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2017 (9) TMI 807 - AT - Income TaxDenying exemption u/s 11 & 12 - assessee has made investment in its wholly owned subsidiary company in accordance with the directions of SEBI - main object of assessee trust - Held that:- The main object of subsidiary was to acquire the membership rights of the BSE / NSE so as to facilitate the members of the investor. The assessee is a recognized stock exchange by Central Government in terms of Section 4 of the Securities Contract Regulation Act. Therefore, on these facts we find that the investment in subsidiary was in tune with the requirement of Section 11(5) read with Rule 17C and there was no violation of the same and therefore, the assessee could not be visited with consequential disallowance u/s 13(1)(d)(iii). Main object of the assessee was to promote and assist dealings in securities of any nature issued by limited companies in India. Further, clause V of the said memorandum contained restrictive conditions as to distribution of dividend / bonus/ profits / remuneration / fees whatsoever to its members and the income / property of the assessee was to be applied solely for the promotion of its objects. Further, the assessee company was governed by its by-laws and chapter XV-A of the said by-laws dealt with code of ethics for directors and functionaries of exchanges and put several restrictive conditions upon directors to obtain any sort of benefits / pecuniary advantages by using their position as directors. It is quite evident that the floating of subsidiary company was in tune with SEBI directions and contradicts the stand of the revenue that the sub-broker membership of the subsidiary was open to select few and not to public at large and the benefit to select few was extended by the assessee. It is an admitted position that the assessee was being reimbursed on actual basis by the subsidiary for various services and therefore, it was wrong to infer that the assessee extended benefits as mentioned in Section 13(2) to class of persons enumerated in Section 13(3) which prima-facie weakens the conclusion of the revenue that the case of the assessee was hit by the provisions of Section 13(2) & 13(3). Revenue has alleged that the assessee failed to charge interest on the amount remaining outstanding at year-end - Held that:- A perusal of ledger extract as produced in the paper book reveals that the same represent reimbursement of the last month of the relevant financial year which has been settled subsequently within a short span of time thereafter and hence, there was no occasion / justification to charge the interest against the same which further negates this stand of the revenue that the assessee extended pecuniary benefits to its subsidiaries in contravention of law. The totality of above discussion leads us to an inevitable conclusion that the revenue was not justified in denying the said exemption to the assessee. Therefore, we are inclined to hold that the assessee was entitled for the said exemption u/s 11 / 12 and the appeal of the assessee stands allowed.
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