ITO (EXEMPTION)- 2(1), MUMBAI vs. NCDEX INVESTOR (CLIENT) PROTECTION FUND TRUST), MUMBAI

These are three appeals filed by Income Tax Officer, Exemption 2(1), Mumbai (the learned Assessing Officer) for A.Y. 2016-17, 2019-20 and 2020-21, in case of NCDEX Investor Protection Fund Trust, Mumbai (assessee / appellant) against the appellate order passed by the National Faceless appeal Centre, Delhi, on 6th May, 2022 for A.Y. 2016-17 and on 13th June, 2022 for A.Y. 2019-20 and 2020-21.

In all these three appeals, identical grounds of appeal are raised as under:-

The facts of A.Y. 2016-17 shows that Assessee trust has been established by National Commodity & Derivatives Exchange Limited (NCDEX) by trust deed dated 25th June, 2012, in terms of guidelines issued by the Forward Markets Commission (FMC) with an object of compensating eligible claims of investors against defaulting members. It has the object also of creating awareness and educating public about the benefits of trading on commodity exchange and to publish books etc for the same object. As per notification dated 18th January 2017, the assessee has been specified as assessee trust for claiming exemption under that section 10 (23EC) of The Act. Assessee is also registered under Section 12A of the Act as per registration dated 17 March 2016. Assessee trust filed its return of income on 17th October, 06. 2016 declaring total income at ₹ 15,37,007/-. In the return of income assessee claimed exemption under section 10 (23EC) of the act on account of the contribution received of ₹ 92,458,751/–. As assessee has also other income other than the contribution income to which provisions of section 10 (23EC) of the act applies amounting to ₹ 44,934,879/–, assessee claimed deduction of amount of expenditure incurred on the object of the

The return was processed under Section 143(1) of the Act and intimation was issued on 17th March, 2018. The total income of the trust was determined at ₹ 9,39,95,760/- denying the claim of exemption under Section 10(23EC) of the Act. Thus, Centralized processing Centre of Income Tax did not grant exemption under section 10 (23EC) of the act of ₹9,2458,751/-.

Prior to filing of appeal before the learned CIT (A), the assessee filed an application for rectification on 3rd April, 2018, which was rejected on 10th April, 2018, in the communication, the reasons for raising demands were that where the trust has been granted registration under Section 12A or 12AA of the Act and said registration is in force, then exemption claimed under Section 10 other than clause (1) and (23C) shall not be allowed, therefore, assessee was advised to claim exemption under Section 11 of the Act instead of section 10 of the Act.

Before the learned CIT (A), assessee submitted that assessee has claimed exemption under Section 10 (23EC) of the Act of ₹9,24,58,751/- being contribution received. Further, assessee has claimed exemption under Section 11 of the Act on other income being income derived from property held under trust as assessee is registered under Section 12AA of the Act. Before the learned CIT (A), assessee explained provision of Section 10(23EC), provision of Section 11(7) of the Act and submitted that assessee is eligible for exemption of contribution under Section 10(23EC) of the Act. Further, on other income those are chargeable to tax as per provisions of Section 11 and 12 of the Act assessee is also eligible for those benefits. The learned CIT (A) was also urged that identical issue arose in the case of the assessee for A.Y. 2015-16, 2017-18 and 2018-19, wherein identical intimation under Section 143(1) of the Act were passed disallowing exemption under Section 10(23EC) of the Act. However, when those years were picked up for scrutiny, assessment orders were passed under Section 143(3) of the Act for those years and assessee was granted exemption under that provision of the law.

The learned CIT (A) found that assessee has received an income of ₹ 92,458,750 by way of statutory contribution

The learned AO is aggrieved with that order and has preferred this appeal. The learned departmental representative vehemently supported the order of the central processing Centre and the reasons given therein.

The learned authorized representative submitted that assessee is entitled to exemption under section 10 (23EC) on the income of contribution received from recognized stock exchange and the members. With respect to the other income derived from the property held under trust for charitable purposes, assessee is entitled to the benefit of section 11 and 12 of the act as assessee holds the registration under section 12 A of the act. He further submitted that in the several years, the learned assessing officer has granted exemption to the assessee under section 10 (23EC) and under section 11 and 12 of the act Simon tenuously on different incomes.

We have carefully considered the rival contention and perused the orders of the lower authorities. We find that the income of the assessee with respect to contribution

Provisions of section 11 (7) provides that where a trust or institution has been granted registration under section 12 AA and the said registration is in force for any previous year then nothing contained in section 10 shall operate to exclude any income derived from the property held under trust from the total income of the person in receipt thereof for that previous year. However, there is an exception to this rule with respect to income exempt under section 10 (23C) (1), (23EC), (46) and (46A). With effect from 1 April 2024 such is removed with respect to income under section 10 (23EC), (46) (46A) of the act. Thus prior to 1- 4- 2024 there was no bar on assessee claiming exemption under section 10 (23EC) and under section 11 and 12 of the act. The impugned assessment year before us is assessment year 2016 – 17, 2019 – 20 and 2020 – 21. Therefore, we find no justification in the claim of the revenue that assessee can only claim exemption under section 11 and 12 even prior to 1/4/2024. Thus, we do not find any merit in the argument of the revenue. Further the assessment orders passed under section 143 (3) of the act for earlier years and subsequent years have granted assessee exemption on contribution income under section

Accordingly as similar issue involved in other two appeals of the learned assessing officer, we dismiss the appeal of the revenue for assessment year 2016 – 17, 2019 – 20 and 2020 – 21.

As we have already dismissed the appeal of the revenue, the cross objection filed by the assessee becomes infructuous, therefore those are also dismissed.

In the result appeal of the learned AO and the cross objections of the assessee for all the three assessment years (all three appeals and the cross objections) are dismissed.