NCDEX INVESTOR (CLIENT PROTECTION FUND TRUST), MUMBAI V. DIT(EXEMPTIONS), MUMBAI

ITA 6552/MUM/2013

• Counselvise Citation: 655219914 RSA 2013
• Duration Of Justice: 1 year(s) 10 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-10-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: misc
• Appeal Filed On: 07-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N P SINGH
• Keywords: Charitable institution; Competent authority
• Section: 12A; 12AA

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI- B,BENCH , , BEFORE S/SH. RAJENDRA,ACCOUNTANT MEMB ER & SHAKTIJIT DEY,JUDICIAL MEMBER /.ITA NO.6552/MUM/2013 NCDEX INVESTOR (CLIENT) PROTECTION FUND TRUST 1 ST FLOOR, AKRUTI CORPORATE PARK LBS MARG, NEAR G.E. GARDEN KANJURMARG(W) MUMBAI-400 078. PAN:AABTN 7481 R VS DIRECTOR OF INCOME TAX (EXEMPTION), PIRAMAL CHAMBERS, PAREL, MUMBAI-400 012. ( / APPELLANT) ( / RESPONDENT) /ASSESSEE BY :NONE / REVENUE BY :SHRI N.P. SINGH-(CIT-DR) / DATE OF HEARING : 01 - 10 -2015 / DATE OF PRONOUNCEMENT : 01 -10-2015 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER DATED 24.09.2013 OF DIRECTOR OF INCOME-TAX,EXEMPTION(DIT-E) MUMBAI, THE ASSESSEE-TRUST HAS RAISED FOLLOWING GROUNDS OF APPEAL: THE GROUNDS OF APPEAL SET BELOW ARE WITHOUT PREJUD ICE TO EACH OTHER: 1. (A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED DIRECTOR OF INCOME TAX (EXEMPTION) ERRED IN PASSING THE ORDER U NDER SECTION 12AA(1 )(B )(II) OF THE INCOME TAX ACT, 1961 REJECTING THE APPLICATION MADE BY THE APPLICANT TRUST FOR GRANTING APPROVAL UNDER SECTION 12A AND THE REASONS ASSIGNE D FOR DOING SO ARE WRONG AND CONTRARY TO THE PROVISIONS OF INCOME TAX ACT, 1961 AND THE RULES MADE THEREUNDER. (B) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED DIRECTOR OF INCOME TAX (EXEMPTION) ERRED IN OBSERVING THAT THER E WAS NO COMPLIANCE TO THE SHOW CAUSE LETTER DATED 03.09.2013 FIXING THE DATE OF H EARING ON 10.09.2013 WHEREAS THE APPLICANT TRUST HAD RECEIVED THE SAID NOTICE ONLY ON 10.09.2013, I.E. THE DATE FIXED FOR HEARING AND IT FILED ITS REPLY TO THE SAID LETTER VIDE LETTER DATED 16.09.2013. 2 (A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED DIRECTOR OF INCOME TAX (EXEMPTION) ERRED IN REJECTING THE APPLI CATION OF THE APPLICANT TRUST FOR REGISTRATION U/S 12AA OF THE INCOME TAX ACT, 1961 O N THE REASONING THAT:- (I) THE OBJECTS OF THE APPELLANT TRUST ARE NOT CHA RITABLE AND (II) THE ACTIVITY BEING CARRIED OUT BY THE APPLICAN T TRUST CANNOT BE TERMED AS ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY AS IT IS MEANT FOR THE BENEFIT OF SPECIFIC PERSONS WHO INVEST THROUGH SPECIFIC COMMODITY EXCHANGES AND NOT FOR G ENERAL PUBLIC, (III) THE APPELLANT TRUST IS ELIGIBLE FOR BENEFIT O F EXEMPTION U/S. 10(23EC) AND TO AVOID TAX LIABILITY ON INTEREST INCOME IT HAS SOUGHT THE REG ISTRATION AS CHARITABLE INSTITUTION, WHICH IS WRONG AND CONTRARY TO THE FACTS OF THE CAS E, THE PROVISIONS OF INCOME TAX ACT, 1961 AND THE RULES MADE THEREUNDER. 6552/13NCDEX 2 THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND AND /OR MODIFY ALL OR ANY OF THE ABOVE GROUNDS OF APPEAL ON OR BEFORE THE DATE OF HEARING. BRIEF FACTS: 2. ASSESSEE-TRUST IS FORMED BY NATIONAL COMMODITY AND DERIVATIVES EXCHANGE LTD.,WHICH IS A RECOGNISED STOCK EXCHANGE U/S.4 OF THE SECURITIES C ONTRACT(REGULATION ACT,1956).WITH A VIEW TO PROTECT THE INTEREST OF INVESTOR REGARDING LEGITIMA TE INVESTMENT CLAIMS THE GOVERNMENT OF INDIA VIDE NOTIFICATION NO. F.14/4/SE/85 DATED 22.8.1985 STIPU LATED SETTING UP AN INVESTOR PROTECTION FUND BY ALL RECOGNISED STOCK EXCHANGE. IN PURSUANT TO THE S AID NOTIFICATION OF THE GOVERNMENT OF INDIA, SEBI HAS ALSO CIRCULATED COMPREHENSIVE GUIDELINES VIDE T HE CIRCULAR DATED 28.10.2004 FOR SETTING UP THE INVESTOR PROTECTION FUND BY THE STOCK EXCHANGE. NAT IONAL COMMODITY AND DERIVATIVES EXCHANGE LTD.HAS SET UP INVESTOR PROTECTION FUND BEING THE A SSESSEE HAVING FOLLOWING OBJECTS: A) COMPENSATING INVESTORS, WHO SUFFER LOSS ON ACCOU NT OF ANY DEFAULTER MEMBER, THROUGH WHOM THEY TRADE AND/OR WHO HAD UNDERTAKEN TO SETTLE THEI R TRADE, IN ACCORDANCE WITH THE CONDITION MENTIONED HEREINAFTER. B) TAKING APPROPRIATE MEASURES FOR INVESTOR EDUCATI ON AND TRAINING. C) PROMOTING AWARENESS AMONG INVESTORS AT LARGE. D) CONDUCTING RESEARCH OR FACILITATING AND FINANCIN G RESEARCH ON SUBJECT OF INVESTOR PROTECTION, COMPENSATION, EDUCATION AND AWARENESS AND ALLIED SU BJECTS, EITHER BY ITSELF. VIDE ITS APPLICATION,DATED 15.03.2013,IT APPLIED FO R REGISTRATION U/S 12A OF THE ACT.THE DIT-E, REJECTED THE APPLICATION VIDE ORDER DATED 24.09.2013,HOLDING THAT THE ACTIVITY OF THE ASSESSEE BEING CARRIED OUT WERE NOT FOR THE OBJECT OF THE GENERAL PUBLIC UTILITY BUT WERE MEANT FOR BENEFIT FOR SPECI FIC PERSONS INVESTING THROUGH SPECIFIC STOCK EXCHANGES AND THAT THE IT DID NOT QUALIFY AS A CHARITABLE INSTITUTION,THAT IT DID NOT CATER FOR ANY PUBLIC AT LARGE BUT IT HAD BEEN CREATED TO INDEMNITY THE INVESTORS AGAINST THE LOSS CAUSED ON ACCOUNT OF NEG LIGENCE ETC. 3. BEFORE US THE AUTHORISED REPRESENTATIVE(AR)SUBMITTE D THAT AN IDENTICAL ISSUE HAS BEEN CONSIDERED AND DECIDED BY THE TRIBUNAL IN CASE OF INTER-CONNEC TED STOCK EXCHANGE INVESTORS PROTECTION FUND VIDE ORDER,DATED 20.9.2013(ITA/7436/M/2011).HE POIN TED OUT THAT THE OBJECTS AND FACTS AND CIRCUMSTANCES IN THE CASE OF THE ASSESSEE AS WELL A S IN THE CASE OF INTERCONNECTED STOCK EXCHANGE INVESTORS PROTECTION FUND WERE IDENTICAL,THAT THE G ROUNDS ON WHICH THE APPLICATION FOR REGISTRATION HAS BEEN REJECTED BY THE DIT-E WERE ALSO IDENTICAL. DEPARTMENTAL REPRESENTATIVE(DR)LEFT THE ISSUE TO THE DISCRETION OF THE BENCH. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT IN THE CASE OF INTERCONNECTED STOCK EXCHANGE INVESTORS PROTECTION FUND(SUPRA) THE TRIBUNAL HAS DELIBERATED UPON THE ISSUES AND HAS DECIDED IT IN THE FOLLOWING MANN ER: HOWEVER,A COMPREHENSIVE AND HOLISTIC READING OF TH E 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 OF THE STOCK EXCHANGE IS TO BE DECLARED AS A DEFAULTER FOLLOWING THE PRESCRIBED PROCEDURE. TWO, THE CORPUS OF THE FUND IS TO BE BUILT THROUGH, INTER ALIA, SHARE OF LISTING FEES, I NTEREST ON 1% LISTING DEPOSIT, PAID AND KEPT BY THE ISSUER COMPANIES WITH THE RESPECTIVE STOCK EXCHANGE S. AN INDIVIDUAL MEMBER OF A PARTICULAR MEMBER 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 CIRCULAR (FITTC/FII/02/2002 DATED 15.05.2002), MADE OVER TO THE CORPUS OF THE FUND. ACCORDINGLY, THE OBJECT OF THE APPLICANT CANNOT BE AS A SERVICE IN R ELATION TO ANY TRADE, ETC. FURTHER, EVEN ASSUMING SO, THE SAME DOES NOT INVOLVE ANY CONSIDERATION INA SMUCH AS NO QUID PRO QUO CAN BE ATTRIBUTED TO THE MANDATORY CONTRIBUTIONS TO THE FUND BY THE PART ICIPATING STOCK EXCHANGES. IN OUR CONSIDERED VIEW, THEREFORE, THE APPLICANT FUND IS A PUBLIC CHA RITABLE FUND, SET UP TO ADVANCE AN OBJECT OF 6552/13NCDEX 3 GENERAL PUBLIC UTILITY, AND HAS BEEN WRONGLY DENIED REGISTRATION AS ONE BY THE REVENUE. WE, ACCORDINGLY, VACATING THE FINDINGS OF THE COMPETENT AUTHORITY VIDE THE IMPUGNED ORDER, DIRECT IT TO GRANT REGISTRATION APPLIED FOR. WE DECIDE ACCORDING LY. RESPECFULLY,FOLLOWING THE ABOVE DECISION,WE DECIDE EFFECTIVE GROUND OF APPEAL IN FAVOUR OF THE ASSESSEE-TRUST AND DIRECT THE DIT-E TO GRANT REGIST RATION TO IT. AS A RESULT,APPEAL FILED BY THE STANDS ALLOWED. . ORDER PRONOUNCED IN TH E OPEN COURT ON 1 ST ,OCTOBER,2015. 01 2015 SD/- SD/- ( / SHAKTIJIT DEY) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER /MUMBAI, /DATE: 01.10.2015 . . . JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR B BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.