ACIT Circle-3 (1), v. BLB Ltd, New Delhi

ITA 2290/DEL/2008 | 2005-2006
Pronouncement Date: 29-01-2010 | Result: Allowed

Appeal Details

RSA Number 229020114 RSA 2008
Assessee PAN AAACB0184H
Bench Delhi
Appeal Number ITA 2290/DEL/2008
Duration Of Justice 1 year(s) 7 month(s) 16 day(s)
Appellant ACIT Circle-3 (1),
Respondent BLB Ltd, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 29-01-2010
Appeal Filed By Department
Order Result Allowed
Bench Allotted A
Tribunal Order Date 29-01-2010
Date Of Final Hearing 10-09-2009
Next Hearing Date 10-09-2009
Assessment Year 2005-2006
Appeal Filed On 12-06-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL [ DELHI BENCH A DELHI ] BEFORE SHRI RAJPAL YADAV JM & SHRI K. D. RA NJAN AM I. T. APPEAL NO. 2290 (DEL) OF 2008. ASSESSMENT YEAR : 2005-06. ASSTT. COMMISSIONER OF INCOME-TAX M/ S. B L B LTD. C I R C L E : 3 (1) VS. 4764 / 23-A ANSARI ROAD N E W D E L H I. DARYA GANJ NEW DELHI. PAN / GIR NO. AAA CB 0184 H ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY : SHRI C. S. AGGARWAL SR. ADV.; & SHRI K. C. JAIN C. A. ; DEPARTMENT BY : SHRI A. K. PANDEY [CIT] - D . R.; O R D E R. PER K. D. RANJAN AM : THIS APPEAL BY THE REVENUE FOR ASSESSMENT YEAR 2005 -06 ARISES OUT OF THE ORDER OF THE LD. CIT (APPEALS)-VI NEW DELHI. 2. THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE AS FOLLOWS:- 2 I. T. APPEAL NO. 2290 (DEL) OF 2008. ' 1. THE LD. CIT (APPEALS) ERRED ON FACTS AND CIRCUMSTANCES IN DELETING THE ADDITION OF RS.3 84 01 623/- ON ACCOUNT OF SEBI REG ISTRATION FEES THOUGH THE EXPENSES CLAIMED IN THE ASSESSMENT YEAR 1005-06 GOT CRYSTALISED IN THE ASSESSMENT YEAR 2001-02 WITH THE DECISION OF HON'BL E SUPREME COURT; 2. THE LD. CIT (APPEALS) ERRED ON FACTS AND CI RCUMSTANCES IN DIRECTING THE ASSESSING OFFICER TO RECALCULATE THE REBATE UNDER S ECTION 88-E THOUGH THERE ARE NUMBER OF EXPENSES NOTED IN THE ASSESSMENT ORDER WH ICH HAVE NOT BEEN TAKEN INTO ACCOUNT BY THE ASSESSEE WHILE CALCULATING THE REBATE OF SECTION 88-E. ' 3. THE FIRST ISSUE FOR CONSIDERATION RELATES TO DEL ETING THE ADDITION OF RS.3 84 01 623/- ON ACCOUNT OF SEBI REGISTRATION FEE. THE FACTS OF THE CASE STATED IN BRIEF ARE THAT THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION WAS MAINLY DEAL ING IN BUYING AND SELLING OF SHARES ON ITS OWN ACCOUNT. THE ASSESSEE ALSO ACTED AS A SHARE BR OKER BEING A MEMBER OF NATIONAL STOCK EXCHANGE [NSE] AND BOMBAY STOCK EXCHANGE [BSE]. OR IGINALLY THE RETURN OF INCOME WAS FILED ON 29/10/2005 AT AN INCOME OF RS.8 92 070/- WHICH WAS REVISED ON 30TH MARCH 2007 AT AN INCOME OF RS.7 45 34 674/-. DURING THE COURSE O F ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAD CLAIMED EXPENSE S OF RS.3 94 16 470/- AS SEBI REGISTRATION FEE VIDE DEBITING THE AMOUNT IN PROFIT AND LOSS ACC OUNT. THE ASSESSEE WAS ASKED TO PROVIDE THE DETAILS OF PAYMENT MADE TO SEBI. THE ASSESSING OFFICER FURTHER NOTED THAT THE ASSESSEE HAD PAID RS.3 84 01 623/- TOWARDS ONE TIME SETTLEME NT FEE TO SEBI UNDER SECURITIES AND EXCHANGE BOARD OF INDIA [INTERNAL LIABILITY REGULAR IZATION SCHEME 2004]. THE AO FURTHER NOTED THAT ACCORDING TO THE SCHEME ALL THE BROKERS OF BSE AND NSE WERE REQUIRED TO PAY TURNOVER FEES AT A PRESCRIBED FEE FOR AN INITIAL PE RIOD OF 5 YEARS. FOR NON-PAYMENT SEBI HAD CHARGED INTEREST ON THE AMOUNT PAYABLE BY THE BROKE RS. THE MATTER HAD GONE TO THE COURT AND HON'BLE SUPREME COURT VIDE ORDER DATED 1/02/2001 DE CIDED THE MATTER AGAINST THE BROKERS. AS A RESULT THEREOF THE SEBI CAME OUT WITH A SCHEME FOR ONE TIME SETTLEMENT PAYMENT BY BROKERS IF THEY PAY THE TURNOVER FEE AS ALSO 20 PE R CENT OF TOTAL INTEREST PAYABLE BEFORE THE SPECIFIED DATE I.E. 15/11/2004. THE ASSESSEE PAID THE SAID AMOUNT ON THE BASIS OF QUANTIFICATION MADE BY SEBI WITHIN THE STIPULATED P ERIOD I.E. ON 13TH & 14TH NOVEMBER 2004. IT WAS ALSO SUBMITTED THAT THE LIABILITY TO PAY THE FEE WAS IN DISPUTE BETWEEN ALL THE SHARE BROKERS AND SEBI AND THE MATTER WAS SUB-JUDIC E BEFORE THE HON'BLE SUPREME COURT. 3 I. T. APPEAL NO. 2290 (DEL) OF 2008. AFTER THE DECISION OF HON'BLE SUPREME COURT THE SE BI CAME OUT WITH THE SCHEME ON 15/07/2004 AND DIRECTED THE PAYMENT TO BE MADE ON O R BEFORE 15TH NOVEMBER 2004. SINCE THE LIABILITY WAS QUANTIFIED DURING THE YEAR THE CL AIM OF EXPENSES WAS RIGHTLY MADE BY THE ASSESSEE DURING THE YEAR AND THE PAYMENT WAS ALLOWA BLE IN TERMS OF SECTION 43-B OF THE ACT. THE ASSESSING OFFICER HOWEVER WAS OF THE VIEW THA T THE LIABILITY TO PAY THE FEE AROSE IN EARLIER YEARS AND THEREFORE THE ASSESSEE SHOULD H AVE MADE PAYMENT IN EARLIER YEARS. THE ASSESSING OFFICER FURTHER NOTED THAT THE LIABILITY FOR PAYMENT OF FEE TO SEBI WAS KNOWN TO THE ASSESSEE AND IT COULD HAVE MADE A PROVISION FOR THI S EXPENDITURE FOR EARLIER YEARS. THE ASSESSEE HAD FAILED TO CLAIM THIS EXPENDITURE IN TH E RELEVANT ASSESSMENT YEAR. THEREFORE THE SAME COULD NOT BE ALLOWED IN SUBSEQUENT YEARS. HE PLACED RELIANCE ON THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF DELHI TOURI SM & DEVELOPMENT CORPORATION REPORTED IN 285 ITR 114 (DEL.) AND DISALLOWED THE CLAIM OF THE ASSESSEE. 4. BEFORE THE LD. CIT (APPEALS) IT WAS SUBMITTED TH AT THE PAYMENT WAS ALLOWABLE IN TERMS OF SECTION 43-B. IT WAS ALSO SUBMITTED THAT THE PAYMENT MADE IS IN THE NATURE OF FEE AND THEREFORE COVERED BY THE PROVISIONS OF SECTIO N 43-B OF THE ACT. THE LD. CIT (APPEALS) AFTER GOING THROUGH THE MATTER IN DETAIL WAS OF THE VIEW THAT THE SEBI REGISTRATION FEE WAS IN THE NATURE OF A FEE. HE PLACED RELIANCE ON THE DEC ISION OF HON'BLE HIGH COURT IN THE CASE OF OM PRAKASH AGGARWAL VS. GIRIRAJ KISHORE 164 ITR 376 WHEREIN THE DEFINITION OF THE WORD 'FEE' AND 'TAX' WAS EXPLAINED. ACCORDING TO THE DE CISION A FEE IS GENERALLY DEFINED TO BE A CHARGE FOR A SPECIAL SERVICE RENDERED TO INDIVIDUAL BY SOME GOVERNMENTAL AGENCY. THE AMOUNT OF FEE LEVIED IS SUPPOSED TO BE BASED ON EXP ENSES INCURRED BY THE GOVERNMENT IN RENDERING THE SERVICE THOUGH IN MANY CASES THE COST S ARE ARBITRARILY ASSESSED. ORDINARILY THE FEES ARE UNIFORM AND NO ACCOUNT IS TAKEN OF VARYING LIABILITY OF DIFFERENT RECIPIENT TO PAY. THESE ARE UNDOUBTEDLY SOME OF THE GENERAL CHARACTER ISTICS BUT AS THERE MAY BE VARIOUS KINDS OF FEES IT IS NOT POSSIBLE TO FORMULATE A DEFINITIO N THAT WOULD BE APPLICABLE TO ALL CASES. IF FEE IS REGARDED AS A SHORT OF RETURN FOR CONSIDERATION FOR SERVICES RENDERED IT IS ABSOLUTELY NECESSARY THAT THE LEVY OF FEES SHOULD ON THE FACE OF LEGISLATIVE PROVISION BE CO-RELATED TO THE EXPENSES INCURRED BY THE GOVERNMENT IN RENDERING TH E SERVICE. THE LD. CIT (APPEALS) ON THE BASIS OF THE ABOVE CAME TO THE CONCLUSION THAT THE FEES PAID TO SEBI WAS A CHARGE FOR A SPECIAL SERVICE RENDERED BY SEBI TO ITS MEMBERS AND WAS LEVIED IN ORDER TO MEET THE EXPENSES INCURRED BY SEBI IN RENDERING THE SERVICE TO ITS ME MBERS. HE FURTHER PLACED RELIANCE ON THE 4 I. T. APPEAL NO. 2290 (DEL) OF 2008. DECISION OF ITAT BOMBAY IN THE CASE OF RELIANCE SH ARE & STOCK BROKERS PVT. LTD. VS. ADDL. CIT (2005) ITD 44 AND IN THE CASE OF INCOME-T AX OFFICER VS. SURESH CHAND JAIN 100 ITD 435 HELD THAT SEBI REGISTRATION FEE WAS A F EES AND ALLOWABLE AS DEDUCTION IN TERMS OF SECTION 43-B OF THE ACT. HE ACCORDINGLY D IRECTED THE ASSESSING OFFICER TO ALLOW THE CLAIM. 5. BEFORE US SH. C.S. AGARWAL THE SENIOR COUNSEL F OR THE ASSESSEE SUBMITTED THAT THE SEBI REGISTRATION FEE IS NOTHING BUT A FEE UNDER R EGULATION 10 OF (STOCK BROKERS AND SUB-BROKERS) REGULATION ACT 1992 AND SINCE IT IS T HE FEE IT HAS TO BE ALLOWED AS DEDUCTION IN TERMS OF SECTION 43-B OF THE ACT EVEN IF IT IS HELD THAT IT PERTAIN TO PRIOR PERIOD NOT FALLING IN ASSESSMENT YEAR OR EVEN IF THE LIABILITY HAD ACCRUED IN EARLIER YEARS WHEN TRANSACTIONS WERE ENTERED. ON THE OTHER HAND LD SR. DR SUPPORTED THE ORDER OF ASSESSING OFFICER. 6. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. ITAT MUMBAI BENCH IN THE CASE OF ITO VS. SURESH CH AND JAIN (SUPRA) HAS HELD THAT THE TURNOVER CHARGES PAYABLE BY THE ASSESSEE WERE IN TH E NATURE OF CESS AND DUTY PAYABLE UNDER LAW. THIS ISSUE IS ALSO COVERED BY THE DECISION OF ITAT IN THE CASE OF K. HOLDING COMPANY P. LTD. VS. DCIT SPECIAL RANGE : 8 32 S.O.T. 586 WHEREIN IT HAS BEEN HELD THAT SEBI TURNOVER FEE BEING A STATUTORY LIABILITY WAS ALLOWA BLE UNDER SECTION 43-B OF THE ACT. THEREFORE THE PAYMENT OF STATUTORY FEE WILL BE ALL OWABLE AS DEDUCTION UNDER SECTION 43-B IN THE YEAR IN WHICH THE PAYMENT WAS MADE. ACCORDIN GLY WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) ALLOWING THE CLAIM OF THE ASSESSEE. 7. THE NEXT ISSUE FOR CONSIDERATION RELATES TO DIRE CTING THE ASSESSING OFFICER TO THE REBATE ALLOWABLE UNDER SECTION 88-E OF THE ACT. THE FACTS OF THE CASE RELATING TO THIS GROUND OF APPEAL ARE THAT THE ASSESSING OFFICER WHILE COMPUTI NG THE TAX PAYABLE ALLOWED THE REBATE UNDER SECTION 88-E OF THE ACT OF RS.2 76 81 059/-. ON AP PEAL THE LD. CIT (APPEALS) CALCULATED THE REBATE UNDER SECTION 88-E AT RS.3 95 27 704/- AS AG AINST RS.2 76 81 059/- CALCULATED BY THE ASSESSING OFFICER. 5 I. T. APPEAL NO. 2290 (DEL) OF 2008. 8. BEFORE US IT HAS BEEN SUBMITTED BY THE LD. SENIO R COUNSEL FOR THE ASSESSEE THAT TOTAL INCOME WAS ASSESSED AT RS.11 29 36 297/- ON WHICH T AX PAYABLE COMES TO RS.3 95 27 704/-. REBATE UNDER SECTION 88-E OF THE ACT IS ALLOWABLE F ROM THE AMOUNT OF INCOME-TAX ON SUCH INCOME ARISING FROM SUCH TRANSACTIONS COMPUTED IN T HE MANNER PROVIDED IN SUB-SECTION (2) OF AN AMOUNT EQUAL TO THE SECURITY TRANSACTION TAX PAI D BY HIM IN RESPECT OF TAXABLE SECURITIES TRANSACTIONS ENTERED INTO IN THE COURSE OF HIS BUSI NESS DURING THAT PREVIOUS YEAR. ON THE OTHER HAND LD SR. DR SUPPORTED THE ORDER OF ASSESSING OFF ICER. 9. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. IN THIS CASE THE SECURITY TRANSACTION TAX HAS BEEN PAID AT RS.8 35 86 315/- WHEREAS THE AVERAGE RATE OF INCOME-TAX COMES TO RS.3 95 27 704/ -. UNDER SECTION 88-E OF THE ACT THE ASSESSEE IS ENTITLED FOR PAYMENT OF INCOME-TAX ON P ROFIT AND GAINS OF BUSINESS OR PROFESSION ARISING FROM TAXABLE SECURITY TRANSACTIONS COMPUTED IN THE MANNER PROVIDED IN SUB-SECTION (2) OF AN AMOUNT EQUAL TO SECURITY TRANSACTION TAX PAID IN RESPECT OF TAXABLE SECURITY TRANSACTIONS. SUB SECTION (2) OF SECTION 88-E PROV IDES THE MANNER IN WHICH TAX IS TO BE COMPUTED. ACCORDING TO SUB SECTION (2) THE AMOUNT OF INCOME/TAX ARISING FROM TAXABLE SECURITY TRANSACTIONS SHALL BE EQUAL TO THE AMOUNT CALCULATED BY APPLYING THE AVERAGE RATE OF INCOME ON WHICH INCOME. IN THE CASE OF THE ASSE SSEE THE ASSESSING OFFICER HAS WORKED OUT TAX ON ASSESSED INCOME OF RS.11 29 36297/- AT R S.3 95 27 704/-. THE LD. CIT (APPEALS) HAS ALLOWED THE REBATE OF RS.3 95 27 704/- WHICH I S THE TAX PAYABLE ON TOTAL ASSESSED AT RS. 11 29 36 297/-. THE LD. CIT (APPEALS) HAS DELE TED THE ADDITION ON ACCOUNT OF SEBI REGISTRATION FEE AT RS.3 84 01 623/- WHICH STANDS U PHELD BY US. IF THE BENEFIT IS ALLOWED THE ASSESSED INCOME WILL BE AT RS.7 45 34 674/- ON WHICH TAX CANNOT BE COMPUTED AT RS.3 95 27 704/- TAKING THE AVERAGE RATE OF INCOME- TAX AS PROVIDED UNDER SUB SECTION (2) OF SECTION 88-E OF THE ACT. SINCE THE REBATE IS TO BE ALLOWED IN THE MANNER GIVEN IN SUB SECTION (2) ON AVERAGE RATE OF TAX WE SET ASIDE THI S ISSUE TO THE FILE OF ASSESSING OFFICER WITH THE DIRECTION TO ALLOW THE REBATE UNDER SECTION 88 -E IN RESPECT OF SECURITY TRANSACTION ASSESSED TO TAX AS PER PROVISIONS OF LAW AFTER AFFO RDING THE ASSESSEE AN REASONABLE OPPORTUNITY OF BEING HEARD. 6 I. T. APPEAL NO. 2290 (DEL) OF 2008. 10. IN THE RESULT THE APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. THE ORDER PRONOUNCED IN THE OPEN COURT ON : 29TH JANUARY 2010. SD/- SD/- [ RAJPAL YADAV ] [ K. D. RANJAN ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 29TH JANUARY 2010. *MEHTA * COPY OF THE ORDER FORWARDED TO : - 1. APPELLANT. 2. RESPONDENT. 3. CIT 4. CIT (APPEALS) 5. DR ITAT NEW DELHI. TRUE COPY. BY ORDER. ASSISTANT REGISTRAR ITAT. 7 I. T. APPEAL NO. 2290 (DEL) OF 2008.