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Income Tax Appellate Tribunal, DELHI BENCH “SMC-2”, NEW DELHI
Before: SHRI H.S. SIDHU
Date of Hearing : 16-08-2016 Date of Order : 16-08-2016 ORDER PER H.S. SIDHU, JM Revenue has filed the appeal against the Order dated 19.1.2015 passed by the Ld. Commissioner of Income Tax (Appeals)--7, New Delhi pertaining to assessment year 2010-11 on the following ground:-
1. In the facts and under the circumstances of Ld. CIT(A) has erred in deleting the disallowance of Rs. 39,83,538/- made by AO in respect of fee paid to SEBI as the issue is sub judice before the Hon’ble Supreme Court.
2. In the facts and under the circumstances, the Ld. CIT(A) has erred in directing the AO to recomputed and allow long term capital loss after considering indexation, as the same are unlisted shares. 3. The appellant craves to be allowed to add any fresh grounds of appeal and / or delete or amend any of the grounds of appeal.
2. The facts narrated by the Revenue Authorities are not disputed, therefore, the same are not repeated here for the sake of convenience.
3. Notice of hearing was issued to both the parties and in response to the same only the Ld. A.R. of the Assessee attended the hearing, but none appeared on behalf of the Department nor any application for adjournment has been filed by the Department. Keeping in view of the facts and circumstances of the case, I am deciding the Appeal exparte qua Revenue, after hearing the Ld. AR and perusing the records.
4. Ld. A.R. of the Assessee relied upon the order of the Ld. CIT(A) and has stated that Ld. CIT(A) has passed a well reasoned order which does not need any interference. Further, Ld. A.R. of the Assessee stated that Ld. CIT(A) has decided the issue by respectfully following the Hon’ble Delhi High Court decision in the case of CIT vs. BLB Ltd. passed in ITA 1878/2010. Therefore, he stated that present appeal may be dismissed accordingly.
5. I have carefully considered the submissions and perused the records. I find that Ld. CIT(A) has elaborately adjudicated the issue vide para no. 6 to 7 vide his order dated 19.1.2015. The relevant paras no. 6 to 7 are reproduced as under:-
“6. Ground No. 2 is in respect of disallowance of Rs. 39,83,538/-0 which was fees paid by the appellant to SEBI.
6.1 The appellant is member of NSE & BSE and is a registered stock broken dealing in shares and securities. The appellant is required to pay fees to SEBI every year in terms of the provisions of the SEBI Act and regulations framed. SEBI had raised a demand of Rs.39,83,538/- towards registration fees for the period 01.10.2006 to 30.09.2007. The appellant contested the demand before the Securities Appellate Tribunal who dismissed the appeal and held the demand to be in order.
6.2. The appellant had to pay the entire fee to SEBI during the relevant assessment year. SEBI raised demand for interest on this fee which was stayed by the Hon'ble Supreme Court.
6.3. The AO noted that the appellant had claimed Rs.53,63,358/- in the P&L Account as fees paid to SEBI. Out of this amount Rs.38,83,538/- pertained to earlier years and was paid during this year. The AO disallowed this amount stating that this was prior period expenses .
6. 4. The appellant stated that the demand was quantified only after receipt of order form the Securities Appellate Tribunal and was therefore paid during the relevant assessment year and should be allowed u/s 43B. The appellant has quoted the decision of the Hon’ble Delhi Court in the case of CIT vs. BLB Ltd reported in ITA No. 1878/2010.
6.5. I have perused the order of the Hon'ble Delhi High Court. The court had observed as under:
"10. Aggrieved by this order, the Revenue/Department filed an appeal before ITAT who relied on the order passed by ITAT Mumbai Bench in case of ITO vs. Suresh Chand 100 ITD 435 and another In case of K Holding Co. (P) Ltd vs. DCIT 32 SOT 586 wherein it had been 3 held that SEBI turnover fee, being a statutory liability was allowable u/s 43B of the Act. Accordingly, in the present case ITAT held that same as payment as ‘fee’ is filing u/s 43B in the year under consideration as payment was made during the year.
The ITA T has come to the conclusion on the following basis:-
(I) The SEBI is a. nodal agency for regulating the stock market, brokers, sub-brokers, and other brokers and intermediate who have registered themselves with the SEBL
(II) The SEBI Act 1992, empowers SEBI to levy 'fee,' for registration for registering brokers/sub-brokers called as SEBI registration 'fee': -
(III) The SEBI Regulations also prescribe the basis for charging of SEBI registration 'fee' which is relatable to the turnover of the assessee.
(iv) The broken however were representing to the Board that the 'fee' was arbitrary and excessive.
(v) The brokers forum went to the Supreme Court who vide its judgment dated 07.02.2011 upheld the regulations of SEBI and held that the 'fee' levied by SEBI was reasonable and valid.
(vi) In the meantime, the SEBI came out with one time settlement 'fees' along with interest for non-late payment of SEBI registration 'fee'. There was a case of Lalit Kumar Marodia vs. UOI & Ors. 2005 59 SCL 474 (Cal) wherein an interim order was passed by the High Court on 20.05.2004, ~here after was payment was made by the appellant. "
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According to the perception of the income tax department contained in Circular No. 528 dated 16. 12. 1988, the disallowance was to cover any amount payable to any statutory authority including local authority and could be allowed only in the year in which such an amount is paid In that view, therefore, the amendment was made and it was clarified that such an amount would also be allowable only on actual payment irrespective of the previous year in which liability to pay such sum was incurred In view thereof, the amendment was made and it was clarified that such an amount would also be allowable only on actual payment irrespective of the previous year in which liability to pay such sum was incurred"
6.6. I find that in this case the facts are similar. The appellant was required to pay a fee to SEBI. The appellant filed an appeal before the Securities Appellate Tribunal who passed the order dismissing the appeal and thereafter the appellant made the payment. The amount of Rs.39,83,538/- was therefore paid during the year. In view of the discussion above, in view of the judgement of the Honble High Court of Delhi the amount of Rs.39,83,538/- is allowed as a deduction to the appellant. The addition is thus deleted. The ground of appeal is ruled in favour of the appellant.
Ground No.3 is in respect of the fact that the AO determined long term capital loss at Rs. 75 lacs but did not allow indexation of cost. The appellant has stated that the loss after indexation works out to RS.1,19,10,163/-. The AO is directed to re-compute and allow the loss after considering indexation. The ground of appeal is ruled in favour of the appellant.”
5.1 After perusing the aforesaid finding of the Ld. CIT(A), I am of the view that Ld. CIT(A) has rightly respectfully followed the Hon’ble High Court of Delhi decision in the case of CIT vs. BLB Ltd. reported in by observing that the assessee was required to pay a fee to SEBI. The assessee filed an appeal before the Securities Appellate Tribunal who passed the order dismissing the appeal and thereafter the assessee made the payment. The amount of Rs.39,83,538/- was therefore paid during the year. In view of the discussion above and in view of the judgement of the Honble High Court of Delhi the amount of Rs.39,83,538/- was rightly allowed as a deduction to the assessee and thus addition was deleted and ground of appeal was ruled in favour of the assessee. In view of the above, I am of the considered view that Ld. CIT(A) has passed a well reasoned order which does not need any interference on my part, hence, I uphold the same and reject the ground no. 1 of appeal raised by the Revenue.
5.2 With regard to ground no. 2 relating to re-computing and allowing long term capital loss after considering indexation is concerned, I find that Ld. CIT(A) has rightly observed that the AO determined long term capital loss at Rs. 75 lacs but did not allow indexation of cost. However, the assessee has stated that the loss after indexation works out to RS.1,19,10,163/-. Therefore, the Ld. CIT(A) was right in directing the AO to re-compute and allow the loss after considering indexation. In view of the above, I am of the considered view that Ld. CIT(A) has passed a well reasoned order which does not need any interference on my part, hence, I uphold the same and reject the ground no. 2 of appeal raised by the Revenue.
In the result, the appeal filed by the Revenue stands dismissed.
Order pronounced in the Open Court on 16/08/2016.