WALLFORT SHARE & STOCK BROKERS PVT.LTD., MUMBAI v. ITO 4(2)(2), MUMBAI

ITA 5958/MUM/2008 | 2005-2006
Pronouncement Date: 12-02-2010 | Result: Dismissed

Appeal Details

RSA Number 595819914 RSA 2008
Assessee PAN AAACW0750G
Bench Mumbai
Appeal Number ITA 5958/MUM/2008
Duration Of Justice 1 year(s) 4 month(s) 12 day(s)
Appellant WALLFORT SHARE & STOCK BROKERS PVT.LTD., MUMBAI
Respondent ITO 4(2)(2), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 12-02-2010
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted G
Tribunal Order Date 12-02-2010
Date Of Final Hearing 01-02-2010
Next Hearing Date 01-02-2010
Assessment Year 2005-2006
Appeal Filed On 30-09-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH: MUMBAI BEFORE SHRI D K AGARWAL JUDICIAL MEMBER AND SHRI R K PANDA ACCOUNTANT MEMBER ITA NO 5958/MUM/2008 (ASSESSMENT YEAR: 2005-06) WALLFORT SHARE & STOCK BROKERS PVT LTD 205 GUNDECHA CHAMBERS NAGINDAS MASTER ROAD FORT MUMBAI -400 001 PAN: AAACW 0750 G VS ITO 4(2)(2) AAYAKAR BHAVAN MUMBAI-400 020 APPELLANT RESPONDENT ITA NO 5984/MUM/2008 (ASSESSMENT YEAR: 2005-06) ITO 4(2)(2) AAYAKAR BHAVAN MUMBAI-400 020 VS WALLFORT SHARE & STOCK BROKERS PVT LTD 205 GUNDECHA CHAMBERS NAGINDAS MASTER ROAD FORT MUMBAI -400 001 PAN: AAACW 0750 G APPELLANT RESPONDENT ASSESSEE BY: SHRI BEHARILAL REVENUE BY: SHRI SUNIL K SINGH ORDER PER D K AGARWAL JUDICIAL MEMBER THESE CROSS APPEALS BY THE ASSESSEE AND THE REVENU E ARE DIRECTED AGAINST THE ORDER DATED 23.7.2008 PASSED BY THE LEARNED CIT (A) FOR THE ASSESSMENT YEAR 2005- 06. BOTH THESE APPEALS ARE DISPOSED OF BY THIS COM MON ORDER FOR THE SAKE OF CONVENIENCE. 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT T HE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF TRADING IN SHARES AND STOCK BROK ING. IT FILED RETURN DECLARING THE ITAD 5958 & 5984/M/2008 WALLFORT SHARE & STOCK BROKERS PVT LTD 2 TOTAL INCOME OF RS 38 85 380/-. HOWEVER THE ASSES SMENT WAS COMPLETED AT AN INCOME OF RS 38 67 310/- INCLUDING THE DISALLOWANCE OF DEPRECIATION ON BSE CARD RS 18 28 313/- AND DISALLOWANCE OF INTEREST OF RS 5 85 194/- BEING PAYMENT OF INTEREST ON ARREARS OF SEBI FEES TREATED AS PRIOR PERIOD EXP ENSES VIDE ORDER DATED 19.12.2007 PASSED U/S 143(3) OF THE INCOMETAX ACT 1961 (THE ACT). ON APPEAL THE LEARNED CIT (A) WHILE UPHOLDING THE DISALLOWANC E OF DEPRECIATION ON BSE CARD DELETED THE DISALLOWANCE OF INTEREST ON ARREARS OF SEBI FEES AND ACCORDINGLY PARTLY ALLOWED THE APPEAL. 3. BEING AGGRIEVED BY THE ORDER OF LEARNED CIT (A) THE ASSESSEE AND THE REVENUE BOTH ARE IN APPEAL BEFORE US. ITA 5958/MUM/2008 (ASSESSEES APPEAL) 4. THE ONLY ISSUE TAKEN-UP BY THE ASSESSEE IS AGAIN ST THE SUSTENANCE OF DISALLOWANCE OF DEPRECIATION ON BSE CARD. 5. AT THE TIME OF HEARING BOTH THE PARTIES HAVE AGR EED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE B Y THE DECISION OF HONBLE BOMBAY HIGH COURT THEREFORE THE ISSUE MAY BE DECIDED ACC ORDINGLY. 6. THAT BEING SO AND RESPECTFULLY FOLLOWING THE JUD GMENT OF HONBLE JURISDICTIONAL HIGH COURT IN CIT VS TECHNO SHARES AND STOCK LTD (2 009) 184 TAXMAN 103 (BOM) WHEREIN IT HAS BEEN HELD THAT THE BSE CARD DID NOT FALL IN ANY OF THE CATEGORIES SPECIFIED U/S 32(1)(II) DEPRECIATION COULD NOT BE ALLOWED ON THE BSE CARD WE ARE OF THE VIEW THAT THE ASSESSEE IS NOT ENTITLED TO DEPRE CIATION ON BSE MEMBERSHIP CARD AND ACCORDINGLY THE ORDER PASSED BY THE LEARNED CIT (A) IN THIS REGARD IS REVERSED AND THAT OF THE ASSESSING OFFICER IS RESTORED. THE GROUNDS TAKEN BY THE ASSESSEE ARE THEREFORE REJECTED. ITAD 5958 & 5984/M/2008 WALLFORT SHARE & STOCK BROKERS PVT LTD 3 ITA 5984/MUM/2008 (REVENUES APPEAL) 7. THE GROUNDS TAKEN BY THE REVENUE ARE AGAINST THE DELETION OF DISALLOWANCE OF INTEREST OF RS 5 85 194/- PAID TO SEBI. 8. BRIEF FACTS OF THE ABOVE ISSUE ARE THAT IT WAS INTER ALIA OBSERVED BY THE ASSESSING OFFICER THAT THE ASSESSEE AS A MEMBER BRO KER IS GOVERNED BY THE PROVISIONS OF SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI). AS PER SEBI REGULATIONS 1992 THE BROKERS WERE REQUIRED TO PAY THE TURNOVER TAX BASED ON THEIR ANNUAL TURNOVER AS A REGISTRATION FEE. THE SAME WERE DISPUTED BY THE BR OKERS. THE BOARD THEREFORE APPOINTED AN EXPERT COMMITTEE WHICH SUBMITTED ITS R EPORT IN DECEMBER 1992. THE COMMITTEE OBSERVED THAT THE TURNOVER WAS A FAIR BAS IS FOR DETERMINATION OF REGISTRATION FEE AND THE INCIDENCE OF FEES PRESCRIB ED BY THE BOARD WAS REASONABLE. THE MATTER WAS TAKEN BY THE STOCK BROKERS TO THE CO URT AND FINALLY THE SUPREME COURT VIDE ITS JUDGEMENT DATED 1.2.2001 UPHELD THE REGULATIONS AND POWER OF SEBI TO LEVY FEES ON THE BASIS OF TURNOVER. IN THE MEANTIM E ON 16.12.1998 THE SEBI (BROKER AND SUB-BROKER) REGULATIONS 1992 WAS AMEND ED AND AN INTEREST @ 15% P.A. WAS LEVIED IN RESPECT OF ANY DELAY / FAILURE OF PAY MENT OF REGISTRATION FEES / TURNOVER FEE WHICH WAS ACCRUING ON THE UNPAID AND DISPUTED T URNOVER TAX. IN THE YEAR 2004 THE SEBI CAME OUT WITH THE INTEREST LIABILITY REGUL ATIONS SCHEME WHEREBY ONE TIME WAIVER WAS GIVEN TO THE BROKERS TO PAY ONLY 20% OF THE INTEREST ACCRUED SO FAR IN FULL AND FINAL SETTLEMENT OF THEIR DUES. THE ASSESSEE H AS PAID INTEREST UPTO THE DATE OF PAYMENT OF RS 5 85 194/-. IT WAS INTER ALIA STATED BY THE ASSESSEE THAT THE LIABILITY WAS DETERMINED DURING THE FINANCIAL YEAR 2004-05 UN DER SEBI (INTEREST LIABILITY REGULATION SCHEME) 2004. IN THE EARLIER YEARS THE INTEREST LIABILITY WAS NOT ASCERTAINED SINCE THERE WAS A DISPUTE REGARDING PAY MENT OF SEBI TURNOVER FEES BETWEEN STOCK BROKER FORUM AND SEBI AND THE QUANTUM REGARDING PAYMENT OF INTEREST WAS FINALIZED AS PER THE REGULATION SCHEME DURING THE YEAR UNDER CONSIDERATION ONLY. IN THE EARLIER IT WAS NOT DECI DED WHETHER INTEREST WOULD BE PAYABLE OR NOT. SINCE IT WAS IN THE NATURE OF CONT INGENT LIABILITY NO PROVISION WAS MADE IN THE ACCOUNTS IN THE EARLIER AND THE CLAIM W AS MADE ONLY IN THE YEAR WHEN THE LIABILITY GOT FINALLY CRYSTALLIZED. HOWEVER T HE ASSESSING OFFICER WAS OF THE VIEW ITAD 5958 & 5984/M/2008 WALLFORT SHARE & STOCK BROKERS PVT LTD 4 THAT SINCE ASSESSEE IS FOLLOWING THE MERCANTILE SYS TEM OF ACCOUNTING THE INTEREST PAID TO SEBI ON ARREARS IS NOT ALLOWABLE AND HENCE HE DI SALLOWED THE SAME AND ADDED TO THE INCOME OF THE ASSESSEE BEING PRIOR PERIOD EXPEN DITURE. ON APPEAL THE LEARNED CIT (A) FOLLOWING THE RATIO OF DECISION OF HONBLE SUPREME COURT IN THE CASE OF MAHALAXMI SUGAR MILLS CO VS CIT (1980) 123 ITR 429 (SC) WHILE OBSERVING THAT THE INTEREST ON SEBI FEE PARTAKES THE CHARACTER OF SEBI FEES ITSELF AND IS THUS ALLOWABLE ON THE BASIS OF ACTUAL PAYMENT U/S 43B DELETED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. 9. AT THE TIME OF HEARING THE LEARNED DEPARTMENTAL REPRESENTATIVE SUPPORTS THE ORDER OF THE ASSESSING OFFICER. 10. ON THE OTHER HAND THE LEARNED COUNSEL FOR THE ASSESSEE WHILE RELYING ON THE ORDER OF LEARNED CIT (A) ALSO RELIED ON THE DECISIO NS IN (I) SHREE PIPES VS DY CIT (ASSTT) (2007) 289 ITR 154 (RAJ) AND (II) DY CIT (A SSESSMENT) VS ARVIND MILLS LTD (2009) 314 ITR 251 (GUJ) TO CONTEND THAT INTEREST I S ALLOWABLE ON ACTUAL PAYMENT U/S 43B OF THE ACT. HE FURTHER SUBMITS THAT SINCE THE PAYMENT WAS MADE IN THE YEAR UNDER CONSIDERATION THE SAME IS ALLOWABLE. HE TH EREFORE SUBMITS THAT THE ORDER PASSED BY LEARNED CIT (A) IN ALLOWING THE SAME BE U PHELD. 11. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE FACTS ARE NOT IN DISPUTE INASMUCH AS ACCORDING TO SEBI (INTEREST LIABILITY REGULATION S SCHEME) 2004 WHEREBY ONE TIME WAIVER WAS GIVEN TO THE BROKERS TO PAY ONLY 20% OF THE INTEREST ACCRUED SO FAR IN FULL AND FINAL SETTLEMENT OF THEIR DUES THE ASSESSEE HA S PAID INTEREST AMOUNTING TO RS 5 85 194/- TO SEBI. CO-ORDINATE BENCH OF THE TRIBU NAL IN ITO VS SURESHCHAND JAIN (2006) 284 ITR (AT) 160 (MUM) HAS HELD AT PAGE 161 OF THE HEAD NOTE AS UNDER: HELD ACCORDINGLY THAT IT WAS NOT A CASE WHERE A O NE-TIME LICENCE FEE OR CHARGE WAS REQUIRED TO BE PAID BY THE ASSESSEE. IT WAS A CASE WHERE A PARTICULAR PERCENTAGE OF TURNOVER WAS TO BE CHARGED AS TURNOVER CHARGES. THE TURNOVER CHARGES WERE IN THE NATURE OF TAX DUTY C ESS OR FEES PAYABLE UNDER A LAW. NOTHING HAD BEEN BROUGHT ON RECORD TO PROVE T HAT THE TURNOVER CHARGES WERE NOT PAYABLE UNDER THE LAW ENACTED BY THE CENTR AL GOVERNMENT. ITAD 5958 & 5984/M/2008 WALLFORT SHARE & STOCK BROKERS PVT LTD 5 THEREFORE THE TURNOVER CHARGES PAID BY THE ASSESSE E TO THE BOARD FELL WITHIN THE PURVIEW OF SECTION 43B. THE ABOVE DECISION HAS ALSO BEEN FOLLOWED IN ITO VS S S J FINANCE AND SECURITIES PVT LTD IN ITA NO.5981 AND 5982/MUM/2008 FOR AY 2005-06 ORDER DATED 2ND DECEMBER 2009 WHEREIN ONE OF US (JM) WAS A PARTY. IN THE A BSENCE OF ANY DISTINGUISHING FEATURE BROUGHT ON RECORD BY THE REVENUE WE RESPEC TFULLY FOLLOWING THE CONSISTENT VIEW OF THE TRIBUNAL HOLD THAT THE PAYMENT OF INTER EST MADE BY THE ASSESSEE AMOUNTING TO RS 5 85 194/- TO SEBI IS ALLOWABLE IN THE YEAR UNDER CONSIDERATION AND ACCORDINGLY WE ARE INCLINED TO UPHOLD THE FINDING OF CIT (A) IN DELETING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. GROUND S TAKEN BY THE REVENUE ARE THEREFORE REJECTED. 12. IN THE RESULT BOTH THE APPEALS STAND DISMISSED . PRONOUNCED IN THE OPEN COURT TODAY ON THE 12TH DAY OF FEBRUARY 2010. SD/- (R K PANDA) ACCOUNTANT MEMBER SD/- (D K AGARWAL) JUDICIAL MEMBER MUMBAI DATE: 12TH FEBRUARY 2010 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) IV MUMBAI. 4) THE CIT -4 MUMBAI. 5) THE D.R. G BENCH ITAT MUMBAI. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR CHAVAN* I.T.A.T. MUMBAI ITAD 5958 & 5984/M/2008 WALLFORT SHARE & STOCK BROKERS PVT LTD 6 SR.N. EPISODE OF AN ORDER DATE INITIALS CONCERNED 1 DRAFT DICTATED ON 01.02.10 SR.PS 2 DRAFT PLACED BEFORE AUTHOR 01.02.10 SR.PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.PS SR.PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS 7 FILE SENT TO THE BENCH CLERK SR.PS 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER