INTER-CONNECTED STOCK EXCHANGE INVESTORS PROTECTION FUND (ISE IPF), NAVI MUMBAI V. DIT (E), MUMBAI

ITA 7436/MUM/2011

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71117 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-09-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 16-08-2013
• Assessment Year: 2011-2012
• Appeal Filed On: 04-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: A H DALAL; RAJESH V SHAH
• Keywords: Charitable institution; Source of fund; Competent authority
• Section: 12

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUM BAI .. , , BEFORE SHRI B. R. MITTAL, JM AND SHRI SANJAY ARORA , AM ./ I.T.A. NO. 7436/MUM/2011 ( / ASSESSMENT YEAR: N.A.) INTER-CONNECTED STOCK EXCHANGE INVESTORS PROTECTION FUND (ISE IPF) C/. INTER-CONNECTED STOCK EXCHANGE OF INDIA LTD. TOWER NO.7, 5 TH FLOOR, INTERNATIONAL INFOTECH PARK, SECTOR 30A, VASHI, NAVI MUMBAI-400 703 / VS. DIRECTOR OF INCOME TAX (EXEMPTION) ROOM NO.616, 6 TH FLOOR, PIRAMAL CHAMBER, LAL BAUG, PAREL, MUMBAI-400 012 ! ./' ./PAN/GIR NO. AAATI 8422 Q ( !# /APPELLANT ) : ( $!# / RESPONDENT ) !# % / APPELLANT BY : SHRI A. H. DALAL & SHRI RAJESH V. SHAH $!# & % / RESPONDENT BY : SHRI PRAVEEN KUMAR ' ()* & + / DATE OF HEARING : 16.08.2013 ,-. & + / DATE OF PRONOUNCEMENT : 20.09.2013 / / O R D E R PER SANJAY ARORA, A. M.: THIS IS AN APPEAL BY THE ASSESSEE AGITATING THE ORD ER BY THE DIRECTOR OF INCOME- TAX (EXEMPTION), MUMBAI (DIT(E) FOR SHORT) DATED 23.08.2011, REJECTING THE ASSESSEES APPLICATION FOR REGISTRATION U/S.12A OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER). 2 ITA NO.7436/MUM/2011 (A.Y. 2011-12) INTER-CONNECTED STOCK EXCHANGE INVESTORS PROTECTION FUND (ISE IPF) VS. DIT (EXEMPTION) 2.1 OPENING THE ARGUMENTS FOR AND ON BEHALF OF THE ASSESSEE, IT WAS SUBMITTED BY ITS COUNSEL, SHRI A. H. DALAL, THAT THE ASSESSEE-APPELL ANT IS A TRUST FORMED AND SETTLED ON 29 TH DAY OF JUNE, 2009 BY INTER-CONNECTED STOCK EXCHANGE INDIA LTD. (ISEL), A COMPANY FORMED BY THE COMING TOGETHER OF THE 23 (THE TRUST DEED MENTIONS THE SAID NUMBER AT 36 THOUGH/ PB PGS. 04 - 15) REGIONAL STOCK EXCHANGES O F INDIA TO PROVIDE A COMMON PLATFORM FOR TRADING IN SHARES AND SECURITIES. THE ASSESSEE-TRUST WAS FORMED IN PURSUANCE OF THE SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI ) GUIDELINES/REGULATIONS FOR INVESTOR PROTECTION, WITH THE SOLE AIM OF CREATING A FUND WH ICH COULD PROVIDE COMPENSATION TO THE INVESTORS IN CASE OF LOSS ON ACCOUNT OF DEFAULT BY ANY MEMBER OF A PARTICIPATING, RECOGNIZED STOCK EXCHANGE. THE SAME IS A PUBLIC CHA RITABLE CAUSE, FALLING WITHIN THE SCOPE OF THE TERM CHARITABLE PURPOSE AS DEFINED U /S. 2(15), VIDE THE LAST LIMB THEREOF, I.E., THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERA L PUBLIC UTILITY. THE AMBIT OF THE SAME IS WELL-SETTLED PER A NUMBER OF DECISIONS BY NO LES S THAN THE HONBLE APEX COURT; IT CLARIFYING PER ITS RECENT DECISION IN CIT VS. GUJARAT MARITIME BOARD [2007] 295 ITR 561(SC) THE SAID TERM T O BE OF THE WIDEST CONNOTATION. THERE IS, AS SUCH, NO DENYING THE FACT THAT THE OBJECT OF THE TRUST QUALIFIES TO BE A CHARITABLE PURPOSE UNDER THE ACT. THE REVENUE HAS, HOWEVER, DENIED THE BENEFIT OF REGISTR ATION ON THE GROUND THAT THE SAME DOES NOT CATER TO THE MEMBERS OF THE PUBLIC AT LARGE, BU T ONLY TO THE MEMBERS OF THE PUBLIC WHO INVEST IN SHARES. IT IS NOT NECESSARY THAT THE OBJE CTS OF A TRUST OR FUND, TO QUALIFY AS FOR A CHARITABLE PURPOSE, SHOULD BE APPLICABLE TO ALL THE MEMBERS OF THE PUBLIC, AND IT WOULD SUFFICE IF THEY ARE SO TO MEMBERS DRAWN FROM A CROS S-SECTION OF THE PUBLIC ENGAGED IN A PARTICULAR TRADE OR ACTIVITY, AS THE INVESTING COMM UNITY IN THE INSTANT CASE. REFERENCE FOR THE PURPOSE WAS DRAWN BY HIM TO THE DECISION IN THE CASE OF AHMEDABAD RANA CASTE ASSOCIATION VS. CIT [1971] 82 ITR 704 (SC), COPY OF WHICH IS PLACED AT PAGES 60-63 OF THE ASSESSEES PAPER-BOOK (PB). IN FACT, CONTINUING FURTHER, HE WOULD SUBMIT THAT SUCH INVESTOR PROTECTION FUNDS SET UP BY THE BOMBAY AND THE CALCUTTA STOCK EXCHANGES H AVE ALREADY BEEN GRANTED REGISTRATION AS CHARITABLE FUNDS UNDER THE ACT BY THE DEPARTMENT, AND MUCH PRIOR TO THE 3 ITA NO.7436/MUM/2011 (A.Y. 2011-12) INTER-CONNECTED STOCK EXCHANGE INVESTORS PROTECTION FUND (ISE IPF) VS. DIT (EXEMPTION) CREATION OF SUCH FUND/S BY THE OTHER RECOGNIZED STO CK EXCHANGES ON BEING MANDATED BY SEBI, THE REGULATORY BODY OVERSEEING THE MANAGEMENT OF THE SECURITY TRANSACTIONS AND CAPITAL MARKETS, INCLUDING ALLIED LEGISLATION, IN I NDIA. AS SUCH, THE STAND OF THE DEPARTMENT IN THE INSTANT CASE IS BOTH UNTENABLE IN LAW, AND EVEN OTHERWISE INCONSISTENT AND, THUS, INCOMPREHENSIBLE. 2.2 THE LD. DR, ON THE OTHER HAND, WOULD SUBMIT THA T THE ASSESSEES OBJECTS, WITH REFERENCE TO WHICH IT CLAIMS TO BE SET UP FOR CHARI TABLE PURPOSE/S, FALLS UNDER THE LAST CATEGORY OF SUCH PURPOSES, INCLUSIVELY DEFINED U/S. 2(15) OF THE ACT, I.E., ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. A PROVISO TO THE PROVISION STANDS INSERTED BY FINANCE ACT, 2008 W.E.F. 01.04.2009, SO AS TO EXCLU DE THE SAME FROM THE AMBIT OF THE PROVISION WHERE IT INVOLVES ANY ACTIVITY IN THE NAT URE OF TRADE, COMMERCE OR BUSINESS, OR ANY ACTIVITY OF RENDERING ANY SERVICES IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS, WHERE THE SAME IS FOR A CESS OR FEE OR ANY OTHER CO NSIDERATION, IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION OR RETENTION OF THE INCOME FROM SUCH ACTIVITY. IN THE INSTANT CASE, THE FUNDING OF THE ACTIVITIES OF THE ASSESSEE-TRUST IS BY WAY OF CONTRIBUTIONS RECEIVED FROM THE STOCK EXCHANGE/S, AND WHICH ARE FURTHER RECEIVED BY THEM FROM THE COMPANIES LISTED ON THE STOCK EXCHANGE, BY WAY OF A SEPARATE CHARGE, I. E., AS CONTRIBUTION TO THE CONSUMER PROTECTION FUND. AS SUCH, THE ASSESSEES CLAIM OF I T BEING A CHARITABLE PURPOSE IN TERMS OF SECTION 2(15) WOULD NOT BE APPLICABLE AFTER THE SAI D AMENDMENT IN LAW, I.E., W.E.F. A.Y. 2009-10. THE ONLY DIFFERENCE IS THAT THE ASSESSEE, INSTEAD OF RECEIVING SUCH CONTRIBUTIONS DIRECTLY FROM THE BENEFICIARIES, THE MEMBERS OF THE PARTICIPATING STOCK EXCHANGES, DOES SO INDIRECTLY, THE OSTENSIBLE SOURCE BEING THE STOCK E XCHANGE/S, EVEN AS ADMITTEDLY IT IS ONLY THE MEMBERS OF THE RESPECTIVE STOCK EXCHANGES WHO H AVE A STAKE IN ITS RESOURCES, AND WHICH ARE FURTHER RAISED FROM THE COMPANIES LISTED THEREAT BY WAY OF A FEE OR CESS. THE INDIRECT MANNER OF RECEIVING SUCH FEES OR CONSIDERA TION WOULD NOT, HOWEVER, IMPACT THE APPLICABILITY OF THE LAW, AS AMENDED, WHICH CLEARLY PROVIDES FOR THE EXCLUSION FROM THE AMBIT OF A CHARITABLE PURPOSE ACTIVITIES FALLING WI THIN THE LAST LIMB OF SECTION 2(15) WHERE A CESS OR FEES OR CONSIDERATION QUA THE SAME IS CHARGED. THEREFORE, GUJARAT MARITIME 4 ITA NO.7436/MUM/2011 (A.Y. 2011-12) INTER-CONNECTED STOCK EXCHANGE INVESTORS PROTECTION FUND (ISE IPF) VS. DIT (EXEMPTION) BOARD , THE RESPONDENT-COMPANY IN THE CASE OF CIT VS. GUJARAT MARITIME BOARD (SUPRA), WOULD ALSO BE NOT LIABLE TO BE CONSIDERED AS A CHAR ITABLE INSTITUTION UNDER THE AMENDED LAW, WHICH APPLIES IN THE INSTANT CASE. THE MATTER STANDS ABUNDANTLY EXPLAINED BY THE CBDT VIDE ITS CIRCULAR NO. 11/2008 DATED 19.12.2008 , PLACING A COPY OF THE SAME ON RECORD. THIS WOULD ALSO SERVE TO DISTINGUISH THE AS SESSEES CASE FROM THAT OF THE FUNDS ESTABLISHED OR SET UP BY THE BOMBAY AND THE CALCUTT A STOCK EXCHANGES RESPECTIVELY, WHICH WERE GRANTED REGISTRATION BY THE DEPARTMENT A S PER THE EXTANT LAW, I.E., AS IT STOOD PRIOR TO ITS AMENDMENT BY FINANCE ACT, 2008. ON A QUERY BY THE BENCH THAT, SO HOWEVER, THE CONTR IBUTIONS UNDER REFERENCE, I.E., RECEIVED FROM THE RECOGNIZED STOCK EXCHANGES AND/OR MEMBERS THEREOF, STAND ALREADY EXCLUDED FROM THE AMBIT OF THE TOTAL INCOME UNDER THE ACT U/S.10(23EA). FURTHER, THAT THE INCOME OF THE STOCK EXCHANGES IS SUBJECT TO TAX , AND WHICH WOULD ALSO, THEREFORE, INCLUDE THE CESS OR FEE LEVIED BY WAY OF CONSUMER P ROTECTION FUND TO THE COMPANIES LISTED THEREAT. AS SUCH, THE PLEA OF THE APPLICATION OF TH E PROVISO TO SECTION 2(15) TO SUCH CONTRIBUTIONS, SO AS TO EXCLUDE THE ASSESSEES ACTI VITY FROM THE PURVIEW OF CHARITABLE PURPOSE, MAY NOT BE OF ANY IMPORT INASMUCH AS SUCH FUNDING OF THE ASSESSEE-TRUST IS ALREADY PROVIDED FOR BY LAW, ACCORDING IT TAX-EXEMP T STATUS U/S.10(23EA). TO THAT, HE WOULD REPLY BY STATING THAT IN THAT CASE THERE OUGH T TO BE NO NEED FOR THE ASSESSEE TO APPLY FOR REGISTRATION U/S.12AA AS A PUBLIC CHARITABLE TR UST; ITS PRINCIPAL SOURCE OF FUNDING, I.E., BY WAY OF CONTRIBUTIONS AFORE-SAID, BEING ALREADY E XEMPT FROM TAX U/S.10(23EA). THE ASSESSEE, BY DOING SO, SEEKS TO ENLARGE THE SCOPE O F THE EXEMPTION FROM TAX AS ACCORDED TO IT BY LAW, I.E., BY EXTENDING IT TO INCOME FROM OTHER ACTIVITIES, VIZ., TRADE INCOME AND THE INTEREST ON THE PARKING OF ITS SURPLUS FUNDS. O N THE BENCH REQUIRING HIM TO SPECIFY THE SAID ACTIVITY OR THE INCOME GENERATED THUS, EUPHEMI STICALLY TERMED BY HIM AS TRADE INCOME, HE WAS HOWEVER UNABLE TO SPECIFY ANY, REST RICTING HIS OBSERVATION TO ONLY INTEREST INCOME, WHICH THE ASSESSEE MAY STAND TO EA RN BY DEPOSIT/INVESTMENT OF ITS SURPLUS FUNDS WITH THE BANK OR ANY OTHER PERMISSIBLE AVENUE S. 5 ITA NO.7436/MUM/2011 (A.Y. 2011-12) INTER-CONNECTED STOCK EXCHANGE INVESTORS PROTECTION FUND (ISE IPF) VS. DIT (EXEMPTION) 2.3 IN REJOINDER, THE LD. AR WOULD SUBMIT THAT IT I S BY NOW A WELL SETTLED POSITION THAT IT IS NOT NECESSARY FOR THE ACTIVITIES OF A TRUST O R FUND TO CONSTITUTE A CHARITABLE PURPOSE FOR IT TO BE GRANTED REGISTRATION UNDER THE ACT. TH OUGH OF-COURSE SUCH REGISTRATION IS NECESSARY FOR THE APPLICABILITY AND THE AVAILMENT O F BENEFIT U/S.11 & 12, THE EFFECT OF REGISTRATION WOULD NOT IPSO FACTO LEAD TO THE GRANT OF EXEMPTION U/S.11 R.W.S. 12 OF THE ACT, AS WHERE THE OBJECTS OR THE PURPOSE OF UTILIZA TION OF THE FUNDS IS NOT DEEMED TO BE FOR A CHARITABLE OR RELIGIOUS PURPOSE. HOWEVER, THE REG ISTRATION COULD NOT BE DENIED ON THAT BASIS. FOR THIS, HE WOULD REFER TO, AMONG OTHERS, T HE DECISION BY THE TRIBUNAL IN THE CASE OF RAJASTHAN HOUSING BOARD VS. CIT [2012] 51 SOT 383 (JP), ADVERTING TO AND READING FR OM THE RELEVANT PART THEREOF (PB PAGES 99-102). ITS ST ANDS AMPLY CLARIFIED THAT THE ASSESSING OFFICER (AO) IS EMPOWERED TO EXAMINE THE ALLOWABILI TY OF EXEMPTION U/S.11 WHERE THE REVENUE CONSIDERS THE OBJECT/S AS NOT CHARITABLE. T HE SAME WOULD NOT HAVE A BEARING AS REGARDS THE GRANTING OF REGISTRATION U/S.12AA OF TH E ACT IS CONCERNED. IN THE INSTANT CASE, IN FACT, THE PROVISO TO S. 2(15) HAS NO APPLICATION, AND THE ASSESSEES ACTIVITIES SQUARELY FALL WITHIN THE AMBIT OF A CHARITABLE PURPOSE, SO T HAT CONSIDERED EITHER WAY, REGISTRATION THERETO COULD NOT BE DENIED. 3. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. 3.1 THE FIRST ASPECT THAT NEEDS TO BE CLARIFIED IN THE INSTANT CASE IS THAT IT IS A CASE OF REFUSAL TO GRANT REGISTRATION U/S.12AA(1), AND NOT OF WITHDRAWAL OF REGISTRATION ALREADY GRANTED, I.E., U/S.12AA(3) OF THE ACT. IN THIS REGA RD IT WOULD BE PERTINENT TO REPRODUCE THE RELEVANT PART OF THE ORDER BY THE TRIBUNAL IN THE C ASE OF MAHARASHTRA HOUSING & AREA DEVELOPMENT AUTHORITY V. ADIT(E) [2013] 58 SOT 196 (MUM), UPHOLDING ITS EARLIER ORDER IN RAJASTHAN HOUSING BOARD (SUPRA), RELIED UPON BY THE ASSESSEE. THE REGISTRAT ION U/S.12AA IS GRANTED BY THE COMMISSIONER WHERE HE IS SATISFIED ABOUT: (A) THE OBJECTS OF THE TRUST OR INSTITUTION; AND (B) THE GENUINENESS OF THE ACTIVITIES THEREOF. 6 ITA NO.7436/MUM/2011 (A.Y. 2011-12) INTER-CONNECTED STOCK EXCHANGE INVESTORS PROTECTION FUND (ISE IPF) VS. DIT (EXEMPTION) THE ISSUE IN RAJASTHAN HOUSING BOARD (SUPRA) WAS OF WITHDRAWAL OF REGISTRATION U/S. 12AA(3), SO THAT AFTER REPRODUCING THE RELEVANT PAR TS OF THE PROVISION, I.E., 12AA(1) & 12AA(3), THE TRIBUNAL IN MAHARASHTRA HOUSING & AREA DEVELOPMENT AUTHORITY (SUPRA) OPINED AS FOLLOWS (PARA 701, PG. 204): THUS, IT IS ONLY UPON BEING SATISFIED ABOUT THE OB JECTS OF THE APPLICANT, AS WELL AS ABOUT THE GENUINENESS OF ITS ACTIVITIES THA T THE COMMISSIONER IS OBLIGED TO REGISTER A TRUST/INSTITUTION AS CHARITAB LE, BY AN ORDER IN WRITING, BEING ALSO REQUIRED TO DO SO WHERE NOT SO SATISFIED . CLEARLY, THE SATISFACTION QUA THE OBJECTS IS ONLY WITH REGARD TO THEIR BEING F OR A CHARITABLE (OR RELIGIOUS) PURPOSE/S. IT CANNOT BUT BE OTHERWISE; T HE REGISTRATION BEING ONLY TOWARD THE APPLICANT BEING A PUBLIC CHARITABLE (OR RELIGIOUS) TRUST OR INSTITUTION UNDER THE ACT. THIS, IN FACT, IS THE ED IFICE OR THE TERRA FIRMA ON WHICH THE PROVISION RESTS . AS SUCH, EVEN THOUGH THE REGISTRATION CERTIFICATE OR THE COMMUNICATION IN ITS RESPECT MAY NOT, OR IS NOT REQUIRED TO, CONTAIN AN EXPLICIT FINDING OR MENTION AS TO THE SATISFACTI ON WITH REGARD TO THE OBJECTS OF THE TRUST OR INSTITUTION BEING FOR CHARI TABLE PURPOSE/S, THAT IS THE BASIS UPON WHICH, OR A CONDITION PRECEDENT TO THE G RANT OF THE STATUS OF A PUBLIC CHARITABLE ENTITY IN-SO-FAR AS THE ACT IS CO NCERNED, THAT THE REGISTRATION THERE-UNDER CONFERS. [EMPHASIS, BY UNDERLINI NG, OURS] WE, THUS, CONCUR WITH THE ARGUMENT OF THE LD. DR TH AT GUJARAT MARITIME BOARD , THE RESPONDENT-COMPANY IN THE CASE GUJARAT MARITIME BOARD (SUPRA) COULD NOT BE GRANTED REGISTRATION U/S.12AA(1) UNDER THE AMENDED LAW. WE, THEREFORE, ARE NOT IN AGREEMENT WITH, AND REJECT THE ARGUMENT OF THE LD. AR THAT TH E ASSESSEE-APPELLANT IS LIABLE TO BE REGISTERED AS A CHARITABLE INSTITUTION U/S.12AA DE HORS THE APPLICABILITY OF SECTION 2(15) OF THE ACT, I.E., EVEN IF ITS OBJECTS ARE NOT CHARITAB LE IN NATURE IN TERMS OF S.2(15). 3.2 COMING, NEXT, TO THE OBJECTIONS, I.E., THE REAS ON/S THAT INFORM THE ORDER OF THE LD. DIT (EXEMPTION) TOWARD THE ASSESSEES OBJECTS BEING NOT CHARITABLE, WE SHALL CONSIDER THE SAME IN SERIATIM, AS UNDER: (A) THAT THE APPELLANT FUND IS FOR THE BENEFIT OF THE S PECIFIC PERSONS WHO INVEST IN A PARTICULAR MARKET, AND NOT FOR THE GENERAL PUBLIC . 7 ITA NO.7436/MUM/2011 (A.Y. 2011-12) INTER-CONNECTED STOCK EXCHANGE INVESTORS PROTECTION FUND (ISE IPF) VS. DIT (EXEMPTION) AS EXPLAINED BY THE APEX COURT IN THE CASE OF AHMEDABAD RANA CASTE ASSOCIATION (SUPRA), AN OBJECT BENEFICIAL TO A SECTION OF THE P UBLIC IS AN OBJECT OF GENERAL PUBLIC UTILITY. TO SERVE A CHARITABLE PURPOSE IT IS NOT NECESSARY T HAT THE OBJECT LEADS TO THE BENEFIT THE WHOLE MANKIND OR ALL PERSONS IN A PARTICULAR COUNTR Y OR EVEN STATE, AND IT WOULD BE SUFFICIENT IF THE INTENTION IS TO BENEFIT A SECTION OF THE COMMUNITY, SUFFICIENTLY DEFINED AND IDENTIFIABLE BY SOME COMMON QUALITY OF A PUBLIC OR IMPERSONAL NATURE . WHAT IS TO BE SEEN IS THE INTENTION TO BENEFIT A SECTION OF THE PUBLIC AS DISTINGUISHED FROM A SPECIFIED INDIVIDUAL OR GROUP. AS SUCH, WE FIND NO MERIT IN T HE SAID OBJECTION BY THE LD. DIT (E). (B) THAT THE CONTRIBUTION WHICH THE PARTICIPATING MEMBE R STOCK EXCHANGE IS REQUIRED TO MAKE TO THE APPELLANT-FUND IS TOWARD DEFINED SER VICES, SO THAT THE SAME, AS WELL AS THE INTEREST EARNED THEREON, WOULD BE LIABLE TO BEING T AXED, AND WHICH IS SOUGHT TO BE EVADED BY SEEKING REGISTRATION AS THE CHARITABLE INSTITUTI ON . IT WOULD BE RELEVANT TO REFER TO THE RELEVANT PROVI SION, I.E., SECTION 10(23EA) OF THE ACT, GRANTING EXEMPTION TO THE INCOME BY WAY OF CONTRIBU TIONS RECEIVED BY THE RECOGNIZED STOCK EXCHANGE. THE SAME READS AS UNDER: INCOMES NOT INCLUDED IN TOTAL INCOME . 10. IN COMPUTING THE TOTAL INCOME OF A PREVIOUS YEA R OF ANY PERSON, ANY INCOME FALLING WITHIN ANY OF THE FOLLOWING CLAUSES SHALL NOT BE INCLUDED (1) .. (2) .. (23EA) AND INCOME BY WAY OF CONTRIBUTIONS RECEIVED FROM RECOGNIZED STOCK EXCHANGES AND THE MEMBERS THEREOF, OF SUCH IN VESTOR PROTECTION FUND SET UP BY RECOGNIZED STOCK EXCHANGES IN INDIA, EITH ER JOINTLY OR SEPARATELY, AS THE CENTRAL GOVERNMENT MAY, BY NOTIFICATION IN T HE OFFICIAL GAZETTE, SPECIFY IN THIS BEHALF: PROVIDED THAT WHERE ANY AMOUNT STANDING TO THE CREDIT OF TH E FUND AND NOT CHARGED TO INCOME-TAX DURING ANY PREVIOUS YEAR IS S HARED, EITHER WHOLLY OR IN PART, WITH A RECOGNIZED STOCK EXCHANGE, THE WHOL E OF THE AMOUNT SO SHARED SHALL BE DEEMED TO BE THE INCOME OF THE PREV IOUS YEAR IN WHICH SUCH AMOUNT IS SO SHARED AND SHALL ACCORDINGLY BE CHARGE ABLE TO INCOME-TAX; OUR FIRST OBSERVATION IN THIS REGARD IS THAT ONCE I T IS DECIDED THAT THE ASSESSEES PRINCIPAL OBJECT IS FOR THE ADVANCEMENT OF AN OBJECT OF ANY G ENERAL PUBLIC UTILITY, UNDER WHICH 8 ITA NO.7436/MUM/2011 (A.Y. 2011-12) INTER-CONNECTED STOCK EXCHANGE INVESTORS PROTECTION FUND (ISE IPF) VS. DIT (EXEMPTION) CLAUSE THE ASSESSEES CLAIM TO BEING FOR A CHARITAB LE PURPOSE IN TERMS OF SECTION 2(15) LIES, IT WOULD NOT BE MATERIAL IF THE INCOME BY WAY OF CO NTRIBUTIONS FROM THE MEMBER STOCK EXCHANGES IS OTHERWISE TAX EXEMPT U/S. 10(23EA) OR NOT. WHETHER, THEREFORE, THE INCOME OF THE TRUST IS OTHERWISE LIABLE TO TAX OR NOT, WHI CH SHALL BE ENTITLED TO EXEMPTION U/S.11 ONLY UPON IT BEING APPLIED FOR A CHARITABLE PURPOSE /S, IT WOULD, IN OUR OPINION, BE OF NO CONSEQUENCE OR RELEVANCE IN DETERMINING THE QUESTIO N OF IT BEING A CHARITABLE INSTITUTION OR NOT, AND WHICH SHOULD, THEREFORE, BE LIABLE TO B E REGISTERED AS SUCH, I.E., WHERE OTHERWISE ELIGIBLE THEREFOR. CONTINUING FURTHER, WE HAVING FOUND THIS TO BE NOT A RELEVANT CONSIDERATION, IT IS, THEREFORE, IMMATERIAL WHETHER THE APPLICANTS FUNDS IN THE INSTANT CASE ARE LIABLE TO BE SHARED WITH THE CONTRIBUTING STOCK EXCHANGE/S OR NO T. ON A SPECIFIC QUERY BEING PUT TO THE LD. AR DURING HEARING IT STOOD CLARIFIED THAT THE C ONTRIBUTING STOCK EXCHANGES DO NOT RETAIN ANY SHARE OR RIGHT IN THE AMOUNT CONTRIBUTED BY THEM OR THEIR MEMBERS. SO HOWEVER, TO THE EXTENT IT IS BY WAY OF PERFORMAN CE LINKED, OR EVEN A UNIFORM CHARGE ON THE COMPANIES LISTED ON THE STOCK EXCHANG E/S, AS, SAY, A PERCENTAGE OF THEIR REVENUE, IN OUR VIEW, THE SAME COULD BE AN ARRANGEM ENT TO INDEMNIFY THEIR MEMBERS BY CHARGING THEM A PARTICULAR AMOUNT, EVEN THOUGH TERM ED AS A CONTRIBUTION. THE SAID MEMBERS MAY WELL SEEK INSURANCE IN RESPECT OF THE L OSSES LIABLE TO BE SUSTAINED IN THE COURSE OF AND IN PURSUANCE TO THEIR TRADE, WITH THE INSURANCE COMPANY CREATING SUCH A FUND, AND FOR WHICH IT MAY CHARGE AN INSURANCE PREM IA. ON THE OTHER HAND, IF THE CONTRIBUTIONS IS NOT LINKED TO ANY SERVICE, MADE VO LUNTARILY BY THE RECOGNIZED STOCK EXCHANGE, WITH IT RETAINING NO LIEN OR RIGHT ON THE SAID CONTRIBUTION, NO CHARGE AS TO THE SAME BEING HIT BY THE PROVISO TO S. 2(15) WOULD HOLD AND, CONSEQUENTLY, THE REVE NUES OBJECTION WOULD NOT BE VALID. WE HAVE PERUSED THE TRUST DEED FORMING PART OF THE APPLICATION FOR REGISTRATION UNDER FORM 10A. THE TRUST IS FORMED TO SERVE THE CA USE OF THE INVESTING PUBLIC AT LARGE. THOUGH THE INVESTOR CONCERNS ARE SOUGHT TO BE ADEQU ATELY MET THROUGH THE BYE LAWS AND REGULATIONS OF THE STOCK EXCHANGES, AS WELL AS THE GUIDELINES ISSUED FROM TIME TO TIME BY 9 ITA NO.7436/MUM/2011 (A.Y. 2011-12) INTER-CONNECTED STOCK EXCHANGE INVESTORS PROTECTION FUND (ISE IPF) VS. DIT (EXEMPTION) SEBI, THE CAPITAL MARKET REGULATOR, WHICH IN FACT A RE EQUALLY APPLICABLE TO THE APPLICANT- FUND ALSO, YET IN VIEW OF THE PROCEDURES AND PROLIX ITIES THEREOF, THE NEEDS OF THE INVESTORS ARE NOT POSSIBLE TO BE MET IN ALL CASES AND, IN ANY CASE, WITH SUFFICIENT DISPATCH, I.E., AS MAY BE WARRANTED IN THE EXIGENCIES OF THE SITUATION . IN FACT, THE INVESTORS COMPLAINT IS TO BE FINALLY SETTLED ON THE BASIS OF THE DECISION BY THE INVESTORS SERVICE COMMITTEE OF THE SETTLER-COMPANY, I.E., ISEL. FURTHER, THE DEED MAKE S IT ABUNDANTLY CLEAR THAT THE FUND MONIES SHALL BE TOWARD SETTLING THE CLAIMS OF THE I NVESTORS AND NOT TO COMPENSATE THE INDIVIDUAL MEMBERS OF THE STOCK EXCHANGE WHO HAVE D EFAULTED OR OTHERWISE INCURRED LOSSES. WE, THEREFORE, HAVE NO DOUBT IN OUR OWN MIN D THAT THE OBJECT IS ONE FOR ADVANCEMENT OF GENERAL PUBLIC UTILITY; THE FUND HAV ING BEEN SET UP ONLY IN PURSUANCE TO AND COMPLY WITH THE ADVISORY/S ISSUED BY THE SEBI T O THE RECOGNIZED STOCK EXCHANGES FROM TIME TO TIME. THE ONLY ISSUE THAT, THEREFORE, SURVIVES IS WITH RE GARD TO THE BUSINESS MODEL OR THE FUNDING OF THE APPLICANT FUND. THIS IS NOT FOR THE REASON THAT THE CONTRIBUTIONS TO THE FUND BY THE MEMBER STOCK EXCHANGE ARE EXEMPT U/S. 10(23A ), AS THE LD. DR WOULD POINT TO US. AS EXPLAINED, THE SAME, TO OUR MIND, IS IRRELEVANT; IT IS FOR THE ASSESSEE TO SEE AS TO WHICH COURSE OF ACTION IS MORE BENEFICIAL OR DESIRABLE TO IT . BESIDES, EXEMPTION U/S. 10(23EA) IS SUBJECT TO THE NOTIFICATION BY THE CENTRAL GOVERNME NT, TO WHICH THERE IS NO REFERENCE IN THE ORDERS OF THE AUTHORITIES BELOW. OUR REASON FOR THE SAME IS THAT IF THE SAID FUNDING BY WAY OF CONTRIBUTION BY THE STOCK EXCHANGES IS, IN T URN, RECOVERED FROM THE INDIVIDUAL MEMBER BROKERS, THE ARRANGEMENT WOULD IN ESSENCE BE COMES ONE OF INSURANCE BY THE INDIVIDUAL BROKERS OF THE STOCK EXCHANGE TO MEET TH EIR LIABILITIES ARISING IN THE COURSE OF THEIR TRADE. THIS IS AS, SIMPLY PUT, THE LOSS TO TH E INVESTOR ARISING ON ACCOUNT OF THE DEFAULT OF THE BROKER IS ONLY THE BROKERS LIABILITY, AND A TRADE LIABILITY AT THAT. THIS THEN ASSUMES THE FORM OF AN UNDERWRITING ARRANGEMENT, OR AN INSU RANCE SCHEME UNDER THE AEGIS OF THE STOCK EXCHANGE, WHICH IS ONLY A TRADE ASSOCIATION S ET UP OR FORMED FOR THE BENEFIT OF ITS MEMBERS. THE ONLY DIFFERENCE IS THAT SUCH A FUND IN STEAD OF BEING CREATED BY THE SETTLOR STOCK EXCHANGE WITHIN ITSELF, IS SO DONE BY WAY OF A SEPARATE FUND. THE WORD 10 ITA NO.7436/MUM/2011 (A.Y. 2011-12) INTER-CONNECTED STOCK EXCHANGE INVESTORS PROTECTION FUND (ISE IPF) VS. DIT (EXEMPTION) CONSIDERATION IN PROVISO TO SECTION 2(15) IS, TO OUR MIND, WIDE ENOUGH TO C OVER SUCH INDIRECT FUNDING, IF ANY. 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 FOLLOWI NG THE PRESCRIBED PROCEDURE. TWO, THE CORPUS OF THE FUND IS TO BE BUILT THROUGH, INTER ALIA , SHARE OF LISTING FEES, INTEREST ON 1% LISTING DEPOSIT, PAID AND KEPT BY THE ISSUER COMPAN IES WITH THE RESPECTIVE STOCK EXCHANGES. AN INDIVIDUAL MEMBER OF A PARTICULAR MEM BER STOCK EXCHANGE IS NOT CALLED UPON TO PAY ANY DIRECT CHARGES TO THE APPLICANT FUN D. IN FACT, A PART OF THE AUCTION MONEY OF THE DEFAULTING MONEY IS ALSO, IN TERMS OF THE SE BI CIRCULAR (FITTC/FII/02/2002 DATED 15.05.2002), MADE OVER TO THE CORPUS OF THE FUND. A CCORDINGLY, 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 QUID 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 CHARITABLE FUND, SET UP TO ADVANCE AN OBJECT OF GENERAL PUBLIC UTILITY, AND HA S BEEN WRONGLY DENIED REGISTRATION AS ONE BY THE REVENUE. WE, ACCORDINGLY, VACATING THE F INDINGS OF THE COMPETENT AUTHORITY VIDE THE IMPUGNED ORDER, DIRECT IT TO GRANT REGISTR ATION APPLIED FOR. WE DECIDE ACCORDINGLY. 4. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED. 0. 1 (230 & ) 4 & 56 ORDER PRONOUNCED IN THE OPEN COURT ON SEPTEMBER 20, 2013 SD/- SD/- (B. R. MITTAL) (SANJAY ARORA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER ' * MUMBAI; 7( DATED : 20.09.2013 11 ITA NO.7436/MUM/2011 (A.Y. 2011-12) INTER-CONNECTED STOCK EXCHANGE INVESTORS PROTECTION FUND (ISE IPF) VS. DIT (EXEMPTION) ).(../ ROSHANI , SR. PS ! ' #$%& ' &$ / COPY OF THE ORDER FORWARDED TO : 1. !# / THE APPELLANT 2. $!# / THE RESPONDENT 3. ' 8 ( ) / THE CIT(A) 4. ' 8 / CIT - CONCERNED 5. ;)<= $ (>2 , + >2. , ' * / DR, ITAT, MUMBAI 6. =?3 @* / GUARD FILE ! ( / BY ORDER, )/(* + (DY./ASSTT. REGISTRAR) , ' * / ITAT, MUMBAI