Under the provisions of Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2012 (SECC) notified by SEBI, the Clearing Corporations are mandated to establish a fund, called Core Settlement Guarantee Fund (Core SGF) for each segment of each recognized stock exchange to guarantee the settlement of trades executed in respective segments of the exchange.
Under the existing provisions, income by way of contributions to the Investor Protection Fund set up by recognised stock exchanges in India, or by commodity exchanges in India or by a depository shall be exempt from taxation.
On similar lines, it is proposed to exempt the income of the Core SGF arising from contribution received and investment made by the fund and from the penalties imposed by the Clearing Corporation subject to similar conditions as provided in case of Investor Protection Fund set up by a recognised stock exchange or a commodity exchange or a depository.
However, where any amount standing to the credit of the Fund and not charged to income-tax during any previous year is shared, either wholly or in part with the specified person, the whole of the amount so shared shall be deemed to be the income of the previous year in which such amount is shared.
The specified person for this purpose is defined to mean any recognized clearing corporation which establishes and maintains the Core Settlement Guarantee Fund and the recognised stock exchange being the shareholder of such clearing corporation.
This amendment will take effect from 1st April, 2016 and will, accordingly, apply in relation to the assessment year 2016-17 and subsequent assessment years.
Note On Relevant Clauses of Finance Bill 2015
Clause 7 of the Bill seeks to amend section 10 of the Income-tax Act relating to incomes not included in total income.
It is proposed to insert a new clause (23EE) in the aforesaid section so as to provide for exemption in respect of any specified income of such Core Settlement Guarantee Fund, set up by a recognised clearing corporation in accordance with the regulations, as the Central Government may, by notification in the Official Gazette, specify in this behalf.
Clause (23FB) of said section provides that any income of a venture capital company or venture capital fund from investment in a venture capital undertaking shall not be included in total income.
It is proposed to insert a proviso to the said clause to provide that the said clause shall not apply to a venture capital company or venture capital fund, being an investment fund specified in clause (a) of the Explanation 1 to section 115 UB, for any previous year relevant to the assessment year beginning on or after the 1st day of April, 2016.
It is further proposed to insert a new clause (23FBA) to provide that any income of an investment fund other than the income chargeable under the head “Profits and gains of business or profession” shall not be included in the total income of such fund.
It is also proposed to insert a new clause (23FBB) to provide that any income of a person accruing or arising to, or received by, a unit holder of an investment fund, being that proportion of income which is of the same nature as income chargeable under the head “Profits and gains of business or profession” shall not be included in total income of such person.
It is proposed to insert a new clause (23FCA) so as to provide that any income of a business trust, being a real estate investment trust, by way of renting or leasing or letting out any real estate asset owned directly by such business trust, shall not be included in the total income.
It is further proposed to amend (23FD) of the said section to provide that any distributed income, referred to in section 115UA, received by a unit holder from the business trust, being that proportion of the income which is of the same nature as income by way of renting or leasing or letting out any real estate asset owned directly by the business trust, shall be included in total income and not be exempted.
It is also proposed to amend clause (38) of the said section to provide that any income in the nature of long term capital gain arising from transfer of units of a business trust which were acquired in consideration of exchange of shares of a special purpose vehicle and on which securities transaction tax has been paid shall not be included in the total income of the sponsor.
These amendments will take effect from 1st April, 2016 and will, accordingly, apply in relation to the assessment year 2016- 17 and subsequent assessment years.
Extract of Relevant Clauses from Finance Bill 2015 proposing amendment to Income tax Act, 1961
7. Amendment of section 10.
In section 10 of the Income-tax Act,—
(III) with effect from the 1st day of April, 2016—(a) after clause (23ED), the following clause shall be inserted, namely:—
‘(23EE) any specified income of such Core Settlement Guarantee Fund, set up by a recognised clearing corporation in accordance with the regulations, as the Central Government may, by notification in the Official Gazette, specify in this behalf:
Provided that where any amount standing to the credit of the Fund and not charged to income-tax during any previous year is shared, either wholly or in part with the specified person, the whole of the amount so shared shall be deemed to be the income of the previous year in which such amount is so shared and shall, accordingly, be chargeable to income-tax.
Explanation.—For the purposes of this clause,—
(i) “recognised clearing corporation” shall have the same meaning as assigned to it in clause (o) of sub-regulation (1) of regulation 2 of the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2012 made under the Securities and Exchange Board of India Act, 15 of 1992.;
(ii) “regulations” means the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2012 made under the Securities and Exchange Board of India Act, 15 of 1992.;
(iii) “specified income” shall mean,— (a) the income by way of contribution received from specified persons;
(b) the income by way of penalties imposed by the recognised clearing corporation and credited to the Core Settlement Guarantee Fund; or
(c) the income from investment made by the Fund;
(iv) “specified person” shall mean,—
(a) any recognised clearing corporation which establishes and maintains the Core 50 Settlement Guarantee Fund; and
(b) any recognised stock exchange being shareholder in such recognised clearing corporation;’;
(b) in clause (23FB), before the Explanation, the following proviso shall be inserted, namely:—
“Provided that nothing contained in this clause shall apply in respect of any income of a venture capital company or venture capital fund, being an investment fund specified in clause (a) of the Explanation 1 to section 115UB, of the previous year relevant to the assessment year beginning on or after the 1st day of April, 2016;”;
(c) after clause (23FB), the following clauses shall be inserted, namely:—
‘(23FBA) any income of an investment fund other than the income chargeable under the head “Profits and gains of business or profession”;
(23FBB) any income referred to in section 1 15UB, accruing or arising to, or received by, a unit holder of an investment fund, being that proportion of income which is of the same nature as income chargeable under the head “Profits and gains of business or profession”.
Explanation.—For the purposes of clauses (23FBA) and (23FBB), the expression “investment fund” shall have the meaning assigned to it in clause (a) of the Explanation 1 to section 115UB;’;
(d) after clause (23FC), the following clause shall be inserted, namely:—
‘(23FCA) any income of a business trust, being a real estate investment trust, by way of renting or leasing or letting out any real estate asset owned directly by such business trust.
Explanation.—For the purposes of this clause, the expression “real estate asset” shall have the same meaning as assigned to it in clause (zj) of sub-regulation (1) of regulation 2 of the Securities and Exchange Board of India (Real Estate Investment Trusts) Regulations, 2014 made under the Securities and Exchange Board of India Act, 1992;’; 15 of 1992.
(e) in clause (23FD), after the word, brackets, figures and letters “clause (23FC)”, the words, brackets, figures and letters “or clause (23FCA)” shall be inserted;
(f) in clause (38), the second proviso shall be omitted.
