TaxTMI 
TaxTMI 
2016 (2) TMI 1082
X X X X Extracts X X X X
X X X X Extracts X X X X
....r 2010-11 was completed u/s 143(3) of the Act by the Learned AO on 8.3.2013 . Later this assessment was sought to be revised by the Learned CIT by invoking revisionary jurisdiction u/s 263 of the Act for which the show cause notice u/s 263 of the Act dated 8.9.2014 was issued by him . According to the Learned CIT, the Learned AO had erroneously allowed the deduction in respect of sum debited to profit and loss account under the nomenclature of 'Contribution to Settlement Guarantee Fund' amounting to Rs. 6,21,77,737/- which is in the nature of a provision and therefore could not be allowed to be deducted in arriving at the total income. Aggrieved, the assessee is in appeal before us on the following grounds:- "1) For that on the facts and in the circumstances of the case, the order u/s 263 passed by the CIT, Kolkata-2 be held to be bad in law and be cancelled, since in the said order the CIT has nowhere established with cogent reasons as to how the order of assessment was erroneous in so far as it was prejudicial to the interest of the revenue. 2) For that on the facts and in the circumstances of the case, the order of the CIT u/s 263 be held to be bad in law since....
X X X X Extracts X X X X
X X X X Extracts X X X X
....response to this, the Learned AR argued that the assessee is a company which is a self regulatory body operating a stock exchange which is recognized by the Securities Exchange Board of India (SEBI in short). The assessee company is a notified stock exchange which is controlled and managed by its Board of Directors and functions in conformity with rules and regulations which are approved by SEBI and provisions of Securities Contract (Regulation) Act. We find from the records that the principal objective of the assessee is to assist, regulate and control the business of buying, selling and dealing in securities. The assessee is required to regulate and maange dealing in securities so as to protect the public interest, in dealings of all securities notified under the Securities Contract (Regulation) Act, 1956 and to ensure trading is conducted in a transparent, fair and open manner. One of the foremost objective of the assessee is to develop and promote healthy trading practices and facilitate convenient and timely settlement of trades amongst members and investors. The bye laws of the assessee have been framed in conformity with the regulations of SEBI and the assessee is statutoril....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ill be given to the bye laws and instructions of SEBI. Subsequently after various correspondences, the 'Settlement Guarantee Fund' set up by the assesse was given statutory approval on 10.3.1998. 4.2. We find from the aforesaid explanation and documents which are enclosed in pages 17 to 45 of the paper book filed by the assessee , it could be observed that the SGF was constituted in the year 1998 in conformity with the directives of SEBI and it was constituted to meet the specified objects. Since then the SGF maintained by the assessee has been used only to settle bonafide transactions of trading members which form part of the Stock Exchange's settlement system so as to ensure timely completion of Settlements and thereby protect the interest of the investors and also inculcate confidence in the minds of investors regarding the expeditious and timely completion of settlements on the Stock Exchange. The corpus of SGF comprises of donations, contributions , levies, charges obtained from the trading members of the Stock Exchange. The said corpus is invested in notified investments and securities and the income generated also forms part of the corpus of the said Fund. The bye laws an....
X X X X Extracts X X X X
X X X X Extracts X X X X
....aph 8 of Chapter XVII dealing with provisions relating to SGF clearly show that the SGF is solely and exclusively maintained and operated by the assessee for the benefit and purpose of the members, investors and general public. The assessee does not exercise any domain or control over the SGF. The Fund cannot be applied to meet the expenses of the assessee nor can it be appropriated as income of the assessee. The assessee is not free to utilize and apply the Fund in the manner as it deems fit for its own benefit or meet its business obligations / commitments. Further Paragraph 30 of the said Chapter further prevents the trading members of the exchange to draw any remuneration from the Fund and only the expenses for creation, administration and management of Fund including fees of lawyers, auditors, advisers etc and other related costs can be charged to the Fund. This further evidences that no monetary benefit in any form whatsoever can be availed by the assessee or its trading members from SGF. 4.5. Given this factual background, the issue as to whether deduction for Rs. 6,21,77,737/- allowed in the assessment u/s 143(3) of the Act resulted in any erroneous order being passed by....
X X X X Extracts X X X X
X X X X Extracts X X X X
....urt relied upon by the Learned AR in the case of Rajkot District Gopalak Co-op. Milk Prducers' Union Ltd vs CIT reported in 204 ITR 590 (Bom) is very well placed. In this case, the High Court observed that the assessee was running a project under the directive of the State Government. It was maintaining separate set of books for the said project and the profits earned from the project was reflected separately under the head 'Reserves'. Such profits however did not constitute 'income' of the assessee in real sense. Reason being that the assessee did not and could not exercise domain or control over such incoe and the ame has to be applied in the specified manner and for the specified purpose as agreed with the State Government. In the circumstances , such income was directed to be excluded while computing the taxable profits of the assessee. We find that the ratio laid down in the above decision is squarely applicable to the facts of the assessee's case. The assessee herein , as stated above, is desired to maintain a SGF in conformity with the prescribed guidelines and bye-laws approved by SEBI and Government of India. The said Fund is statutory in nature and has not been set up by ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....T as below:- "OFFICE OF THE COMMISSIONER OF INCOM TAX, KOLKATA-II, KOLKATA, AAYAKAR BHAWAN, 3RD'FLOOR, P*7, CHOWRINGHEE SQUARE, KOL*700 069 F.No. Revision 14-15/263/11/The Calcutta Stock Exchange/CIT-II/Kol/ 4333 Dated: 08.09.2014 To, The Principal Officer, M/s. The Calcutta Stock Exchange Ltd. 7, Lyons Range, Kolkata-700 001. Sub.: Proceedings u/s263 of the Income Tax Act, 1961 in the case of M/s. The Calcutta Stock Exchange Ltd., PAN: AABCT8138N in respect of order passed u/s143(3) on 08-03 -2013 for the A.Y. 2010-11- regarding. Please refer to the above. A perusal of the assessment record shows that an amount of Rs. 6,21,77,737/- has been debited in the P&L account for the ending 31-03-2010 towards "Contribution to Settlement Guarantee Fund". As the amount contributed for Settlement Guarantee Fund (SGF) is a provision in nature and is for use as and when any settlement arises during the course of business, the expenditure related to SGF cannot be treated as business expenditure and is required to be added back to the total income. Thus allowance of this expenditure has resulted in an under....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n can be condemned unheard, and therefore, the assessee not having been heard on the question whether or not adequate enquiries were carried out, learned Commissioner could not have subjected the re-assessment order to revision proceedings on the ground that adequate enquiries were not carried out. Secondly, there is nothing on record to provoke an enquiry, which has not been carried out in the instant case. Learned Commissioner has not pointed out any reason as to why the Assessing Officer should have made further enquiry, which was apparently left out. In view of this discussion an entirety of the case, we uphold the grievance of the assessee and quash the impugned revision order. 4.9. We place reliance on the decision of the Hon'ble Bombay High Court in the case of CIT vs Gabriel India reported in (1993) 203 ITR 108 (Bom) wherein it was held that the Commissioner cannot initiate proceedings with a view to starting fishing and roving enquiries in matters or orders which are already concluded. There must be material on record to show that tax which was lawfully exigible has not been imposed if the claim was allowed by the ITO. On being satisfied with the explanation of the asse....