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TMI Blog2023 (10) TMI 1423X X X X Extracts X X X X X X X X Extracts X X X X ..... n the last week and therefore sometime was requested. Appeals were adjourned to 22/6/2023. 03. On 22 June 2023, the learned departmental representative further requested for time and the case were listed for hearing on 30 August 2023. 04. On 30 August 2023,[ by way of letter of CA] the assessee requested for adjournment stating that Issue involved in the assessee's appeals are similar to the issue in the appeal in case of National stock exchange of India Ltd [ NSEIL] for assessment year 2016 -17 and 2017 -18 bearing ITA No. 730/M/2023 and ITA number 731/M/2023. Another bench has heard these matters on 2 August 2023 and the order of the said appeal in the case of that assessee are awaited. The outcome of the said appeals will have bearing on the captioned assessee's appeals. Therefore, adjournment was sought for a month stating that by which time the order in the case of National stock exchange of India Ltd is expected to be received and to refix the hearing on any other date as may be convenient to the bench. 05. Assessee was informed by the bench that these are stay granted matters and assessee cannot be allowed adjournment without there being a 'bona fide reason' or a &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nformation about third party. i.e. NSEIL. Ld CIT DR denied similarity of issue, facts and circumstances of the case. 07. Therefore the situation was :- i. Once again, assessee did not submit the grounds, Assessment and appellate orders in case of NSE. ii. It is to be noted that NSE is a holding company of Assessee and Assessee is a subsidiary of NSE. Despite this relationship of holding -subsidiary companies, being joint contributor to a fund, being one director on the board of the assessee representative of NSEIL as shareholder, assessee did not produce any single document to show about similarity of facts, circumstances and issues in the appeal of NSEIL and assessee. iii. Despite assessee, not producing any information about the facts and circumstances and issues in case of NSEIL, assessee vehemently claimed that issues in case of assessee and NSEIL are similar. We do not know how assessee has come to know this and if assessee has such knowledge, then why assessee is not ready to produce before the bench, when stay was granted with the condition that no adjournment will be sought other than for bonafide reason. iv. Assessee never said that issue heard by the bench covers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ees, Millions of people of our country and other countries trade daily , and conscious of the facts that vacation of stay would harm the interest of all stakeholders, - for that's solitary reason- one more opportunity at date convenient to the assessee was granted to evidence similarity as pleaded by the assessee for deciding whether the reason for adjournment is bona fides and cause is reasonable to seek adjournment on 13 September 2023. vii. Appeal of the Assessee for Ay 2016-17 was adjourned as it was not a stay granted appeal. 09. On 13/9/2023, assessee reiterated what it has stated without producing any evidence and learned departmental representative vehemently stated that the facts are not similar and averments made by the assessee are without any evidence. Therefore, both the sides were directed to file affidavit in support of averments made. Hearing was adjourned to 20/9/2023 for further consideration. 10. On 20/9/2023, affidavit of Mr Vikram Kothari managing director of the assessee was furnished wherein, it was stated as per paragraph number 13 onwards as under :- '1. Mr. Vikram Kothari, son of Sh. Arunendra Singh Kothari, aged 53 years, currently residing at E 921 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2012 (hereinafter referred to as the 'SEBI Regulations'), SEBI inter alia required that a Core Settlement Guarantee Fund be set up and at all times, a 'minimum required corpus (hereinafter referred to as 'MRC) be maintained by the Core SGF so as inter alia to adequately meet all the eventualities arising on account of failure of any clearing member. 10. That in terms of SEBI Regulations and SEBI Circular dated 27th August, 2014, the Appellant Assessee established the NSCCL Core Settlement Guarantee Fund on 1 December 2014 and has been maintaining it since then. NSCCL Core Settlement Guarantee Fund is notified as a recognized fund under section 10(23EE) of the Income Tax Act, 1961 vide CBDT Notification No. SO 2184(E) [No. 51/2016 (F. No. 197/39/2015-ITA-1)], dated 23rd June 2016. NSCCL Core Settlement Fund is treated as a separate 'person' for the purpose of the provisions of the Income Tax Act, 1961 and has been allotted separate and distinct PAN: AAAJN1131F. 11. That SEBI as per its Circular dated 27th August 2014 required that the corpus of Core SGF be contributed by (i) the stoc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adjournment are bona fide, as the issues involved in the Appellant Assessee's appeals and in the case of the abovementioned appeals of NSEIL are pari materia, viz. allowability of the statutory contribution to the Core SGF arises from the same SEBI Regulations / directions, and where the nature of fund and the contribution made is also the same and thus, a decision rendered in the case of the NSEIL will have a bearing on the outcome of the Appellant Assessee's appeals. 21. That the fact that issues involved in Appellant Assessee's appeals and appeals preferred by NSEIL are pari materia is undisputed by the Revenue as well and the Income Tax Appellate Tribunal has acknowledged this in its order dated 28 April 2023 passed in SA Nos. 61 & 62/Mum-2023. 22. I am informed that on 30th August 2023, as the Hon'ble Members pointed out that no written application for adjournment by the Appellant v I was on record, the counsel tendered a letter (which had been prepared earlier) of the same date on 30 August 2023, during the course of the hearing itself. I am informed that for this reason a more comprehensive application dated 1" September 2023 was filed at the commencement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /2023 on 01.09.2023. 4. As directed, the facts and issues involved in the case of M/s NSE Clearing Ltd. and M/s National Stock Exchange of India is submitted hereunder:+ 4.1 On perusal of bare facts as emanating from audited books of accounts of National Stock Exchange of India Ltd. (NSE Ltd.) as applicable for A.Y.2016-17 and A.Y.2017-18, the following salient observations are noticeable. (i) As per the P & L A/c. of A.Y. 2016-17, it is noticed that the assessee has debited a total amount of Rs. 761.52 Crores just above the profit before tax and just below the profit before the exceptional item, contribution to National Securities Clearing Corporation Limited (NSCCL) Core SGF and tax. Further, the same is narrated and explained arithmetically and accounting wise as a provision as per the note 35(a) (i) & (ii) and 35(b). The same reads as under - 35 (a) In accordance with Regulation 33 of Securities Contracts (Regulations) (SFCC) Regulations, 2012 (The Regulations) issued on June 20, 2012, every recognized stock exchange was required to transfer twenty five percent of its annual profits every year to a fund of the recognized clearing corporation(s) which clears and settles ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 dated August 27, 2014, the Clearing Corporation (CC) shall have a fund called Core SGF for each segment of each Recognized Stock Exchange (SE) to guarantee the settlement of trades executed in respective segment of the SE. The Recognized SE shall contribute at least 25% of the Minimum Required Corpus of Core SGE (MRC). The contribution to be made by the Recognized SE to the said Core SGF can be adjusted against transfer of 25% of the profit by the Recognized SE as required by Regulation 33 of SECC Regulations. Accordingly during the year ended March 31, 2016, an amount of 71 crores (Previous Year? 170 crores) has been transferred to the Clearing Corporation towards contribution to the said Minimum Required Corpus of Core SGF and the same is adjusted against appropriation of 25% of the profit as mentioned in note (35)(a)(ii) and has been charged to Statement of Profit and Loss and shown as exceptional item." (ii) From the above, the facts are clear that NSE Ltd. has made a claim for debit in P & L Account by provisional appropriation of liability for Core SGF contribution for a total amount of Rs. 761.52 Crores and accounted the same in the P & L Account as an exceptional ite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annual profit after tax in its financial statements. On August 27, 2014. SEBI vide its circular no CIR/MRD/DRMNP/25/2014 issued norms relating to Core Settlement Guarantee Fund ("Core SGF) and contribution requirements by recognized stock exchange to Core SGF maintained by clearing corporations. As per the circular, stock exchange contribution to Core SGF shall be at least 25% of the Minimum Required Contribution (MRC) determined by clearing corporation. The contribution towards Core SGF is eligible to be adjusted against twenty five percent transfer of profits by stock exchange under the Regulations, Accordingly, the Company had recorded a provisional appropriation of 2527.19 crores as at March 31, 2015 (net of 170 crores for contribution to MRC of Core SGF for the year ended March 31, 2015) and the same had been disclosed as provision for Core Settlement Guarantee Fund in the Balance Sheet of the Company as on April 1, 2015. On May 4, 2016, SEBI in its circular no. SEBI- HO/MRD/ DRMNP/CIR/ 2016/54 notified that the provisions made by stock exchange towards the transfer of profits to SGF until March 31, 2015 shall be transferred to the Core SGF maintained by the clearing corpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utation for a total Rs. 344.88 Crores on account of NSCCL Core SGF contribution The same on the has been considered for disallowance by the AO for these two assessment years, holding to the comparable findings as made in the case of NSE of India Ltd., by treating the same as provisional contribution/liability and also having not met any expenditure during the year as there are no defaults by any clearing members of NSE of India Ltd. However, in the Balance Sheet of the A.Y.2017-18 of NSE Clearing Ltd, the appellant has reflected and referred to this core settlement guarantee fund under equity and liabilities of Rs. 1684.95 Crores for A.Y.2017-18 and of Rs. 675.48 Crores for A.Y. 2015-16. A detailed note no.27 is enumerated to the Balance Sheet giving detailed arithmetic working and accounting treatment of same as part of liability and same reads as under: "27 Securities and Exchange Board of India, vide circular CIR/MRD/DRNMP/25/2014 dated August 27, 2014, interalia, has issued norms related to the computation and contribution to the Core Settlement Guarantee Fund by the Clearing Corporation (minimum 50%) and members (maximum 25%). Further SEBI vide circular CIR/CFD/FAC/62/2016 d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (viii) as appearing in grounds of appeal of M/s NSE of India Ltd. for A.Y. 2016-17 & 2017-18 as filed before Ld. CIT(A). The same reads as under (for emphasis all grounds of appeal of these 4 appeals are herewith enclosed for kind perusal of Hon'ble Bench, to adduce the same as distinguishable facts of case on a qualitative basis. (viii) the Contribution to Core SGF is gone out of the funds and books of appellant company and never form integral part of free reserves of assets of appellant company 5. In view of the above facts of the case, as available as per the file records /appellant's submission / books of accounts etc., it is clear that on strict comparison, the facts of case as emanating from NSE Clearing Ltd. is not exactly the same as relatable to the facts of the case to the NSE of India Ltd underlying the common issue of claim of contribution to Core SGF by these entities. In the case of NSE of India Ltd, the claim is debited in the P & L Account as exceptional item and claimed before CIT(A) that, "(viii) the Contribution to Core SGF is gone out of the funds and books of appellant company and never form integral part of free reserves of assets of appellant co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as claimed as a deduction under section 37 (1) of the act in computation of total income. 15. As per the rebuttal of the assessing officer, it was specifically stated that the appellant could not give any specific facts which proves that the final facts of its accounting, circumstances of the claim on settlement guarantee fund and issue involved in the case of National stock exchange of India Ltd with the case of the assessee is one and the same as per the respective books of accounts of these two assessees and therefore according to him there is a distinguishable features on merits in both the cases and therefore those cases are not similar. 16. On careful consideration of the above facts, we find that if the reason for seeking the adjournment is bona fide and there is a reasonable cause to seek an adjournment, the same must be granted to the assessee and stay must be continued. Therefore, it needs to test the claim of the assessee to grant adjournment to the assessee with continuation of stay. 17. We find that i. National stock exchange of India Ltd and NSE clearing limited are both related parties as per note number 24 (b) of the financial statement of National stock exchan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tested the default waterfall mechanism [ Para no 8 of Circular reproduced by CIT (A) at page No 64 to 70 of his appellate Order] held that no liability or expenses has accrued and will never accrue to assessee. Para no 6.1 of appellate order is clear on this issue. xii. There is no finding in stay order about similarity of issues in appeal between assessee and NSEIL. It is merely the claim of the assessee, which was recorded. Stay was granted only because of payment of taxes more than 20 % of outstanding dues. xiii. If the assessee is so sure about the similarity of the case, it is unexplainable that why assessee did not get appeals of NSEIL and assessee consolidated, after getting demand stayed. 18. Further, merely because an appeal is pending in some other assessee's case, it cannot be a ground for seeking adjournment or showing reluctance to conduct the matter in assessee's own case especially when stay has been granted to the assessee. If such a ground is considered to be bonafide and reasonable, then always on similar issues the cases may be pending at any of various benches of tribunal or at the stage of Honourable high courts and Honourable Supreme court, but because o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay proceed to take coercive action against the assessee. We will not put assessee in to such a situation. 23. As we have vacated the stay granted to the assessee, we grant one more facility to the assessee and direct it to pay the outstanding taxes in three equal instalments on 10/10/2023, 15/10/2023 and 20/10/2023. Assessee is directed to produce proof of such payments to ld AO on next day of such payments. 24. We also give liberty to the assessee that if on any of the dates mentioned above, assessee faces any financial difficulty for payment of above instalments, assessee may immediately approach us with appropriate evidence, the necessary relaxation would be considered immediately. 25. In the end, the learned authorised representative submitted that this bench until 20/10/2023 should stay the order of this bench vacating the stay because Assessee would challenge this order before the honourable High Court. In view of the specific request of the learned authorised representative, we accede to his request and direct the learned assessing officer to not to take any coercive action up to the end of the day 20/10/2023. Thus, we accept the plea of the assessee, which we found reaso ..... X X X X Extracts X X X X X X X X Extracts X X X X
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