TaxTMI 
TaxTMI 
2026 (9) TMI 689
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....arties, and it was agreed that the decision rendered therein shall apply mutatis mutandis to the remaining assessment years. ITA No. 7628/MUM/2025 for AY 2009-10. The Revenue has raised following grounds: 1. "On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in allowing the relief to assessee solely relying on the notifications issued by the CBDT recognizing the trust u/s. 10(23EA) and guidelines issued by the SEBI, without examining the actual activities and reverting any factual findings on the core allegation of the Assessing Officer that the application of the trust fund has directly benefited the settlors of the trust, (Le. Bombay Stock Exchange) and its substantial contributors (le. trading members) who are specified persons covered u/s. 13(3) of the Act, thereby, clearly violating the provisions of section 13(1)(c)(i) & (ii) r.w.s 13(3) of the Act." 2. "On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in holding that the receipts of assessee from Bombay Stock Exchange and its members are exempt for tax by virtue of notification No 65/2007 dated 02.03.2007 issued by the CBDT notifying the assessee u/s. ....
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....e of such a binding stipulation transferring the assets to another charitable institution with similar objects renders the trust non-compliant with the requirements of sections 11 and 12 of the Act and the settled legal position governing charitable trusts. 6. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in holding that as per clause (29) of the trust deed, the question of the trust funds flowing back to the Stock Exchange does not arise, ignoring the fact that the clause itself provides for liquidation or winding up only on the dissolution of the Exchange, which effectively links the existence of the trust to that of the settlor and undermines the condition of irrevocability. 7. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in holding that corpus donations of Rs. 37,28,00,305/ received from BSE and its members are exempt under section 11(1)(d) ignoring that such contributors fall within the ambit of section 13(3)(b) of the Act and, therefore disentitle the assessee from the benefit of exemption u/s. 13(3) of the Act." 8. On the facts and circumstances of the case and in law, the Ld. CIT(A) ....
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....section 13(1)(c) r.w.s 13(3) of the Act, which disentitle the assessee trust from claiming exemption u/s. 11 of the Act, and therefore section 164(2) of the Act mandatorily applies in the case of the assessee." 13. The appellant craves leave to add, amend, alter vary and/or withdraw any the grounds of appeal. 3. The assessee, BSE Investors Protection Fund (formerly known as The Stock Exchange Investors Protection Fund), is a trust constituted on 10.07.1986 pursuant to the directives issued by the Central Government (Ministry of Finance) and the guidelines issued by the Securities and Exchange Board of India (SEBI) under the Rules, Bye-laws and Regulations of the Bombay Stock Exchange (BSE). The principal object of the trust is to safeguard the interests of small investors by compensating eligible claims arising against defaulting trading members and by promoting investor education, awareness and research for the development of a healthy securities market. 4. The assessee is registered as a charitable institution under section 12A of the Income-tax Act, 1961 ("the Act") vide Registration No. TR/25443 dated 15.12.1986. It is also registered with the Charity Commissione....
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....before us. 9. The Revenue has raised various grounds challenging the order of the Ld. CIT(A), inter alia, contending that the Ld. CIT(A) erred in deleting the additions made under section 13(1)(c) read with section 13(3), allowing exemption under sections 11 and 12, holding that section 11(7) was not attracted, accepting the irrevocable nature of the trust, deleting the addition of interest on auction proceeds, holding corpus donations to be exempt and in holding that section 164(2) was not applicable. 10. The Ld. Departmental Representative strongly relied upon the assessment order and submitted that BSE and its member brokers were substantial contributors within the meaning of section 13(3)(b). It was contended that by compensating the clients of defaulting brokers, the assessee effectively discharged the liabilities of such brokers, thereby conferring a direct or indirect benefit upon specified persons in violation of section 13(1)(c). It was further argued that prior to the amendment, section 11(7) prohibited simultaneous claim of exemption under section 10(23EA) and section 11. The Revenue also submitted that Clause 29 of the Trust Deed rendered the trust revocable and t....
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....nder section 13(3), thereby attracting section 13(1)(c). 15. We find that the assessee trust was constituted pursuant to the directive of the Ministry of Finance dated 22.08.1985 and the SEBI Circular dated 28.10.2004 with the sole object of protecting small investors. Upon declaration of a trading member as a defaulter, the assets and deposits of such member are first realized by the Defaulters' Committee. The assessee compensates only the shortfall remaining after realization of such assets. 16. Clause 24 of the SEBI Circular specifically prohibits payment of compensation to any broker or associate broker. The payment made by the assessee to eligible investors does not extinguish the liability of the defaulting member either towards the Exchange or towards the Fund. The right of recovery against the defaulting member continues to remain with the Fund. Thus, the ultimate beneficiary of the application of funds is the investing public and not the defaulting member or BSE. Except for making general allegations, the Revenue has not brought any material on record to establish that any direct or indirect benefit accrued to BSE or its members. 17. We further find that the H....