TMI Blog2015 (6) TMI 68X X X X Extracts X X X X X X X X Extracts X X X X ..... ish that the interest was made part and parcel of the fund and no part of the interest so accrued was the income of the Assessee. We, therefore, restore this issue back to the stage of the AO to consider all these three accounts and if it is demonstrated that the interest is accrued but funds were taken out for the purpose of the benefit of the members and the assessee has no benefit of accrual of interest then naturally in the absence of the element of "income" the additions so made deserves to be deleted. With these remarks the grounds may be treated as allowed but for statistical purpose being restored back for denovo consideration by the AO. - Appeal is allowed for statistical purpose. - ITA No.112/Ahd/2011 - - - Dated:- 23-1-2015 - Mukul Kr. Shrawat, JM And Anil Chaturvedi, AM,JJ. For the Appellant : Smt Sonia Kumar, Sr.DR For the Respondent : Shri M G Patel, AR ORDER Per Mukul Kumar Shrawat, Judicial Member This is an Appeal filed by the Assessee arising from an order of the learned CIT(A)-VI, Ahmedabad dated 09.11.2010. The grounds raised before us are reproduced below: 1. The Learned Commissioner of Income Tax (Appeals)-VI, Ahmedabad has er ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pproved by SEBI, further amounts from the transaction charges collected from the members were also required to be transferred every year. This fund is required to be utilized for the purposes of the scheme and as per direction and approval from SEBI. As such, the fund is to be utilized to meet with defaults by the members to honour their liabilities in settlements so as to safeguard the interest of the other members as well as their constituent investor public as well as the dues of the Stock Exchange. As the fund has been created out of funds of the members held as security deposit as well as transfer from transaction charges collected from them, the fund has been held by the Stock Exchange as liability which may be repayable in case any member ceases to be a member and as may be directed by SEBI Further, as per guidelines of SEBI in that regard, interest on investment out of this fund is also required to be transferred to the fund and accordingly interest has been transferred to this fund every year. (b) Broker's contingency fund This fund was also created about a decade before as per the guidelines from SEBI in this regard and this has also been approved by SEBI. Fund ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e earmarked consisting of trade guarantee fund investors service sale fund and brokers contingency funds and informed that those funds were more than a decade old. It was informed that those funds were created as per the directions of SEBI, being controlling authority over all the recognized stock exchanges in India. The interest amount is transferred to the said funds as directed by SEBI, hence, it was argued that because of an overriding title the Assessee has not earned the interest income. The funds so created were required to be utilized as per the directions of SEBI. An order of ITAT 'D' Bench for A.Y. 2005-06 dated 17.10.2008 has also been referred. It was also informed that a show cause was issued in respect of the said disallowance by learned Commissioner u/s.263 for A.Y. 2004-05 but later on after considering the explanation the said proceedings were dropped. However, learned CIT(A) was not convinced and affirmed the action of the AO as under: 2.3 I have considered the facts of the case; assessment order and appellant's submission. It is not in dispute that appellant received interest income on certain funds created as per Sebi guidelines. Appellant e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant to claim such income exempt. For claiming any income exempt, there has to be specific provision which appellant is not able to identify or mention therefore this does not help appellant. In any case each year is a separate proceedings and any view taken in one year need not be necessarily taken in other years since res judicata does not apply to income tax proceedings. Since interest income is not exempt under any provision and the same is not diverted to other person by overriding title, there is no basis for excluding such income. Accordingly, I confirm the addition made by the assessing officer. 5. From the side of the Appellant, learned AR, Mr. M.G. Patel appeared and mainly contested that the assessee has created those funds as per the circular from SEBI and it was mandatory to provide interest. Funds so created were required to be utilized towards specific purpose as directed by SEBI. Learned AR has drawn our attention on a show cause notice dated 18th February, 2009 issued by Director of Income Tax (Exemption), Ahmedabad through which it was suggested that the accrual of interest income was to be taxed by initiating revision proceedings u/s.263 of IT Act. Learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that there was no overriding title and learned CIT(A) has rightly considered the issue that the interest income so granted was not exempted under any provisions of IT Act. Even, the orders cited by learned AR have no direct connection with the issue as raised in the ground of Appeal. 7. We have heard both the sides at some length. We have perused the compilation filed before us in the light of the case laws cited. We are able to trace an account in the compilation pertained to brokers contingency fund in which the Assessee has credited the interest on loan as granted by the Assessee as well as debited an amount given as loan to members. Rest of the accounts were not found in the compilation although it was specifically asked to refer but learned AR has failed to indicate that account. The issue has to be decided in the light of the facts that if there was an overriding title of SEBI then the accrual interest cannot be taxed from the assessee. The Assessee is expected to place on record the SEBI guidelines to substantiate the creation of the fund. The Assessee is therefore directed to place all the three accounts to establish that the interest was made part and parcel of the fu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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