TaxTMI 
TaxTMI 
2015 (2) TMI 539
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....ceedings, the A.O. noticed that the assessee has disclosed listing fee income only to the tune of Rs. 1.15 Crores, whereas it was seen that aggregate amount of listing fee receivable by the assessee was Rs. 2.49 Crores. The A.O. further noticed that the assessee has appropriated following amounts out of the listing feereceipts and accordingly disclosed the listing fee net of these amounts. (a) Investor Service Reserve Rs. 23,16,889 (b) Investors Protection Reserve Rs. 1,15,844 (c) Contribution to SEBI Rs. 12,58,445 Further, the assessee had received a sum of Rs. 7,69,238/- as interest income out of the deposits made from the amounts received from the companies at the time of their listing. The assessee had transferred the above said interest also to Investor Service Reserve account. The assessee did not disclose the above said interest income also as its income. The submission of the assessee in this regard was that the above said amounts have been diverted by overriding title as per the directions issued by Securities &Exchange Board of India (SEBI) and hence they shall not constitute income of the assessee. The Assessing Officer did not accept the contentions of the asse....
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....owever, accounted for the listing fee on cash basis, which is against the concept of mercantile system of accounting followed by the assessee. The Ld. D.R further submitted that the assessee has been collecting the listing fee from various companies for the past several years and hence the claim of uncertainty over its collection is not tenable. 7. On the contrary, the Ld. A.R submitted that the assessee is collecting listing fee every year from various companies listed in the Stock exchange run by the assessee. However, the assessee was constrained to suspend its trading platform due to technical advancements and hence the stock exchange has no trading platform since 2003 onwards. This situation occurred mainly due to formation of digital stock exchanges like BSE and NSE. Hence, the companies listed in the stock exchange of the assessee are not getting effective benefits of a Stock exchange. Hence, the assessee was not in a position to enforce the payment of listing fee from its members lest they should delist their company from the Stock exchange. However, the companies still remain attached with the assessee due to various services, advices and guidance provided by the assess....
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.... in the category of "Uncertainty". 9. Since the assessee and the company have entered into a listing agreement, the company is expected to abide by the terms and conditions of the same, which includes payment of listing fee also. Hence, as contended by the Ld. D.R, the assessee would automatically get an enforceable right over the collection of the listing fee in terms of the agreement entered between them. At the same time, there is also merit in the submission of the assessee that there is no uncertainty over the continuation of the listing agreement due to the emergence of digital stock exchanges like BSE and NSE. However, we are of the view that the responsibility to show that there was uncertainty over the collection of the listing fee lies with the assessee. Hence, in our view, the assessee should furnish the company wise details relating to Rs. 1.34 crores and also demonstrate the existence of "Uncertainty" over its collection. In the absence of the explanations of the assessee as to how the element of uncertainty exists in respect of listing fee receivable from each of the company, it may not be possible for the Tribunal to adjudicate this issue. Accordingly, we are of t....
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....ilized in the manner specifically directed by the Securities Exchange Board of India (SEBI) asper their guidelines. Actually, the nomenclature for such" reserves" should have been 'funds', so that the nature of the amounts could be understood as funds and not reserves. SEBI had clearly stipulated its treatment vide its Circular dated23.08.2001 giving comprehensive guidelines to set up Investor Protection Fund and Investor Service Fund. Actually appropriation at the stipulated rate in the guidelines from 1% of the listing fees had to be transferred to Investor Protection Fund/Customer Protection Fund and 10% to Investor Service Fund on a quarterly basis along with 100% of the interest earned on such amounts kept as deposit for own use from prescribed services, and these were bound to be utilized as per SEBI guidelines communicated for the following purposes:- (i) The IPF should not be utilized for any purpose other than meeting the legitimate investment claims of the clients of the defaulting members that were not speculative in nature. (ii) The interest earned on the IPF could be utilized only for the purpose of investor education, awareness and research and any unutilized in....
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....on of which the appellant had no actual control. Hence, the above amounts did not belong to appellant by overriding title in favour of SEBI and requires to be reduced from the trading receipts, as has been rightly done by the appellant for the assessment year under consideration and hence the addition of Rs. 32,01,971/- on the same being therefore untenable, is directed to be deleted." 11. Before us, the Ld. counsel appearing for the assessee placed reliance on various case laws, more particularly, the decision rendered by Hon'ble jurisdictional High Court in the case of CIT v. Salem Co-operative Sugar Mills Ltd. (229 ITR 285) (Mad.). He further submitted that the ratio of the said decision has since been approved by the Hon'ble Supreme Court in the case of CIT v.Ambur Co-operative Sugar Mills Ltd. (269 ITR 398) (SC). He submitted that in the above said cases, the portion of sale proceeds of molasses separately accounted for as per the Molasses Cotrol(Amendment) Order for construction of storage tanks was considered as "Diverted at source" and hence not includible in assessee's income. The Ld. A.R submitted that the ratio of the above said decisions shall equally apply t....
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....ofit into a case of diversion of income at source. Accordingly, the Ld. D.R. submitted that the Assessing Officer was justified in assessing the impugned amount as income of the assessee. 13. We heard the parties on this issue and perused the record. Before us, the Ld. A.R placed reliance on the decision rendered by the jurisdictional High Court in the case of Salem Co-operative Sugar Mills Ltd (supra) to contend that there was diversion of income by overriding title. However, a perusal of the facts prevailing in the above said case would show that the assessee therein was directed to collect certain amount along with the sale price fixed for alcohol under the Molasses Control (Amendment)Order. Even before the collection of the amount as per the direction, the assessee was directed to keep this amount under a separate account under the head 'molasses storage fund'. The said collection was seen to belong to the molasses storage fund and the same could be utilized only for constructing storage tank only. It was further noticed that, if the assessee fails to collect such amount as directed by the Molasses Control (Amendment) Order, the Central Government will construct a molasses s....
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.... payable." 15. In the instant case, we have already noticed that the assessee was required to carry out the activities like facilitating investors, educating them, protecting them etc. in the ordinary course of its activities. In our considered opinion, by issuing the direction (referred above), the SEBI has only prescribed the minimum amount that should be spent for such purposes. The direction issued by SEBI nowhere states that the amount should be appropriated out of listing fees or it should be kept in separate account disabling the assessee from using it. The direction no where states that the SEBI would spend the money towards the specific purposes and recover the same from the assessee, if the assessee fails to spend the same. Hence, we are of the view that the assessee cannot take support of the decision rendered by Hon'ble jurisdictional High Court in the case of Salem Co-operative Sugar Mills Ltd (supra), since the facts prevailing in the instant case are totally different. Accordingly we are of the view that the assessee has only appropriated the listing fees after it reached its hands and the purpose of such transfer was only to earmark the income for spending the sa....