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BSE may get 'tax-neutral status', says I-T chief

Sheela Bhatt and Sidharth Shah in Bombay

The latest crisis to hit the Bombay Stock Exchange has brought into focus the issue of possible corporatisition of the country's oldest bourse.

According to Sebi sources, the finance ministry is possibly looking for a solution towards expediting the transfer process.

K V Pai, Chief Commissioner of Income tax (Zone 1) told rediff.com that the "BSE was late by a day in filing the application with the finance ministry to get exemption from paying capital gains tax. If it had applied a little earlier, it would have got the benefit in the Finance Bill itself."

According to Pai, "Deena Mehta (then the vice-president of BSE) met me on March 1 to discuss the issue of transfer. We consider stock exchanges as service organisations. As on today, we are not collecting any tax. When an 'Association of Persons' is converted into a 'Corporation', it is on the lines of any other transfer or merger."

"I have said to the BSE that we have no objection in giving a one-time exemption - or a 'tax-neutral-position'. That is a status we can accord to BSE. It will be a tax-free transfer. There will be no tax liability on BSE," he added

Once a corporation is formed, it will be treated as any other tax organisation and the BSE shall have to pay tax if it makes any profit, Pai concluded.

The BSE's general body meeting has already approved the 'mutualisation'.

"Sebi now expects that the current crisis will bring up the required resolutions and changes in laws to alter the character, management structure and the functioning of the BSE, which is now in the hands of the few well-entrenched sharebrokers," said a Sebi source.

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