TaxTMI 
TaxTMI 
2024 (6) TMI 456
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....sons assigned for doing so are wrong and contrary to facts and circumstances of the case, the provisions of the Income Tax Act. 1961 and the default Rules made thereunder. (b) The Id CIT(A), NFAC erred in not adhering to the judicial discipline as the issue of allowability of claim for deduction of Contribution to Core SGF was considered as allowable being crystalized liability by the judgement of jurisdictional Mumbai ITAT in the case of BSE Ltd. The Id lower authorities erred in holding (i) that Core SGF is in the nature of contingent reserve to meet contingent liability of appellant company: (ii) Contribution is de-facto the part of the net-worth of the contributing Clearing Corporation; (iii) the ownership of the funds remains with appellant company for contribution to the fund; (iv) contribution to core SGF is only an appropriation out of appellant company own funds as there is no diversion of income by overriding title; (v) contribution to Core SGF is similar to Cash Reserve Ratio maintained by the banks with the Reserve Bank of India; which is wrong and contrary to the facts and circumstances of the case, the provisions of the Income Tax Act, 1961 and the Rul....
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....separate charges over and above the rental charges as per the terms of the agreement, cannot be taken as annual value of property i.e., rental income from House Property though inadvertently considered as rental income under the head 'Income from House property' in the return of income filed by the appellant. (c) Without prejudice, the ld. CIT(A), NFAC ought to have allowed maintenance and other charges of Rs. 77,80,386/- being expenses specifically incurred as deduction from annual letting value chargeable to income under the head 'Income from House Property having treated Rs. 1,05,72,994/-recovered from licensees as rental income and the reasons assigned for not doing so is wrong and contrary to the facts of the case, the provisions of the Income Tax Act. 1961 and the Rules made thereunder. (d) Without prejudice, the ld. CIT(A), NFAC erred in not considering the amount of Rs. 77,80, 386/- being the expenses incurred as deduction from the charges of Rs. 1,05,72,994/- recovered from licensees specifically to meet expenses and the reasons assigned for not doing so is wrong and contrary to the facts of the case, the provisions of the Income Tax Act, 1961 and the Rules....
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....rescribed ratio in accordance with the SEBI directions. The objective of the Core SGF as described in the aforesaid circular is as follows - "5. Clearing Corporation (CC) shall have a fund called Core SGF for each segment of each Recognised Stock Exchange (SE) to guarantee the settlement of trades executed in respective segment of the SE In the event of a clearing member (member) failing to honour settlement commitments, the Core SGF shall be used to fulfill the obligations of that member and complete the settlement without affecting the normal settlement process." With respect to the Corpus of Core SGF, the aforesaid circular states as follows- "6. The corpus of the fund should be adequate to meet out all the contingencies arising on account of failure of any members) The risk or liability to the fond depends on various factors such as trade volume, delivery percentage, maximum settlement liability of the members the history of defaults, capital adequacy of the members, the degree of safety measures employed by the CC/SE etc. A fixed formula, therefore cannot be prescribed in estimate the risk or liability of the fund. However, in order to assess the fair quantum of the co....
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....he segment MRC as per previous review (i.e. review done on 15th January for the month of February)" With respect to share in Contribution to Core SGF, the circular lays down as follows- 8. At any point of time, the contributions of various contributors to Core SG of any segment shall be as follows a) Clearing Corporation contribution CC contribution to Core SGF shall be at least 30% of the MRC CC shall make this contribution from its own funds CC contribution to core SGF's shall be considered as part of its net worth. b) Stock Exchange contribution Stock Exchange contribution to Core SGF shall be at least 25% of the MRC can be adjusted against transfer of profit by Stock Exchange as per Regulation 33 of SECC Regulations, which may be reviewed in view of these guidelines). c) Clearing Member primary contribution. If the CC wishes it can seek risk based contribution from Clearing Members (CMs) of the segment (including custodial clearing members) to the Core 5GF subject to the following conditions: * That total contribution from CMs shall not be more than 25% of the MRC * that no exposure shall be available on Core SGF contribution of any CM (exposure-free collatera....
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....theall material funds sequestered in the Core SGF. 3. The amount once contributed or set aside is beyond the control and domain of the assessee company. 4. The amount of Core SGF can only become greater as the time goes by and never reduce. 5. This amount is not dependent on the existence of profits in the books of assessee company. 6. This is statutory diversion at source as the sum sequestered are not available for the use of NSE and NSE in no manner remained the beneficiary of the said funds. 7. The case of NSE is of diversion of Income by Overriding Title as it looses the control and domain over the funds." 4. The core SGF has been created to meet any liability that may arise in eventuality of default by any clearing member. The rational of such a reference is to ensure that the business of the assessee goes on smoothly even in the case of a default to ensure that there are sufficient resources readily available in the case of default to ensure that the stock exchange and clearing corporation keep functioning without any disturbance in their business even in case of default. The nature of business of the stock exchange is prone to risk of default by clearing members.....
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....pproved gratuity fund created by him for the exclusive benefit of his employees under an irrevocable trust. (va) any sum received by the assessee from any of his employees to which the provisions of sub-clause (x) of clause (24) of section 2 apply. if such sum is credited by the to the employee's account in the relevant fund or funds on or before the due date. (viii) in respect of any special reserve created and maintained by a specified entity, an amount not exceeding twenty per cent of the profits derived from eligible business computed under the head "Profits and gains of business or profession" (before making any deduction under this clause) carried to such reserve account. (xiv) any sum paid by a public financial institution by way of contribution to such credit guarantee fund trust for small industries as the Central Government may by notification in the Official Gazette, specify in this behalf. Perusal of the above shows that the contribution to Core SGF is not a contribution specified under the income tax act to seek an automatic allowance as an item of expenditure. 6.1.4 Whether the contribution is an expenditure wholly and exclusively laid out for the purpos....
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....therefore there is diversion at source, are not correct for the following reasons: 1. In the initial years, 25% of the profit after tax was transferred to provisions for contribution to Core SGF out of the book profits forthe year ended 31.3.2013 and 31.3.2014. 2. In the financial year ended 31.3.2016 the provisions made as above were reversed and credited to the profit and loss account balance and the same was tapped for making contribution with corresponding debit to the profit and loss account as an item above the line. 3. The financials clearly reflect this as an exceptional item with specific name viz, 'Contribution to Core SGF. Even the financial results are measured as before and after contribution. The EPS (earning per share) is also calculated on earnings before and after contribution. So, there is every reason to hold this item as 'not an item of expenditure incurred for earning the revenue, for the distinct way it is treated from the rest of the expenditure claims. 4. Besides, expenditure in the normal sense is not measured as a percentage of profits, unless there is an agreement to that effect.(like commission at a certain percentage on profits). 5. Ov....
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....he appellant with a minimum commitment of 50% as compared to 25% from the assessee) has treated the contribution only as appropriation and not as charge to the profit and loss account. 13. The SECC regulations cannot be differently interpreted by each of the contributories - in other words, the clearing corporation treating the contribution as appropriation out of profits and the assessee- appellant treating the same as charge to the profit and loss account. 14. The SECC regulations permitting the Clearing corporations to treat the Contribution to Core SGF to be reckoned for consideration while computing its net worth cannot alter the tax treatment in the hands of the contributory viz., the appellant and the clearing corporation (WOS), 15. The appellant resorted to the unique way of charging the contribution to the profit and loss account knowing fully well that the money set apart would be lying with its own subsidiary and therefore the control and claim is not difficult. 16. In fact, the right way of accounting would be that the Appellant should have reduced the profits to the extent of contribution made and credited to the Core SGF contribution and shown the same as depo....
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....ic purpose, similar to CSR and CRR as mentioned by the AO. For the impugned assessment year, in view of the fact that the contribution made by the appellant and claimed as expenditure is only by reversing the provisions of the earlier years 31.3.2013 and 31.3.2014 and therefore it clearly constitutes an appropriation out of the accumulated profits, which is an undisputed fact as seen from the notes on accounts. For these reasons the addition of Rs. 761.52 crores made by the AO stands upheld and does not call any interference. This ground is dismissed." 7. During the course of appellate proceedings before us the ld. Counsel contended that assessee company has made contribution to Core Settlement Guarantee Funds which has been set up under the guidelines issued by the SEBI. The ld. Counsel submitted that Core SGF was set up to meet settlement obligations of clearing corporation in case of clearing members failing to honour settlement obligations. The ld. Counsel further submitted that contributors to the Core SGF are the Stock Exchange, clearing corporation and the clearing members. Further submitted that contribution made by the assessee will never come back except in a case when....
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....ure and the nature of the expenditure incurred by the assessee was of capital in nature which are not allowable as a deduction. He supported the order of lower authorities. 9. Heard both the sides and perused the material on record. During the course of assessment the assessing officer has disallowed the claim of deduction of Rs. 761.52 crores being statutory contribution made to Core Settlement Guarantee Fund (Core SGF) on the reasoning that no default was made during the year by the clearing members. The assessee company is a stock exchange recognised by Central Government u/s 4 r.w.s 8A of Securities Contract (Regulations) Act 1956. The securities and Exchange Board of India under the SEBI Act, 1992 protect the interest of investors in securities and to promote the development, regulate the securities market which is statutory regulatory authority which regulates the functions and activities of recognised stock exchanges in India and also clearing corporations. 11. SEBI as a regulator or Stock exchanges and clearing corporations in exercising of its power granted u/s 11 of SEBI Act keeps on issuing various directives/guidelines/circulars to the stock exchange and clearing hous....
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....vant extracts are reproduced as under: CIRCULAR CIR/MRD/DRMNP/25/2014 August 27, 2014 To All recognized Clearing Corporations/Stock Exchanges Dear Sir / Madam, Sub: Core Settlement Guarantee Fund, Default Waterfall and Stress Test 1) Vide circular no. SMD/POLICY/SGF/CIR-13/97 dated June 09, 1997 SEBI prescribed the "Guidelines for Settlement Guarantee Fund (SGF) at Stock Exchanges", which, inter-alia, covered criteria for corpus of the fund, contribution to the fund, management of the fund, access to / usage of the fund and recoupment of the fund corpus. 2) After an extensive study on the structure of Indian securities market, which has undergone significant structural changes in the past decade, SEBI notified the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2012, (SECC) on June 20, 2012 to regulate recognition, ownership and governance in stock exchanges and clearing corporations. The SECC Regulations, inter-alia, state the following: 39 Fund to guarantee settlement of trades (1) Every recognised clearing corporation shall establish and maintain a Fund by whatever name called, for each segment, to guarantee the se....
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....guarantee fund), within the SGF, against which no exposure is given and which is readily and unconditionally available to meet settlement obligations of clearing corporation in case of clearing member(s) failing to honour settlement obligation, b) align stress testing practices of clearing corporations with FMI principles (norms for stress testing for credit risk, stress testing for liquidity risk and reverse stress testing including frequency and scenarios), c) capture in stress testing, the risk due to possible default in institutional trades, d) harmonise default waterfalls across clearing corporations e) limit the liability of non-defaulting members in view of the Basel capital adequacy requirements for exposure towards Central Counterparties (CCPs), f) ring-fence each segment of clearing corporation from defaults in other segments, and g) bring in uniformity in the stress testing and the risk management practices of different clearing corporations especially with regard to the default of members. Core Settlement Guarantee Fund (Core SGF) Objective of Core SGF 5) Clearing Corporation (CC) shall have a fund called Core SGF for each segment of each Recognised St....
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....iv above and the segment MRC as per previous review (i.e., review done on 15th January for the month of February). Contribution to Core SGF 8) At any point of time, the contributions of various contributors to Core SGF of any segment shall be as follows: a. Clearing Corporation contribution: CC contribution to Core SGF shall be at least 50% of the MRC. CC shall make this contribution from its own funds. CC contribution to core SGFs shall be considered as part of its net worth. b. Stock Exchange contribution: Stock Exchange contribution to Core SGF shall be at least 25% of the MRC (can be adjusted against transfer of profit by Stock Exchange as per Regulation 33 of SECC Regulations, which may be reviewed in view of these guidelines). c. Clearing Member primary contribution: If the CC wishes, it can seek risk based contribution from Clearing Members (CMs) of the segment (including custodial clearing members) to the Core SGF subject to the following conditions: * that total contribution from CMs shall not be more than 25% of the MRC, * that no exposure shall be available on Core SGF contribution of any CM (exposure-free collateral of CM available with CC can be considere....
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.... / Recoupment of Core SGF 14) Requisite contributions to Core SGF by various contributors (as per clauses 7 and 8) for any month shall be made by the contributors before start of the month. In the event of usage of Core SGF during a calendar month, contributors shall, as per usage of their individual contribution, immediately replenish the Core SGF to MRC. In case there is failure on part of some contributor(s) to replenish its (their) contribution, same shall be immediately met, on a temporary basis during the month, in the following order: (i) By CC (ii) By SE Review of Core SGF 15) The monthly review results shall be communicated to the Risk Management Committee and the Governing Board of the Clearing Corporation. The exception reporting shall be made to SEBI detailing the outcome of the review by the CC Governing Board, including steps taken to enhance the Core SGF. Default waterfall 16) The default waterfall of CC for any segment shall generally follow the following order - I. monies of defaulting member (including defaulting member's primary contribution to Core SGF(s) and excess monies of defaulter in other segments). II. Insurance, if any. III. C....
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....ng such positions could have an impact on the market) and carry out stress testing using self-developed scenarios. Such scenarios should include relevant peak historic price volatilities, shifts in other market factors such as price determinants and yield curves, multiple defaults over various time horizons and a spectrum of forward-looking stress scenarios in a variety of extreme but plausible market conditions. Also, for products for which specific stress testing methodology has not been prescribed in this circular, CCs shall develop extreme but plausible market scenarios (both hypothetical and historical) and carry out stress tests based on such scenarios and enhance the corpus of Core Settlement Guarantee Fund/reserves, as required by the results of such stress tests. 19) Liquidity stress test and adequacy of liquidity arrangements: CC shall ensure that it maintains sufficient liquid resources to manage liquidity risks from members, settlement banks and those generated by its investment policy. CC shall daily test the adequacy of its liquidity arrangements in order to ensure that its liquid resources are adequate to meet simultaneous default of at least two clearing members....
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....t Committee of the CC and the same should be communicated for discussion and review by the Board of the CC. 25) Clearing corporations and Stock Exchanges are directed to: a) take necessary steps to put in place systems for implementation of the circular, including necessary amendments to the relevant bye-laws, rules and regulations; b) bring the provisions of this circular to the notice of their members and also disseminate the same on its website; c) make the following details available on its website: i. Policy on composition and contributions to be made to the Core SGF; ii. Investment policy for Core SGF; iii. Default waterfall for each segment along with the quantum of resources available in each layer of default waterfall; d) implement the provisions of this circular by December 1, 2014 and communicate to SEBI the status of implementation. 26) This circular is being issued in exercise of powers conferred under Section 11 (1) of the Securities and Exchange Board of India Act, 1992 to protect the interests of investors in securities and to promote the development of, and to regulate, the securities market. 27) This circular is available on SEBI website at www....
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....olly and exclusively for the purpose of business and therefore allowable under section 37 of the Act. We are of the view that contingency means a future event or circumstances which is possible but cannot be predicted withcertainty. In the present case the liability to pay/ contribute is certain and accrued as per the Circular of SEBI. The said amount is transferred to CSGF and has not remained with BSE; therefore, it cannot be said to be in a nature of contingency reserve. Secondly, the contribution cannot also be termed as deposit. Oxford dictionary defines deposit as "place (something) somewhere for safekeeping". In the present case the amount is transferred to CSGF of Indian Clearing Corporation Limited (ICCL) and has not been kept for safekeeping. The amount transferred will be utilized by ICCL as per the guidelines provided by SEBI from time to time. Therefore, the contribution is revenue in nature and not an asset or deposit. ICCL has also confirmed vide letter dated 7.12.2017 (refer Annexure 3) that BSE has contributed a sum of Rs. 25,78,84,501/- to CSGF and no amount has been shared with BSE as on 31.03.2015. BSE has no right over the amount already contributed to CSGF. We....
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....lowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year. 14. On these reasonings in the absence of any material change justifying the revenue to take a different view of the matter-and if there was no change it was in support of the assessee-we do not think the question should have been reopened and contrary to what had been decided by the Commissioner in the earlier proceedings, a different and contradictory stand should have been taken. We are, therefore, of the view that these appeals should be a!!owed, and the question should be answered in the affirmative, namely, that the Tribunal was justified in holding that the income derived by the Radhasoami Satsang was entitled to exemption under sections 11 and 12' 14. We also noted that the PCIT in para 4.2 of Show Cause Notice noted that the facts and circumstances of the case for A.Y. 2015-16 being same as A.Y. 2016-17, allowing the claim of contribution to the two funds as business expenditure makes the assessment order for A.Y. 2015-16 erroneous. In this connection, Ld Counsel submitted that during the assessment proceedin....
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.... the judgment of the Commissioner for that of the Income-tax Officer, who passed the order, unless the decision is held to be erroneous. Cases may be visualized where the Incometax Officer while making an assessment examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income either by accepting the accounts or by making some estimate himself. The Commissioner, on perusal of the records, may be of the opinion that the estimate made by the officer concerned was on the lower side and left to the Commissioner he would have estimated the income at a figure higher than the one determined by the Income-tax Officer. That would not vest the Commissioner with power to re-examine the accounts and determine the income himself at a higher figure. It is because the Incometax Officer has exercised the quasi-judicial power vested in him in accordance with law and arrived at a conclusion and such a conclusion cannot be termed to be erroneous simply because the Commissioner does not feel satisfied with the conclusion. It may be said in such a case that in the opinion of the Commissioner the order in question is prejudicial to the inte....
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....onsidered various details submitted during the course of assessment. Hence, the order passed by the AO is neither erroneous nor prejudicial to the interest of revenue i.e. involving any error or it is deviating from law. (as defined in Black's Law Dictionary). Since, the AO has acted in accordance with law and passed the assessment order, the same cannot be considered as erroneous and prejudicial to revenue, simply because AO has not elaborated various things in the body of the assessment order. Hence, we quash the revision order passed by PCIT and allow the appeal of the assessee on this issue. 17. In the result, the appeal of the assessee is allowed." 16. Apart of the above we have gone the through the Finace Bill 2015 which provide Exemption to income of Core Settlement Guarantee Fund (SGF) of the Clearing Corporations Under the provisions of Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2012 (SECC) notified by SEBI, the Clearing Corporations are mandated to establish a fund, called Core Settlement Guarantee Fund (Core SGF) for each segment of each recognized stock exchange to guarantee the settlement of trades executed in resp....
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....ny previous year is shared, either wholly or in part with the specified person, the whole of the amount so shared shall be deemed to be the income of the previous year in which such amount is so shared and shall, accordingly, be chargeable to income-tax. Explanation.-For the purposes of this clause,- (i) "recognised clearing corporation" shall have the same meaning as assigned to it in clause (o) of sub-regulation (1) of regulation 2 of the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 201249 made under the Securities and Exchange Board of India Act, 1992 (15 of 1992) and the Securities Contracts (Regulation) Act, 1956 (42 of 1956); (ii) "regulations" means the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2012* made under the Securities and Exchange Board of India Act, 1992 (15 of 1992) and the Securities Contracts (Regulation) Act, 1956 (42 of 1956); (iii) "specified income" shall mean,- (a) the income by way of contribution received from specified persons; (b) the income by way of penalties imposed by the recognised clearing corporation and credited to the Core Settlement Guarante....
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....e Bombay Stock Exchange to the Core Settlement Guarantee Fund in accordance with the circular of the SEBI holding that assessee is able to prove beyond doubt that the contribution to Core SGF is not in the nature of any deposit/contingency/reserve. In that decision it is further held that the contribution to the Investor Service Fund was made by the BSE from 1992 onwards claimed as deduction u/s 37 of the Act which had been allowed by the department till date. Further in terms of the circular dated 27th August, 2014 issued by SEBI as reproduced supra in this order it is beyond any doubt that the assessee is governed by the rules and regulations framed by the SEBI for carrying on its business of stock exchange in India. The assessee is bound by the mandatory Rules and Regulations issued by the SEBI. Therefore, following the findings of the coordinate bench, rules/regulations of the SEBI and the provisions of section 10 as discussed supra, we consider that statutory contributions made by the assessee to the Core SGF on which it had no control is allowable u/s 37(1) of the Act as the same has been incurred exclusively in the course of carrying on its business. Therefore, this ground o....
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.... under: "3.1. We have heard the rival submissions. We find that similar issue was subject matter of adjudication by this tribunal in the case of IOT Infrastructure & Energy Services Ltd (formerly Indian Oil Tanking Limited) in ITA Nos. 1901 & 2585/Mum/2009 for Asst Year 2004-05 ; ITA Nos. 3477 & 3241/Mum/2009 for Asst Year 2005-06 ; ITA No. 2208/Mum/2010 for Asst Year 2006-07 ; ITA No. 7035/Mum/2010 for Asst Year 2007-08 and ITA No. 7430/Mum/2011 for Asst Year 2008-09 dated 17.5.2013 wherein it was held as under:- "19. As regards the premium and other charges paid in respect of leasehold land, the Id. Counsel for the assessee has submitted that although a similar issue has been decided by the- Tribunal against the assessed in A.Y. 1999-2000, the decision of Hon'ble Gujarat High Court in the case of Sun Pharmaceuticals Ind. reported in (2 010) 3 2 9 IT R 479 rendered subsequently on a similar issue is in favour of the assessee. A perusal of the judgment passed by the Hon'ble Gujarat High Court in the said case shows that the Tribunal in that case had found on analysis of the relevant lease agreement that the land in question was not acquired by the assessee. The lease Deed w....
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....facilities like security etc, was the reimbursement of the cost incurred by it therefore, the same cannot be considered as income from house property. However, the AO has rejected the claim of the assessee and stated that deduction of 30% of the annual value would cover such expenses. 30. The ld. CIT(A) has dismissed the appeal of the assessee holding that there was failure on the part of the assessee to prove that what has been collected towards maintenance recovery has been on cost to cost basis. 31. Heard both the sides on this issue and perused the material on record. The ld. Counsel has referred submission made before the ld. CIT(A) stating that maintenance charges recovered were separate charges for proving facilities such as securities etc. The assessee explained before the ld. CIT(A) that these were the reimbursement of expenses incurred by the assessee. Before the ld. CIT(A) the assessee also submitted that in the case of the assessee itself for A.Y. 2005-06 the ITAT vide its combined order ITA No. 3114/Mum/2009 dated 30.12.2011 has restored the matter back to the ld. CIT(A) with a specific direction to deal with all the contentions of the assessee by way of a speaking ....
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....pra). It is a case where separate payment is being made and there is no dispute that the rent is to be treated as income from house property. The question really is whether a separate payment is being made for other services whether the same could be treated as income from house property It is also to be examined whether such a payment is to be excluded for determination of annual value. There are decisions on the coordinate benches as also Hon'ble Courts above dealing with fine points regarding these aspects. Learned counsel has, even before us, made these legal submissions which the CIT(A) had no occasion to deal with by way of a speaking order. In this view of the matter, we deem it fit and proper to remit the matter to the file of the CIT(A) with a specific direction to deal with all the contentions of the assessee by way of a speaking order and in accordance with the law. We direct so. Para 101. Ground No. 5 is thus allowed for statistical purposes in the terms indicated above. Para 111 In Ground No. 3, the assessee is aggrieved by the CIT(A)'s treating an amount of Rs. 1,62,05,179 being maintenance charges recovered from the licenses as "income from house property....
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....ed that AO had not recorded any satisfaction before rejecting the suo moto disallowance made by the assessee. The ld. Counsel also referred the decision of the ITAT in the case of National Securities Clearing Corporation Ltd. wherein the disallowance was restricted to the 1% of the exempt income. 39. On the other hand, the ld. D.R vehemently contended that the AO had categorically made observation about inadequate disallowance made by the assessee. He supported the order of the lower authority. 40. Heard both the sides and perused the material on record. The assessee had suo-motto disallowed expenses under section 14A. We find that at para 9 of the assessment order the AO has categorically mentioned that he perused the financial of the assessee company and on perusal of such financial the AO noticed that assessee company had shown tax free income representing interest on tax free bonds of Rs. 48,89,38,321/- and dividend income of Rs. 162,94,55,193/-. To earn such exempt income the assessee company has made investment to the tune of Rs. 1576.73 crores. Therefore, he observed that assessee had made substantial portion of the entire investment of the company for earning exempt incom....