUST HAS FILED FOLLOWING GROUNDS OF APPEAL: 1)THE LEARNED DIRECTOR OF INCOME TAX (EXEMPTION) H AS ERRED IN NOT CONSIDERING THE ASSESSEE AS ELIGIBLE FOR REGISTRATION U/S. 12AA. 2)THE LEARNED DIRECTOR OF INCOME TAX (EXEMPTION), E RRED IN STATING THAT THE OBJECT OF THE TRUST IS NOT FOR GENERAL PUBLIC UTILITY AND MEANT ONLY FOR S PECIFIC GROUP OF PERSONS WHO INVEST THROUGH COMMODITY EXCHANGES. 3).THE LEARNED DIRECTOR OF INCOME TAX (EXEMPTION),E RRED IN STATING THAT, AS THE INSTITUTION SQUARELY FALLS U/S. 10(23EC), THE REGISTRATION U/S. 12AA CANNOT BE GRANTED AND HAS FURTHER ERRED IN DENYING REGISTRATION ON THE GROUND THAT SUCH REG ISTRATION IS NOT MANDATORY. 4).THE LEARNED DIRECTOR OF INCOME TAX (EXEMPTION) E RRED IN REFUSING THE REGISTRATION U/S 12AA ESPECIALLY WHEN OTHER EXCHANGES ARE ALLOWED SIMILAR REGISTRATION AND THAT TREATMENT TO DIFFERENT ASSESSEE CANNOT BE DIFFERENT UNDER THE SAME ACT AND RULES. 5).EACH OF THE ABOVE GROUNDS BE CONSIDERED AS SEPAR ATE FROM THE OTHER GROUNDS. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR DELETE ANY OF THE ABOVE GROUNDS OF APPEAL. BRIEF FACTS OF THE CASE: THE ASSESSEE-TRUST HAD FILED AN APPLICATION FOR REG ISTRATION U/S.12AOF THE ACT, ON 07.02.2013.THE TRUST WAS CONSTITUTED BY A TRUST DEED DATED 28.03.2 012 AND WAS REGISTERED WITH THE CHARITY COMMISSIONER,MUMBAI ON.02.2013.DIT-E,VIDE HIS NOTIC E DATED 06.05.2013,REQUIRED THE ASSESSEE TO FURNISH CERTAIN DETAILS/DOCUMENTS ALONG WITH THE COPIES OF AUDITED ACCOUNTS AND NOTE ON ACTIVITIES UNDERTAKEN BY IT DULY SUBSTANTIATED WITH DOCUMENTARY EVIDENCE.AFTER PERUSAL OF THE TRUST DEED,HE HELD THAT THE TRUST WAS MAINLY ESTABL ISHED FOR THE PROTECTION,AWARENESS AND EDUCATI - ON OF THE INVESTORS OF THE COMMODITY EXCHANGE,THAT THE OBJECTS OF THE TRUST WERE NOT CHARITABLE BUT HAD SHADE OF BUSINESS ETHICS INVOLVED FOR CREA TION OF GOODWILL,THAT THE EXEMPTION ON THE INCOME RECEIVED BY SUCH INSTITUTIONS WAS ALLOWABLE U/S.10(23EA)OF THE ACT.HE ISSUED A SHOW- CAUSE NOTICE TO THE ASSESSEE AND ASKED AS TO HOW TH E ACTIVITIES AND OBJECTS FELL WITHIN THE MEANING OF SECTION 2(15) OF THE ACT.ASSESSEE-TRUST FILED IT S REPLY ON 23.08.2013.AFTER COSIDERING THE SUBMISSIONS OF THE ASSESSEE,HE HELD THAT THE ACTIVI TY AS BEING CARRIED OUT COULD NOT BE TERMED AS ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY FOR SIMP LE REASON THAT IT WAS MEANT FOR THE BENEFIT OF SPECIFIC PERSONS WHO INVESTED THROUGH SPECIFIC STOC K EXCHANGE AND NOT FOR GENERAL PUBLIC,THAT A SPECIFIC SECTION HAD BEEN PROVIDED IN THE ACT FOR S TOCK EXCHANGES WHO WISHED TO TAKE BENEFIT OF SECTION 11 AND HAD TO REGISTER ITSELF AS PER THE RE QUIREMENTS OF SECTION 10(23EA),THAT THOSE BENEFITS WERE NOT OPEN FOR GENERAL PUBLIC AT LARGE, THAT IT WAS NOT MANDATORY FOR INSTITUTION TO REGISTER ITSELF UNDER I2AA TO REAP THE BENEFITS ALL OWED U/S.10(23EA),THAT THE CASE OF THE INSTITUTI - ON SQUARELY FELL UNDER SECTION L0(23EA) THE REGISTR ATION U/S. 12AA COULD NOT BE GRANTED,THAT MERELY BECAUSE OF THE REQUIREMENT OF CREATION OF FU ND UNDER THE PROVISIONS OF MULTI COMMODITY EXCHANGE DID NOT IPSO FACTO WOULD MAKE SUCH TRUST/I NSTITUTIONS A CHARITABLE ONE WHICH WOULD BE ENTITLED FOR REGISTRATION U/S.I2AA IN ORDER TO QUAL IFY EXEMPTION U/S. 11 AND 12 OF THE ACT,THAT THE INSTITUTE/TRUST TO QUALIFY AS A CHARITABLE INSTITUT IONS SHOULD HAVE A CHARACTER OF PUBLIC CHARITABLE TRUST AND SHOULD BE ABLE TO CATER FOR ANY PUBLIC AT LARGE,THAT IN THE INSTANT CASE THE TRUST HAD BEEN CREATED TO INDEMNIFY THE INVESTORS AGAINST THE LOSS ES CAUSED ON ACCOUNT OF NEGLIGENCE ETC. WHICH ARE COMMITTED BY SETTLOR OR DEPOSITORY PARTICIPANT OR THE RESPECTIVE EMPLOYEES,THAT THE DEPOSIT AS REQUIRED TO BE MADE IN THE FUND AS PER THE GUIDELIN ES UNDER MULTI COMMODITY EXCHANGE WOULD GENERATE INTEREST AND ONCE NOT UTILIZED OR PARTLY U TILIZED FOR THE PURPOSE FOR WHICH IT HAD BEEN CREATED THE BALANCE WOULD BE LIABLE FOR TAXATION,TH AT THE ASSESSEE-TRUST WAS NOT ENTITLED FOR REGISTRATION AS A CHARITABLE TRUST. 2. BEFORE US,AUTHORISED REPRESENTATIVE(AR)SUBMITTED TH AT THE SIMILAR ISSUE WAS DECIDED BY THE MUMBAI TRIBUNAL IN THE MATTER OF MCX STOCK EXCHANGE INVESTORS PROTECTION FUND CURRENCY DERIVATIVES SEGMENT TRUST(ITA/7922/MUM/2011-AY.2011 -12,DATE-02.01.2014) AND IN THE CASE OF INTER-CONNECTED STOCK EXCHANGE INVESTORS PROTECT ION FUND(ITA/7436/M/2011-20.9.2013),THAT THE OBJECTS AND FACTS AND CIRCUMSTANCES IN THE CASE OF THE ASSESSEE AS WELL AS IN THE ABOVE REFERRED TWO CASES WERE IDENTICAL.DR STATED THAT MA TTER SHOULD BE DECIDED ON MERITS. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD.WE FIND THAT IN THE CASE OF MCX STOCK EXCHANGE INVESTORS PROTECT ION FUND CURRENCY DERIVATIVES SEGMENT TRUST (SUPRA) C BENCH OF THE MUMBAI TRIBUNAL HAS HE LD AS UNDER: 5.HAVING CONSIDERED THE RIVAL SUBMISSIONS AND CARE FUL PERUSAL OF THE RELEVANT RECORD WE NOTE THAT THE APPLICATION FOR REGISTRATION U/S 12AA HAS BEEN REJECTED BY THE DIT (EXEMPTION) ON THE FOLLOWING GROUNDS: I) THE ACTIVITY OF THE ASSESSEE BEING CARRIED OUT N OT FOR THE OBJECT OF THE GENERAL PUBLIC UTILITY BUT MEANT FOR BENEFIT FOR SPECIFIC PERSONS INVESTING THROUGH SPECIFIC STOCK EXCHANGES. II) THAT THE ASSESSEE DOES NOT QUALIFY AS A CHARITA BLE INSTITUTION AS IT DOES NOT CATER, FOR ANY PUBLIC AT LARGE BUT IT HAS BEEN CREATED TO INDE MNITY THE INVESTORS AGAINST THE LOSS CAUSED ON ACCOUNT OF NEGLIGENCE ETC. 6.AT THE OUTSET WE NOTE THAT THE CO-ORDINATE BENCH OF THE TRIBUNAL HAS DEALT WITH BOTH THE OBJECTIONS OF THE DIT(EXEMPTION) IN THE CASE OF INT ERCONNECTED STOCK EXCHANGE INVESTORS PROTECTION FUND VS DIT(EXEMPTION) (SUPRA) AND THE C ONCLUSION OF THE CORDINATE BENCH IS AS UNDER: HOWEVER, A COMPREHENSIVE AND HOLISTIC READING OF T HE TRUST DEED WOULD ALLAY ALL SUCH MISGIVING/S OR INFERENCE/S, AND, IN OUR CLEAR VIEW THERE IS NO SCOPE FOR TAKING ANY SUCH VIEW. FIRSTLY, AS A CONDITION FOR AN ELIGIBLE CLAIM , THE RELEVANT MEMBER OR THE STOCK EXCHANGE IS TO BE DECLARED AS A DEFAULTER FOLLOWI NG THE PRESCRIBED PROCEDURE.TWO,THE CORPUS OF THE FUND IS TO BE BUILT THROUGH, INTER AL /A, SHARE OF LISTING FEES, INTEREST ON 1% LISTING DEPOSIT, PAID, AND KEPT BY THE ISSUER COMPA NIES WITH THE RESPECTIVE STOCK EXCHANGE.AN INDIVIDUAL MEMBER OF A PARTICULAR MEMBE R STOCK EXCHANGE IS NOT CALLED UPON TO PAY ANY DIRECT CHARGES TO THE APPLICANT FUND, IN FACT, A PART OF THE AUCTION MONEY OF THE DEFAULTING MONEY IS ALSO, IN TERMS OF THE SEBI CIRC ULAR (FIITC/FII/02/2002 DATED 15.05.2002),MADE OVER TO THE CORPUS OF THE FUND.ACC ORDINGLY, THE OBJECT OF THE APPLICANT CANNOT BE AS A SERVICE IN RELATION TO ANY TRADE, ET C FURTHER, EVEN ASSUMING SO, THE SAME DOES NOT INVOLVE ANY CONSIDERATION INASMUCH AS NO Q UID PRO QUO CAN BE ATTRIBUTED TO THE MANDATORY CONTRIBUTIONS TO THE FUND BY THE PARTICIP ATING STOCK EXCHANGES IN OUR CONSIDERED VIEW, THEREFORE, THE APPLICANT FUND IS A PUBLIC CHA RITABLE FUND, SET UP TO ADVANCE AN OBJECT OF GENERAL PUBLIC UTILITY, AND HAS BEEN WRONGLY DEN IED REGISTRATION AS ONE BY THE RE VENUE WE, ACCORDINGLY, VACATING THE FINDINGS OF THE COMPE TENT AUTHORITY VIDE THE IMPUGNED ORDER, DIRECT IT TO GRANT REGISTRATION APPLIED FOR WE DECIDE ACCORDINGLY. 7.AS IT IS CLEAR THAT THE CO-ORDINATE BENCH OF TRIB UNAL HAS DECIDED THE IDENTICAL ISSUE IN FAVOUR OF THE ASSESSEE BY HOLDING THAT THE ASSESSEE IS A PUBLIC CHARITABLE FUND, SET UP TO ADVANCE AN OBJECT OF GENERAL PUBLIC UTILITY AND THE REFORE, THE REGISTRATION U/S 12A HAS BEEN WRONGLY. DENIED BY THE AUTHORITY.FOLLOWING THE DECI SION OF THE CO-ORDINATE BENCH WE SET ASIDE THE IMPUGNED ORDER OF THE DIT(EXEMPTION)WITH THE DIRECTION TO GRANT REGISTRATION U/S 12A OF THE INCOME TAX ACT TO THE ASSESSEE. RESPECTFULLY,FOLLOWING THE ORDERS OF THE COORDINATI NG BENCHES,WE DECIDE THE EFFECTIVE GROUND OF APPEAL IN FAVOUR OF THE ASSESSEE AND DIRECT THE DIT -E,MUMBAI TO GRANT REGISTRATION TO THE ASSESSEE-TRUST U/S.12A OF THE ACT. AS A RESULT,APPEAL FILED BY THE ASSESSEE STANDS AL LOWED. 2)3 '() 4 5 + / 6 + ) 7 8. ORDER PRONOUNCED I N THE OPEN COURT ON 8 TH APRIL,2014 . 0 + -.# 9 :' 8 &8 ,201 4 . + / ; SD/- SD/- ( .. / I.P. BANSAL) ( ! ! ! ! / RAJENDRA) / JUDICIAL MEMBER /ACCOUNTANT MEMBER / MUMBAI, :' /DATE: 08.04 . 2014. SK 0 0 0 0 + ++ + &)< &)< &)< &)< = <#) = <#) = <#) = <#) / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / $% 2. RESPONDENT / &'$% 3. THE CONCERNED CIT(A)/ > ? , 4. THE CONCERNED CIT / > ? 5. DR I BENCH, ITAT, MUMBAI / <@/ &)' , . . . 6. GUARD FILE/ / 2 '<) '<) '<) '<) &) &)&) &) //TRUE COPY// 0' / BY ORDER, A / 7 DY./ASST. REGISTRAR , /ITAT, MUMBAI