The Multi Commodity Exchange of India (MCX) is under investigation by the Income-Tax Department for making donations of a ‘non-genuine’ nature to a charitable trust.

Interestingly, the exchange’s original promoter, Financial Technologies India Ltd (FTIL), was also under the Department’s scanner for donations to the same organisation, the Navjeevan Charitable Trust.

The transactions under investigation followed a pattern: cheques paid to the Trust were returned as cash. In MCX’s case, the company approved the donation of a sum of ₹1 crore on June 20, 2013, through “the immediate issuance of a cheque/pay order” to the Trust as part of its “commitment to Corporate Social Responsibility”.

The transaction took place just before the ₹5,600-crore National Spot Exchange Ltd (NSEL) scam broke out in August 2013.

Donations returned in cash

A search action on the Trust by tax officials in October 2014 led one of the trustees of Navjeevan to admit that all donations that were accepted through cheques were “returned to donors in cash after deducting nominal commissions”.

I-T summons

A summons by the Investigation Section of the Deputy Director of Income Tax—Mumbai to MCX, dated February 3, 2015, states that FTIL had also made donations to the same trust in 2013. And that following the launch of enquiry proceedings under the Income Tax Act, FTIL had given up the claim of deduction under section 35AC.

The letter summoning MCX states: “Since MCX Ltd was under the management of FTIL in FY 2013-14, it is assumed that the donations given to Navjeevan Charitable Trust are not genuine.”

In a document approving the donation to Navjeevan Charitable Trust, MCX says it as a non-profit organisation, registered in Mumbai, which provides “vocational training programmes to women” and “support to poor and needy persons”.

Signed by three high-ranking MCX officials (the CFO, the Company Secretary and Chief Economist), it states that the Trust has received approval from the National Committee for Promotion of Social and Economic Welfare (Ministry of Finance, Department of Revenue).

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