LKP SECURITIES LTD, MUMBAI V. ITO 4(3)3, MUMBAI

ITA 1093/MUM/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3394 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-05-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 15-02-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Capital asset; Non compliance
• Section: 43B; 14A; 37(1); 12; 28; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUM BAI , ! ! ! ! '#. .%&. . !', BEFORE SHRI SANJAY ARORA, AM AND DR. S. T. M. PAVAL AN, JM ./ I.T.A. NO.638/MUM/2012 ( ' * !+* ' * !+* ' * !+* ' * !+* / / / / ASSESSMENT YEAR: 2008-09) ITO 4(3)(3), R. NO.637, 6 TH FLOOR, AAYAKAR BHAVAN, MUMBAI-400 020 ' ' ' ' / VS. LKP SECURITIES LTD. 203, EMBASSY CENTRE, NARIMAN POINT, MUMBAI-400 021 , ./ - ./ PAN/GIR NO. AAACL 0963 A ( ,. / APPELLANT ) : ( /0,. / RESPONDENT ) & ./ I.T.A. NO.1093/MUM/2012 ( ' * ' * ' * ' * !+* !+* !+* !+* / ASSESSMENT YEAR: 2008-09) LKP SECURITIES LTD. 203, EMBASSY CENTRE, NARIMAN POINT, MUMBAI-400 021 ' ' ' ' / VS. ITO 4(3)(3), R. NO.637, 6 TH FLOOR, AAYAKAR BHAVAN, MUMBAI-400 020 , ./ - ./ PAN/GIR NO. AAACL 0963 A ( ,. / APPELLANT ) : ( /0,. / RESPONDENT ) ! 1 / REVENUE BY : SHRI MANOJ KUMAR ' *23 4 1 / ASSESSEE BY : SHRI SUBHASH S. SHETTY '! 4 3& / // / DATE OF HEARING : 18.02.2013 5+ 4 3& / DATE OF PRONOUNCEMENT : 17.05.2013 2 ITA NO.638 & 1093/MUM/2012 (A.Y. 2008-09) LKP SECURITIES LTD. 6 / O R D E R PER SANJAY ARORA, A. M.: THESE ARE A SET OF CROSS APPEALS BY THE ASSESSEE AN D THE REVENUE ARISING OUT OF THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-9 , MUMBAI (CIT(A) FOR SHORT) DATED 11.11.2011, PARTLY ALLOWING THE ASSESSEES AP PEAL CONTESTING ITS ASSESSMENT U/S.143(3) OF THE INCOME TAX ACT, 1961 (THE ACT H EREINAFTER) FOR THE ASSESSMENT YEAR (A.Y.) 2008-09 VIDE ORDER DATED 24.12.2010. REVENUES APPEAL (IN I.T.A. NO.638/MUM/2012) 2. WE SHALL TAKE UP THE REVENUES APPEAL, BEING SEN IOR, FIRST. VIDE ITS FIRST GROUND, THE REVENUE ASSAILS THE DELETION OF THE DISALLOWANC E U/S.37 IN THE SUM OF RS.2,87,505/- ON ACCOUNT OF FINES AND PENALTIES. WHILE THE ASSESSING OFFICER (A.O.) DISALLOWED THE SAME IN VIEW OF THE EXPLANATION TO SECTION 37(1), THE ASSESSEE FOUND FAVOUR WITH TH E LD. CIT(A) ON THE BASIS THAT THE FINES AND PENALTIES LEVIED TO THE ASSESSEE WERE BY NATIONAL STOCK EXCHANGE (NSE) FOR VARIOUS PROCEDURAL DEFAULTS, VIZ ., TRADING BEYOND EXPOSURE LIMIT, LATE SUBMISSION OF MARGIN CERTIFICATES, DELAY IN MAKING DELIVERY OF SHARES, ETC. THERE WAS AS SUCH NO INFRACTION OF LAW, AS TO ATTRACT THE EXPLANATION TO SECTION 37, BUT ONLY OF THE PROCEDURAL GUIDELINES AND REGULATIONS BY NSE, WHICH CANNOT BE EQUATED WITH STATUTORY RULES OR LAW. NSE IS NOT A STATUTORY BODY AS SEBI. RATHER, EVEN IN THE CONTEXT OF THE PENALTIES LEVIED IN RELATION TO SEBI REGULATIONS, T HE SAME CANNOT BE TREATED AS PENALTY SO AS TO SUFFER DISALLOWANCE U/S.37. 3. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. ANY INFRACTION OF LAW CANNOT BE CONSIDERED AS AN INCIDENT OF BUSINESS AND, ACCORDINGLY, EVEN APART FROM EXPLANATION TO SECTION 37(1), WOULD NOT MERIT ALLOWANCE THERE- UNDER. THIS IS TRITE LAW, AS CLARIFIED BY THE APEX COURT AS FAR BACK AS IN THE C ASE OF HAJI AZIZ AND ABDUL SHAKOOR BROS. VS. CIT [1961] 41 ITR 350 (SC), AND WHICH LAW HAS BEEN REI TERATED BY IT TIME AND AGAIN, AGAIN, EVEN PRIOR TO THE INSERTION OF EXPLANATION TO SECTION 37(1) BY FINANCE (NO.2) ACT, 1998 W.R.E.F. 01.04.1962. SO, HOWEVER, IN THE INSTANT CASE, THE REVENUE HAS NOT 3 ITA NO.638 & 1093/MUM/2012 (A.Y. 2008-09) LKP SECURITIES LTD. SPECIFIED ANY SPECIFIC VIOLATION OF ANY PROVISION O F LAW, SO THAT WE ARE UNABLE TO UNDERSTAND THE BASIS OF ITS CASE. CLEARLY, THE VARI OUS DEFAULTS OR DEFICIENCIES, WHICH STAND TO BE REGULATED BY NSE IN TERMS OF ITS BYE-LAWS, CA NNOT BE REGARDED AS AN INFRACTION OF LAW, SO AS TO ATTRACT DISALLOWANCE. WE, THEREFORE, SEE NO REASON FOR INFERENCE WITH THE IMPUGNED ORDER ON THIS GROUND. 4. THE REVENUES SECOND GROUND CONCERNS THE DISALLO WANCE U/S.2(24)(X) R.W.S. 36(1)(VA) OF THE ACT ON ACCOUNT OF EMPLOYEES CONTR IBUTION TO THE EMPLOYEES PROVIDENT FUND (EPF) AND EMPLOYEES STATE INSURANCE CORPORATIO N (ESIC) IN THE SUM OF RS.35,70,973/- AND RS.46,229/- RESPECTIVELY. THE A. O. MADE THE DISALLOWANCE ON THE BASIS THAT THE PAYMENTS WERE MADE BEYOND THE DUE DA TE, BEING 15 TH OF THE FOLLOWING MONTH IN RESPECT OF CONTRIBUTIONS TO THE PROVIDENT FUND, AND 21 ST OF THE FOLLOWING MONTH IN THE CASE OF PAYMENTS TO ESIC. FURTHER, THE GRACE PERIOD OF 5 DAYS FOR PAYMENT OF PF CONTRIBUTION WAS ONLY WITH RESPECT TO NON-CHARGE OF PENAL INTEREST AND OTHER PENALTIES UNDER THE RELEVANT ACT. THE SAME WOULD NOT BY ITSEL F EXTEND THE DUE DATE, WITH REFERENCE TO WHICH DATE ONLY THE ALLOWABILITY OF THE SUM REQU IRED TO BE PAID BY THE ASSESSEE IN RESPECT OF THE EMPLOYEES CONTRIBUTION IS TO BE REC KONED. RELIANCE WAS PLACED BY HIM ON THE DECISIONS IN THE CASE OF CIT VS. SOUTH INDIA CORPORATION LTD. [2000] 242 ITR 114 (KER.) AND CIT VS . SREE KAMAKHYA TEA CO. (P.) LTD. [1993] 199 ITR 714 (CAL.). THE LD. CIT (A), IN APPEAL, RULED IN FAVOUR OF THE ASSESSEE IN VIEW OF THE DECISION BY THE APEX COURT IN THE CASE OF CIT VS. ALOM EXTRUSIONS LTD. [2009] 319 ITR 306 (SC) , AS WELL AS IN THE CASE OF CIT VS. AIMIL LTD. [2010] 188 TAXMANN 265 (DEL.) [321 ITR 508]. AGGRIEVED, THE REVENUE IS IN APPEAL. 5.1 BEFORE US, THE LD. DR, PLACING A COPY OF THE OR DER BY THE TRIBUNAL IN THE CASE OF DY. CIT VS. BENGAL CHEMICALS & PHARMACEUTICALS LTD. VS. (IN ITA NO.1680/KOL/2010 DATED 07.01.2011, REPORTED AT [2011] 10 TAXMANN.COM 26(KOL.)] WOULD SUBMIT THAT THE TRIBUNAL, AFTER CONSIDERING THE DECISION BY THE APE X COURT IN THE CASE OF ALOM EXTRUSIONS LTD. (SUPRA), AS WELL AS IN THE CASE OF CIT VS. SABARI ENTERPRISES [2008] 298 ITR 141 4 ITA NO.638 & 1093/MUM/2012 (A.Y. 2008-09) LKP SECURITIES LTD. (KAR.) AND ALLIED MOTORS (P.) LTD. VS. CIT [1997] 224 ITR 677 (SC), HAS CLARIFIED THAT THE PAYMENT UNDER REFERENCE IS NOT GOVERNED BY SECTION 43B OF THE ACT. AS SUCH, THE AMENDMENTS TO THE SAID SECTION WOULD HAVE NO BEARIN G ON THE DEDUCTIBILITY OF THE SUMS COVERED BY SECTION 36(1)(VA) OF THE ACT. TO THE SAM E EFFECT, IN FACT, IS THE DECISION BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. PAMWI TISSUES LTD. [2008] 215 CTR 150 (BOM.), WITH THE HONBLE COURT CLARIFYING T HAT THE DISMISSAL OF THE SPECIAL LEAVE PETITION (SPL) IN THE CASE OF CIT V. VINAY CEMENT LTD. [2007] 213 CTR (SC) 268 (SC) CANNOT BE SAID TO BE A LAW DECIDED, SO THAT THE SAM E WOULD NOT HAVE ANY BEARING ON ITS SAID DECISION. AS SUCH, ACCORDINGLY, THE EMPLOYEES CONTRIBUTION TO EPF/ESIC, IF NOT PAID BY THE DUE DATE, WAS NOT ALLOWABLE. 5.2 THE LD. AR, ON THE OTHER HAND, WOULD PLACE RELI ANCE ON THE DECISION IN THE CASE OF AIMIL LTD. (SUPRA), STATING THAT THE HONBLE COURT, AFTER CONS IDERING THE DECISIONS BY THE APEX COURT IN THE CASE OF VINAY CEMENT LTD. (SUPRA), HAS CLARIFIED THAT THE AMENDMENT TO SECTION 43B BY FINANCE ACT, 2003 (W.E.F. 01.04.2004 ) WOULD APPLY TO THE EMPLOYERS AS WELL AS THE EMPLOYEES CONTRIBUTION TO THE VARIOUS WELFARE FUNDS. IT HAS BEEN CLEARLY HELD THAT THE DECISION BY THE HONBLE JURISDICTIONAL HIG H COURT IN THE CASE OF PAMWI TISSUES LTD. (SUPRA) IS NO LONGER GOOD LAW AFTER THE DECISION BY THE APEX COURT IN THE CASE OF VINAY CEMENT LTD. (SUPRA). IN FACT, THERE SHOULD BE NO SCOPE FOR ANY DOUBT AFTER THE DECISION BY IT IN THE CASE OF ALOM EXTRUSIONS LTD. (SUPRA). AS SUCH, ANY PAYMENT MADE BY THE EMPLOYER, EITHER IN RESPECT OF THE EMPLOYEES O R THE EMPLOYERS CONTRIBUTION, BY THE DUE DATE OF FILING OF THE RETURN, WOULD QUALIFY FOR BEING ALLOWED AS A DEDUCTION FOR THE RELEVANT YEAR. IN THE INSTANT CASE, AS WOULD BE EVI DENT FROM THE CHART OF THE PAYMENTS LISTED AT PARA 9 OF THE ASSESSMENT ORDER, THE SAME WERE DURING THE RELEVANT YEAR ITSELF, WITH THE EXCEPTION OF ONE, I.E., FOR THE MONTH OF MARCH, 2008, IN APRIL, 2008, I.E., WELL BEFORE THE DUE DATE OF FILING THE RETURN OF INCOME. THE EN TIRE DISALLOWANCE STANDS, THUS, RIGHTLY DELETED BY THE LD. CIT(A). 6. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. 5 ITA NO.638 & 1093/MUM/2012 (A.Y. 2008-09) LKP SECURITIES LTD. 6.1 THE ISSUE UNDER REFERENCE IS THE ALLOWABILITY O R OTHERWISE IN LAW OF THE SUMS PAID BY THE ASSESSEE-EMPLOYER BY WAY OF EMPLOYEES CONTR IBUTION TO THE PROVIDENT AND THE EMPLOYEES STATE INSURANCE CORPORATION (ESIC) FUNDS WHERE THE SAID PAYMENT IS MADE BEYOND THE DUE DATE AS DEFINED UNDER THE RELEVANT S TATUTES, THOUGH BEFORE THE DUE DATE OF THE FILING OF THE RETURN OF INCOME FOR THE RELEVANT YEAR. 6.2 THE DISALLOWANCE HAVING BEEN DELETED BY THE LD. CIT(A) WITH REFERENCE TO SECTION 43B, ON WHICH ALSO THE ASSESSEE BASIS ITS CASE, IT WOULD, THEREFORE, BE FIRSTLY REQUIRED TO BE SEEN IF THE DEDUCTION QUA THE SAID PAYMENT IS REGULATED BY THE SAID SECTION, I.E., S.43B. THIS BECOMES ALSO RELEVANT AS THE DECISIONS BY THE APEX COURT IN THE CASE OF VINAY CEMENT LTD . (SUPRA) AND ALOM EXTRUSIONS LTD . (SUPRA) RELIED UPON BY THE ASSESSEE CONCERN SECTI ON 43B ONLY, I.E., IN RESPECT OF THE RETROSPECTIVITY O R OTHERWISE OF THE AMENDMENT THERETO BY FINANCE ACT, 2003, W.E.F. 01.04.2004 (BY WAY OF OMI SSION OF THE SECOND PROVISO AS WELL AS REFERENCE TO CLAUSES (A) AND (C) TO (F) IN THE F IRST PROVISO TO THE SECTION), HOLDING IN FAVOUR OF THE SAME BEING CURATIVE AND, THUS, RETROS PECTIVE. SECTION 43B AS IT IS STOOD PRIOR TO THE SAID AMENDM ENT READS AS UNDER: CERTAIN DEDUCTIONS TO BE ONLY ON ACTUAL PAYMENT . 43B. NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PRO VISION OF THIS ACT, A DEDUCTION OTHERWISE ALLOWABLE UNDER THIS ACT IN RESPECT OF (A) ANY SUM PAYABLE BY THE ASSESSEE BY WAY OF TAX, DUTY, CESS OR FEE, BY WHATEVER NAME CALLED, UNDER ANY LAW FOR THE TIME BEING IN FORCE, OR] (B) ANY SUM PAYABLE BY THE ASSESSEE AS AN EMPLOYER BY WAY OF CONTRIBUTION TO ANY PROVIDENT FUND OR SUPERANNUATION FUND OR GRATUITY F UND OR ANY OTHER FUND FOR THE WELFARE OF EMPLOYEES, OR (C) . (D) . (E) . (F) . SHALL BE ALLOWED (IRRESPECTIVE OF THE PREVIOUS YEAR IN WHICH THE LIABILITY TO PAY SUCH SUM WAS INCURRED BY THE ASSESSEE ACCORDING TO THE METHO D OF ACCOUNTING REGULARLY EMPLOYED 6 ITA NO.638 & 1093/MUM/2012 (A.Y. 2008-09) LKP SECURITIES LTD. BY HIM) ONLY IN COMPUTING THE INCOME REFERRED TO IN SECTION 28 OF THAT PREVIOUS YEAR IN WHICH SUCH SUM IS ACTUALLY PAID BY HIM : PROVIDED THAT NOTHING CONTAINED IN THIS SECTION SHALL APPLY IN R ELATION TO ANY SUM REFERRED TO IN CLAUSE (A) OR CLAUSE (C) OR CLAUSE ( D) OR CLAUSE (E) OR CLAUSE (F) WHICH IS ACTUALLY PAID BY THE ASSESSEE ON OR BEFORE THE DUE DATE APPLICABLE IN HIS CASE FOR FURNISHING THE RETURN OF INCOME UNDER SUB-SECTION ( 1) OF SECTION 139 IN RESPECT OF THE PREVIOUS YEAR IN WHICH THE LIABILITY TO PAY SUCH SU M WAS INCURRED AS AFORESAID AND THE EVIDENCE OF SUCH PAYMENT IS FURNISHED BY THE ASSESS EE ALONG WITH SUCH RETURN. PROVIDED FURTHER THAT NO DEDUCTION SHALL, IN RESPECT OF ANY SUM REF ERRED TO IN CLAUSE (B), BE ALLOWED UNLESS SUCH SUM HAS ACTUALLY BEEN PAID I N CASH OR BY ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE ON OR BEFORE THE DUE DAT E AS DEFINED IN THE EXPLANATION BELOW CLAUSE (VA) OF SUB-SECTION (1) OF SECTION 36, AND W HERE SUCH PAYMENT HAS BEEN MADE OTHERWISE THAN IN CASH, THE SUM HAS BEEN REALIZED W ITHIN FIFTEEN DAYS FROM THE DUE DATE . [EMPHASIS, OURS] VIDE AMENDMENT BY FINANCE ACT, 2003 W.E.F. 01.04.20 04, THE SECOND PROVISO STANDS OMITTED, AS ALSO REFERENCE TO CLAUSES (A) AN D (C) TO (F) IN THE FIRST PROVISO . SECTION 43B IS A NON OBSTANTE CLAUSE PROVIDING FOR AN OVERARCHING AND ADDITIONAL QUALIFICATION, SO THAT IT WOULD OPERATE WITHOUT EXCEPTION. AS SUCH, I T WOULD APPLY TO ANY SUM COVERED THEREBY, IRRESPECTIVE OF THE SECTION OR THE PROVISI ON GOVERNING THE DEDUCTION IN ITS RESPECT. AS PER ITS TERMS, THE SUMS SPECIFIED IN CLAUSE (A) TO (F) WOULD, WHERE OTHERWISE ALLOWABLE, YET HAVE TO SATISFY THE TEST OR CONDITION OF PAYMEN T FOR THE SAME TO QUALIFY FOR DEDUCTION. THE DEDUCTION, IN THE EVENT OF NON-PAYMENT, WOULD S TAND DEFERRED TO THE YEAR OF ACTUAL PAYMENT. AN EXCEPTION, BY WAY OF FIRST PROVISO TO THE SECTION, IS DRAWN TO SUMS SPECIFIED IN CLAUSES (A), (C) TO (F), SO THAT THE PAYMENT WOU LD NOT STAND TO BE DISALLOWED IF IT IS MADE BY THE DUE DATE OF FILING THE RETURN OF INCOME FOR THE RELEVANT YEAR. FOR THE PAYMENTS COVERED BY CLAUSE (B), THE TIME LIMIT PRESCRIBED, H OWEVER, IS THE DUE DATE AS DEFINED UNDER EXPLANATION TO SECTION 36(1)(VA), I.E., THE TIME PERIOD ALLOWE D PER THE RELEVANT ACT. 6.3 HAVING GONE THROUGH THE ANATOMY OF THE SECTION, WE ARE NOW IN A POSITION TO ANSWER OUR FIRST QUESTION, I.E., IF THE PAYMENT OF THE EMPLOYEES CONTRIBUTION IS COVERED U/S. 43B(B). IN OUR CLEAR VIEW, IT IS NOT . THIS IS FOR THE REASON THAT SECTION 43B COVERS ON LY 7 ITA NO.638 & 1093/MUM/2012 (A.Y. 2008-09) LKP SECURITIES LTD. THE SUMS PAYABLE BY WAY OF CONTRIBUTION BY THE ASSE SSEE AS AN EMPLOYER, I.E., THE EMPLOYERS CONTRIBUTION, INTER ALIA , THE PF AND ESI FUNDS. UNDER THE SAID ACTS (I.E., PROVIDENT FUND ACT AND THE EMPLOYEES STATE INSURANC E ACT), THE EMPLOYER IS TO DEDUCT A PRESCRIBED PERCENTAGE OF THE EMPLOYEES REMUNERATIO N, AS THE EMPLOYEES CONTRIBUTION TO THE SAID FUND/S. HE IS FURTHER OBLIGED TO MAKE A MA TCHING CONTRIBUTION, AND PAY THE ENTIRE SUM TO THE CREDIT OF THE EMPLOYEES ACCOUNT WITH TH E RELEVANT FUND BY THE DUE DATE UNDER THE RELEVANT ACT. BOTH THE CONTRIBUTIONS ARE TO BE PAID SIMULTANEOUSLY, VIDE SEPARATE CHALLANS THOUGH, THE DUE DATE FOR WHICH IS THE SAME . THE EMPLOYERS CONTRIBUTION IS DEDUCTIBLE U/S. 37(1) OF THE ACT, BEING ONLY A PART OF THE EMPLOYEE COST OR OF HIS EMPLOYMENT. THE EMPLOYEES CONTRIBUTION, ON THE OTH ER HAND, IS TO BE DEDUCTED FROM THE SALARY/WAGES DUE TO THE EMPLOYEE, I.E., FOR WHICH THE ASSESSEE IS CONTRACTUALLY OBLIGED AS AN EMPLOYER, SO THAT NO SEPARATE EXPENDITURE STANDS INCURRED IN ITS RESPECT AND, CONSEQUENTLY, THERE IS NO QUESTION OF THE SAME BEIN G CLAIMED OR ALLOWED AS AN EXPENSE. SO HOWEVER, SECTION 2(24) OF THE ACT, THE PROVISION WHICH DEFINES INCOME UNDER THE ACT, I.E., INCLUSIVELY, VIDE SUB-CLAUSE (X) THEREOF , DEEMS THE SUM SO RETAINED BY THE EMPLOYER TOWARD THE EMPLOYEES CONTRIBUTION (FOR O NWARD PAYMENT) AS THE EMPLOYERS INCOME; THE SAID SECTION READING AS UNDER: DEFINITIONS . 2 . IN THIS ACT, UNLESS THE CONTEXT OTHERWISE REQUIRES, (24) INCOME INCLUDES- (X) ANY SUM RECEIVED BY THE ASSESSEE FROM HIS EMPL OYEES AS CONTRIBUTIONS TO ANY PROVIDENT FUND OR SUPERANNUATION FUND OR ANY FUND S ET UP UNDER THE PROVISIONS OF THE EMPLOYEES' STATE INSURANCE ACT, 1948 (34 OF 1948), OR ANY OTHER FUND FOR THE WELFARE OF SUCH EMPLOYEES ; [EMPHASIS, OURS] SECTION 36(1)(VA) OF THE ACT CORRESPONDINGLY PROVID ES FOR DEDUCTION QUA THESE SUMS WHERE PAID TO THE CREDIT OF THE EMPLOYEES ACCOUNT IN THE RELEVANT FUND BY THE DUE DATE. DUE DATE IS DEFINED PER EXPLANATION THERETO AS A DATE BY WHICH THE EMPLOYER IS REQUIRE D TO CREDIT THE EMPLOYEES CONTRIBUTION TO THE EMPLOY EES ACCOUNT IN THE RELEVANT FUND 8 ITA NO.638 & 1093/MUM/2012 (A.Y. 2008-09) LKP SECURITIES LTD. UNDER ANY ACT, OR ANY RULE, ORDER, NOTIFICATION, ET C . , ISSUED THERE-UNDER; THE RELEVANT PROVISION READING AS UNDER:- OTHER DEDUCTIONS . 36 . (1) THE DEDUCTIONS PROVIDED FOR IN THE FOLLOWING CLAUSE S SHALL BE ALLOWED IN RESPECT OF MATTERS DEALT WITH THEREIN, IN COMPUTING THE INCOME REFERRED TO IN SECTION 28 (I) (VA) ANY SUM RECEIVED BY THE ASSESSEE FROM ANY OF HIS EMPLOYEES TO WHICH THE PROVISIONS OF SUB-CLAUSE (X) OF CLAUSE (24) OF SECTION 2 APPLY , IF SUCH SUM IS CREDITED BY THE ASSESSEE TO THE EMPLOYEE'S ACCOUNT IN THE RELEVANT FUND OR F UNDS ON OR BEFORE THE DUE DATE. EXPLANATION.FOR THE PURPOSES OF THIS CLAUSE, 'DUE DATE' MEANS THE DATE BY WHICH THE ASSESSEE IS REQUIRED AS AN EMPLOYER TO CREDIT AN EM PLOYEE'S CONTRIBUTION TO THE EMPLOYEE'S ACCOUNT IN THE RELEVANT FUND UNDER ANY A CT, RULE, ORDER OR NOTIFICATION ISSUED THERE-UNDER OR UNDER ANY STANDING ORDER, AWARD, CON TRACT OF SERVICE OR OTHERWISE ; [EMPHASIS, OURS] AS WOULD BE APPARENT FROM A BARE READING OF THE PRO VISION, THE DEDUCTION IS SUBJECT TO THE ACTUAL PAYMENT AND, FURTHER, BY THE DUE DATE. IT IS, THEREFORE, ABUNDANTLY CLEAR THAT WHILE DEDUCTIBILITY OF THE EMPLOYERS CO NTRIBUTION (TO THE RELEVANT FUND) IS GOVERNED BY SECTION 37(1), THAT OF THE EMPLOYEES C ONTRIBUTION, WHICH IS DEEMED AS INCOME U/S.2(24)(X), IS BY SECTION 36(1)(VA). IT IS ONLY THE FORMER THAT IS COVERED BY SECTION 43B, PER CLAUSE (B) THEREOF. THIS IS MANIFE ST FROM THE CLEAR LANGUAGE OF THE PROVISIONS, VIZ., SS. 2(24)(X), 36(1)(VA) AND 43B(B ). FURTHER, AS THE DUE DATE FOR BOTH THE PAYMENTS, OR THE CREDIT IN ITS RESPECT THEREOF TO T HE EMPLOYEES ACCOUNT, IS THE SAME, SECTION 43B(B), IN DEVIATION OF THE NORM OF THE ACT UAL PAYMENT DURING THE RELEVANT YEAR, OR MODIFIED/AMENDED NORM OF PAYMENT BY THE DUE DATE OF FILING OF THE RETURN OF INCOME FOR THE RELEVANT YEAR, PROVIDES FOR THE SAME BASIS FOR DEDUCTION THEREOF UNDER THE ACT., I.E., THE PAYMENT BY THE DUE DATE. THIS, THUS, ALSO EXPLAINS THE RATIONALE IN PROVIDING FOR A SEPARATE PAYMENT PRESCRIPTION FOR SUMS SPECIFIED U/ S. 43B(B), I.E., AS AGAINST THE UNIFORM PRESCRIPTION FOR THOSE FALLING UNDER THE OTHER CLAU SES OF SECTION 43B. CONTINUING FURTHER, AS AFORE-NOTED, SECTION 43B PRO VIDES FOR AN ADDITIONAL QUALIFICATION OF PAYMENT (BY THE DATE SPECIFIED THE RE-UNDER), FAILING WHICH THE DEDUCTION 9 ITA NO.638 & 1093/MUM/2012 (A.Y. 2008-09) LKP SECURITIES LTD. WOULD STAND TO BE ALLOWED ONLY IN THE YEAR OF ACTUA L PAYMENT. THAT IS, IT SUBJECTS THE DEDUCTION TO THE ADDITIONAL CONDITION OF PAYMENT. T HE SUM UNDER REFERENCE, HOWEVER, MUST BE OTHERWISE ALLOWABLE, I.E., UNDER A PARTICUL AR PROVISION, I.E., BUT FOR THE FACTUM OF PAYMENT, THE ADDITIONAL CONDITION PROVIDED BY THE S ECTION. NOW WHEN SECTION 36(1)(VA) ITSELF PROVIDES FOR THE CONDITION OF ACTUAL PAYMENT , SECTION 43B WOULD EVEN OTHERWISE BE RENDERED OF NO CONSEQUENCE. THAT IS, EVEN IF WE WER E TO OVERLOOK THE CLEAR LANGUAGE OF SECTION 2(24)(X) R.W.S. 36(1)(VA) (ON ONE HAND) AND SECTION 43B(B) (ON THE OTHER), SO THAT THEY CLEARLY CONCERN SEPARATE AND DISTINCT SUMS, AN D CONSIDER, FOR THE SAKE OF THE ARGUMENT, SECTION 43B(B) AS APPLICABLE TO SECTION 3 6(1)(VA) PAYMENTS, IT WOULD BE RENDERED OTIOSE. THIS IS AS THE SUM UNDER REFERENCE HAS TO BE OTHERWISE ALLOWABLE, I.E., UNDER THE RELEVANT PROVISION. THE PAYMENT BY THE DU E DATE U/S. 36(1)(VA) HAVING NOT BEEN MADE, THE SAME IS NOT ALLOWABLE THEREUNDER, SO THAT THERE IS NO SCOPE FOR APPLICATION OR INVOCATION OF SECTION 43B. ON THE OTHER HAND, IF TH E PAYMENT HAS BEEN MADE, SECTION 43B AGAIN BECOMES OF NO FUNCTIONAL RELEVANCE. THIS ASPE CT STANDS ALSO EXPLAINED BY THE TRIBUNAL IN THE CASE OF BENGAL CHEMICALS & PHARMACEUTICALS LTD . (SUPRA), FOLLOWING ITS EARLIER ORDER IN ITA NO.1255/KOL./2010 DATED 19.11. 2010, ALSO REPRODUCING THEREFROM AT PARA 5 OF ITS ORDER. REFERENCE IN THIS CONTEXT IS A LSO DRAWN TO, INTER ALIA , PARA 8 OF THE SAID ORDER, CITING THE REASONS WHY IN ITS VIEW SECTION 4 3B DOES NOT APPLY TO THE PAYMENT OF THE EMPLOYEES CONTRIBUTION. IN FACT, EVEN AS NOTED BY THE TRIBUNAL ITS ORDER IN ITA NO.1255/KOL./2010 (SUPRA), THIS ASPECT STANDS ALSO CLARIFIED BY THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF JT. CIT V. ITC LTD . [2008[ 112 ITD 57 (KOL.)(SB), HOLDING THAT SECTION 43B DOES NOT APPLY TO PAYMENT OF THE EMPLOY EES CONTRIBUTION. RATHER, AS WOULD BE CLEAR, SECTION 43B, EVEN ASSUMING APPLICABILITY, WOULD BECOME RELEVANT ONLY IF IT PROVIDES FOR PAYMENT TERMS MOST STRINGENT THAN THAT PROVIDED BY SECTION 36(1)(VA). THIS IS AS IT IS ONLY IN THAT CASE THAT THE PRESCRIPTION OF OTHERWISE ALLOWABLE WOULD STAND MET, SO AS TO CONSIDER THE SATISFACTION OR OTHERWISE OF THE ADDITIONAL, MORE STRINGENT CONDITION QUA PAYMENT. QUITE ON THE CONTRARY, WE HAVE BEEN FOUND THE PAYMENT TERMS FOR SUMS SPECIFIED U/S. 43B(B) TO BE AT PAR WITH THAT PROVID ED U/S.36(1)(VA), AND WHICH IN FACT GETS RELAXED BY AMENDMENT BY FINANCE ACT, 2003 (W.E.F. 0 1.04.2004) TO THE DUE DATE OF THE 10 ITA NO.638 & 1093/MUM/2012 (A.Y. 2008-09) LKP SECURITIES LTD. FILING OF THE RETURN (FOR THE RELEVANT YEAR), I.E., AS IN THE CASE OF PAYMENTS FALLING UNDER THE OTHER CLAUSES OF SECTION 43B. THE DEDUCTION OF THE EMPLOYEES CONTRIBUTION, WHICH IS DEEMED AS THE EMPLOYERS INCOME U/S.2(24)(X),AND WH ICH IS SUBJECT TO DEDUCTION U/S.36(1)(VA) IS, THUS, WITHOUT DOUBT NOT GOVERNED BY SECTION 43B . 6.4 THE DECISIONS BY THE APEX COURT IN THE CASE OF VINAY CEMENT LTD . (SUPRA) AND ALOM EXTRUSIONS LTD . (SUPRA) ARE ADMITTEDLY WITH REFERENCE TO SECTION 43B AND, FURTHER, QUA THE SCOPE OF THE AMENDMENTS THERETO. THE DEDUCTIBILITY OF THE EMPLOYEES CONTRIBUTION IS NOT REGULATED BY SECTION 43B. FURTHER, EVEN IF SO CONSI DERED, THE SAID SECTION WOULD NOT COME INTO PLAY AS THE SUM UNDER REFERENCE HAS FIRST TO B E OTHERWISE ALLOWABLE, SATISFYING THE TEST OF THE RELEVANT PROVISION UNDER WHICH IT IS DE DUCTIBLE, BEFORE THE DEDUCTION COULD BE SUBJECT TO THE ADDITIONAL RIGOR OF SECTION 43B. IT IS, THEREFORE, DIFFICULT TO SEE AS TO HOW THESE DECISIONS WOULD HAVE ANY BEARING ON THE ISSUE OF THE DEDUCTIBILITY OF THE EMPLOYEES CONTRIBUTION TO THE EMPLOYEE WELFARE FUN DS, WHICH IS GOVERNED SOLELY BY SECTION 2(24)(X) R.W.S. 36(1)(VA) AND, AS SUCH, IND EPENDENT OF AND DE HORS SECTION 43B OF THE ACT. CONSEQUENTLY, THE AMENDMENT/S TO THIS SECT ION WOULD BE OF NO CONSEQUENCE. THIS ASPECT STANDS ALSO EXPLAINED BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF PAMWI TISSUES LTD . (SUPRA) AS WELL. THE SAME, WE ARE CONSCIOUS, STAN DS REVERSED BY THE APEX COURT VIDE ITS DECISION IN THE CASE OF ALOM EXTRUSIONS LTD . (SUPRA). HOWEVER, THE REVERSAL IS ON THE ISSUE THAT STANDS DECIDED AND WAS THE SUBJECT MATTE R OF THE DECISION BY THE APEX COURT, I.E., THE RETROSPECTIVITY OR OTHERWISE OF THE AMENDMENT T O S. 43B BY WAY OF OMISSION OF THE SECOND PROVISO AND THE DELETION IN THE FIRST PROVISO THERETO BY FINANCE ACT, 2003 W.E.F. 01/4/2004. THE DECISION IN THE CASE OF PAMWI TISSUES LTD . (SUPRA), IN FACT, ENDORSES THE DECISION IN THE CASE OF CIT V. GODAVERI (MANNAR) SAHAKARI SAKHAR KHARKHANA LTD . [2008[ 298 ITR 149 (BOM.), WHEREIN ISSUES OTHER THA N THOSE RELATING TO THE SAID AMENDMENT TO S. 43B WERE ALSO REFERRED TO. THESE QU ESTIONS REMAIN UNANSWERED OR UNADDRESSED BY THE DECISION IN THE CASE OF ALOM EXTRUSIONS LTD . (SUPRA). IN FACT, A MERE REFERENCE TO THE QUESTION REFERRED TO THE HONBLE A PEX COURT, WHICH STANDS SET OUT BY IT AT THE BEGINNING OF ITS DECISION AND, THEREFORE, IT SE TS OUT TO AND, ACCORDINGLY, ANSWERS, 11 ITA NO.638 & 1093/MUM/2012 (A.Y. 2008-09) LKP SECURITIES LTD. WOULD DISPEL ANY DOUBT IN THE MATTER, EVEN AS WE HA VE ALSO CAREFULLY PERUSED THE JUDGMENT. A DECISION, IT IS TRITE, IS AN AUTHORITY FOR WHAT IT ACTUALLY DECIDES (REFER: CIT V. SUN ENGINEERING WORKS (P.) LTD . [1992] 198 ITR 297 (SC); BLUE STAR LTD. V. CIT [1996] 217 ITR 514 (BOM.)). FURTHER, AS EXPLAINED BY THE A PEX COURT IN THE CASE OF CIT V. MURLIDHAR BHAGWAN DASS [1964] 52 ITR 335 (SC), A FINDING CAN ONLY BE TH AT WHICH IS NECESSARY FOR THE DISPOSAL OF THE APPEAL FOR THE RE LEVANT YEAR, OR TO PUT IN A BROADER CONTEXT, TO ANSWER THE QUESTION THAT IS REFERRED TO AND, ACCORDINGLY, ANSWERED BY THE COURT. THERE IS NO FINDING BY THE HONBLE APEX COURT THAT THE EMPLOYEES CONTRIBUTION, DEDUCTION OF WHICH IS SUBJECT TO S. 36(1)(VA), IS FURTHER SUB JECT TO S. 43B. NOR, FOR THAT MATTER, A FINDING THAT S. 43B WOULD APPLY EVEN WHERE THE SUM UNDER REFERENCE IS NOT, EVEN AS STATED BY THE TRIBUNAL IN THE CASE OF BENGAL CHEMICALS & PHARMACEUTICALS LTD . (SUPRA), ALLOWABLE UNDER THE RELEVANT PROVISION, I.E., IS NO T OTHERWISE ALLOWABLE . THESE ASPECTS, EVEN AS SOUGHT TO BE EMPHASIZED WITH REFERENCE TO T HE QUESTION POSED AND ANSWERED BY THE APEX COURT, DID NOT ARISE FOR CONSIDERATION BY THE HONBLE COURT. RATHER, WE HAVE LABORED TO EXPLAIN THE UNFEASIBILITY AND THE INOPER ABILITY OF S. 43B EVEN IF, IGNORING THE CLEAR IDENTIFICATION OF THE SEPARATE SUMS REFERRED TO IN SS. 36(1)(VA) AND 43B, PER THE CLEAR LANGUAGE OF THE SAID PROVISIONS, WHERE IT IS SOUGHT TO BE APPLIED TO THE SUMS COVERED U/S. 36(1)(VA). THE TRIBUNAL IN THE CASE OF BENGAL CHEMICALS & PHARMACEUTICALS LTD . (SUPRA), AS WELL AS PER ITS EARLIER DECISION IN ITA NO. 1255 /KOL./2010, HAS ALSO CONSIDERED THE DECISION BY THE APEX COURT IN THE CASE OF ALOM EXTRUSIONS LTD . (SUPRA), FINDING IT AS NOT GERMANE TO THE SPECIFIC ISSUE UNDER REFERENCE, I.E. , THE DEDUCTIBILITY OF THE EMPLOYEES CONTRIBUTION, BEING NOT COVERED BY SEC. 43B(B) OF T HE ACT. COMING, NEXT, TO THE DECISION IN THE CASE OF CIT V. AIMIL LTD . (SUPRA). WE HAVE GONE THROUGH THE SAID DECISION, WHICH STANDS AGAIN CONSIDERED BY THE TRIBUNAL IN THE CASE OF BENGAL CHEMICALS & PHARMACEUTICALS LTD . (SUPRA). NO DOUBT, THE SAID DECISION COVERS PAYMENT OF EMPLOYEES CONTRIBUTION TO EPF AND ESI F UNDS. HOWEVER, AS A PERUSAL OF THE DECISION WOULD SHOW, THE ENTIRE DELIBERATION THEREI N, AS WELL AS THE SUBJECT MATTER OF THE DECISION, IS QUA S. 43B, INCLUDING THE AMENDMENTS THERETO. IN FACT, THE HONBLE COURT MOVED ON THE PREMISE THAT THE EMPLOYEES CONTRIBUTI ON IS SUBJECT TO CLAUSE (B) OF S. 43B 12 ITA NO.638 & 1093/MUM/2012 (A.Y. 2008-09) LKP SECURITIES LTD. AND, ACCORDINGLY, THE INTERPRETATION OF THE SECTION , AS WELL AS THE NATURE OF THE AMENDMENTS THERETO, ENGAGED ITS MIND. SPECIFIC REFE RENCE IN THIS CONTEXT MAY BE DRAWN TO PARA 11 OF THE JUDGMENT, WHEREAT THE HONBLE COU RT, AFTER DELINEATING THE PROVISIONS OF SS. 2(24)(X) AND 36(1)(VA), GOES ON TO STATE THAT, HOWEVER, S. 43B(B) STIPULATES THAT SUCH DEDUCTION WOULD BE PERMISSIBLE ON ACTUAL PAYMENT. W E HAVE ALREADY NOTED THAT S. 36(1)(VA) ITSELF PRESCRIBES THE CONDITION OF PAYMEN T FOR DEDUCTION AND, BESIDES, EQUAL IF NOT MORE RIGOROUS THAN THAT PROVIDED BY S. 43B. THE DECISION BY THE TRIBUNAL, WHICH STANDS APPROVED BY THE HONBLE COURT IN THE CASE OF AIMIL LTD . (SUPRA), STANDS RENDERED WITHOUT CONSIDERING THE DECISION BY THE SPECIAL BEN CH OF THE TRIBUNAL IN THE CASE OF ITC LTD . (SUPRA), BESIDES BEING ALSO INCONSISTENT WITH THE DECISION BY THE HONBLE JURISDICTIONAL HIGH COURT IN GODAVERI (MANNAR) SAHAKARI SAKHAR KHARKHANA LTD . (SUPRA) INSOFAR AS THE LATTER RELATES TO THE INAPPLICABILIT Y OF S. 43B TO PAYMENTS SPECIFIED U/S. 36(1)(VA). FINALLY, THE ABSENCE OF THE RELEVANT FINDINGS IN TH E CASE OF ALOM EXTRUSIONS LTD . (SUPRA), ALSO ATTEND THE DECISION IN THE CASE OF AIMIL LTD. (SUPRA). WE ARE THEREFORE WITH RESPECT NOT PERSUADED TO FOLLOW THE DECISION I N THE CASE OF AIMIL LTD . (SUPRA); RATHER CONSIDER IT AS NOT APPLICABLE/GERMANE AND, ON THE C ONTRARY, ARE INCLINED TO FOLLOW THE DECISION BY THE SPECIAL BENCH IN ITC LTD . (SUPRA) AS WELL AS IN THE CASE OF BENGAL CHEMICALS & PHARMACEUTICALS LTD . (SUPRA), BOTH OF WHICH ARE CONSISTENT WITH THE DECISIONS BY THE HONBLE JURISDICTIONAL HIGH COURT ON THE MATERIAL ASPECT. IN DOING SO, WE ALSO DERIVE SUPPORT FROM THE DECISION BY THE HONBL E JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. THANE ELECTRICITY SUPPLY LTD . [1994] 206 ITR 727 (BOM.). 6.5 THE DEDUCTIBILITY OF THE IMPUGNED PAYMENTS HAS THUS TO BE SEEN ONLY WITH REFERENCE TO S. 36(1)(VA), WHICH HAS NOT WITNESSED ANY MATERIAL CHANGES SINCE ITS INSERTION ON THE STATUTE BY FINANCE ACT, 1987 W.E.F. 01/4/198 8. AS SUCH, DEDUCTION WOULD BE EXIGIBLE WHERE THE PAYMENT IS MADE BY THE DUE DATE, I.E., UNDER THE RELEVANT ACT. IN THIS REGARD WE OBSERVE THAT THE AO HAS NOT ALLOWED THE GRACE PERIOD OF FIVE DAYS IN CASE OF PAYMENTS UNDER THE PROVIDENT FUND ACT. THIS IS AS T HE DUE DATE IS DEFINED UNDER THE SAID ACT, WHICH COULD NOT BE SUPERSEDED BY ANY CIRC ULAR OR NOTIFICATION. SECONDLY, THE 13 ITA NO.638 & 1093/MUM/2012 (A.Y. 2008-09) LKP SECURITIES LTD. EXTENSION IS ONLY FOR THE LIMITED PURPOSE OF NON-LE VY OF ANY PENAL INTEREST OR PENALTY, AND DOES NOT OPERATE TO ALTER OR REDEFINE OR EXTEND THE DUE DATE, WHICH STANDS CLEARLY DEFINED, AND IS CONSTANT/FIXED. WE HAVE GIVEN OUR CAREFUL CO NSIDERATION TO THE MATTER. IN OUR VIEW, THE PAYMENT/S MADE WITHIN THE GRACE PERIOD AS ALLOW ED BY VIRTUE OF ANY CIRCULAR, ORDER, ETC. WOULD BE ELIGIBLE FOR DEDUCTION U/S. 36(1)(VA) . THE LANGUAGE OF THE PROVISION ACCORDS PRIMACY TO NOT ONLY THE RELEVANT ACT, BUT ALSO TO A NY CIRCULAR, ORDER, NOTIFICATION, ETC. ISSUED THEREUNDER. TWO, A DUE DATE, FOR ALL PRACT ICAL PURPOSES, AS ALSO BY DEFINITION, IS THE DATE BY WHICH THE RELEVANT ACTION (PAYMENT IN T HE INSTANT CASE) COULD BE PERFORMED SO AS TO BE CONSIDERED AS ELIGIBLE, AND WITHOUT INVITI NG ANY PENAL CONSEQUENCES. AS SUCH, THE BENEFIT OF THE GRACE PERIOD COULD NOT BE DISALLOW ED, AND WHICH WOULD RATHER BRING THE TWO ENACTMENTS IN HARMONY. IN SO DECIDING, WE ALSO DERIVE SUPPORT FROM THE DECISION BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE O F GODAVERI (MANNAR) SAHAKARI SAKHAR KHARKHANA LTD . (SUPRA) INASMUCH AS THE HONBLE COURT HAS CLEARLY HELD IN FAVOR OF ALLOWING THE BENEFIT OF THE GRACE PERIOD AFORE-SAID . THE AO IS ACCORDINGLY DIRECTED TO ALLOW DEDUCTION U/S. 36(1)(VA) WHERE ANY PAYMENT IS MADE WITHIN THE GRACE PERIOD. WE DECIDE ACCORDINGLY, AND THE REVENUE GETS PART RELIE F. 7. THE THIRD AND THE FINAL GROUND OF THE REVENUES APPEAL IS IN RESPECT OF DELETION OF DISALLOWANCE ON THE WRITE OFF BAD DEBT/S AMOUNTING TO RS.33,93,886/- BY THE LD. CIT(A). THE BASIS OF THE A.O.S DECISION WAS THAT THOUGH NO DOUBT THE AMOUNT UNDER REFERENCE HAS BEEN WRITTEN OFF BY THE ASSESSEE IN ITS ACCOUNT S, THE PROVISIONS OF SECTION 36(1)(VII) COULD APPLY ONLY TO THE BROKERAGE AMOUNT ARISING TO IT ON THE PURCHASE OR SALE OF THE SHARES ON BEHALF OF THE CLIENTS INASMUCH AS THE ASS ESSEE COMPANY WAS A BROKER. THE BROKERAGE RANGES BETWEEN 0.05% TO 2% OF THE TRANSAC TION VALUE AND, THEREFORE, THE ASSESSEES CLAIM FOR BAD DEBT COULD NOT EXTEND TO T HE ENTIRE AMOUNT DUE FROM ITS CLIENT/S, BUT ONLY TO THE AMOUNT OF BROKERAGE INCOME EMBEDDED THEREIN. THE LD. CIT(A), HOWEVER, ALLOWED RELIEF TO THE ASSESSEE IN VIEW OF THE DECIS ION BY THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF DY. CIT VS. SHREYAS S. MORAKHIA [2010] 5 ITR (TRIB) 1 (MUM.) (SB). 14 ITA NO.638 & 1093/MUM/2012 (A.Y. 2008-09) LKP SECURITIES LTD. 8. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. THE DECISION BY THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF SHREYAS S. MORAKHIA (SUPRA) HAS SINCE BEEN UPHELD BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. SHREYAS S. MORAKHIA [2012] 342 ITR 285 (BOM.), EVEN AS BROUGHT TO OUR NOTICE BY LD. AR DURING HEARING. THE HONBLE COURT HAS CLARIFIED THAT BOTH THE COMPONENTS, I.E., THE VALUE OF THE SHARES TRANSACTED AS WELL AS THE BROKERAGE THEREON, ARISE FROM THE VERY SAME TRANSACTION AND, THUS, CONSTITUTE A PART OF THE DEBT ARISING TH EREFROM. THE REQUIREMENT OF SECTION 36(2)(I), THE NON COMPLIANCE OF WHICH FORMS THE BAS IS OF THE REVENUES CASE, HAS BEEN CLARIFIED AS BEING FULFILLED. IN VIEW THEREOF, THE REVENUES GROUND DESERVES TO BE DISMISSED. WE DECIDE ACCORDINGLY. ASSESSEES APPEAL (I.T.A. NO.1093/MUM/2012) 9. THE FIRST AND THE SECOND GROUNDS OF THE ASSESSEE S APPEAL ARE IN RESPECT OF DISALLOWANCE U/S.40(A)(IA) (AGGREGATING TO RS.44,89 ,619/-) IN RESPECT OF AMOUNTS PAID TOWARD LEASE LINE CHARGES AND VSAT CHARGES INASMUCH AS THE ASSESSEE HAD FAILED TO DEDUCT THE TAX THEREON, WHICH WAS CONSIDERED AS LIA BLE THERE-FOR U/S.194J OF THE ACT. THE LD. CIT(A), AFTER A DETAILED DISCUSSION, WAS OF THE VIEW THAT THE SAID CHARGES, AS ALSO THE TRANSACTION CHARGES PAID BY THE BROKERS TO STOCK EX CHANGE, ARE ONLY FEES FOR TECHNICAL SERVICES LIABLE FOR TAX DEDUCTION AT SOURCE U/S.194 J AND, CONSEQUENTLY, IN CASE OF NON- DEDUCTION, QUALIFY FOR DISALLOWANCE U/S.40(A)(IA) O F THE ACT. THE ALLOWANCE IN ITS RESPECT WOULD FALL DUE ON THE PAYMENT OF THE TAX DEDUCTIBLE . AGGRIEVED, THE ASSESSEE IS IN APPEAL. 10. THE LD. AR DURING HEARING PLACED ON RECORD COPY OF THE DECISION BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF ITO VS. ANGEL CAPITAL & DEBIT MARKET LTD. (IN ITA NO.475 OF 2011 DATED 28.07.2011). THE HONB LE COURT HAS CLARIFIED THAT THE SAID CHARGES BEING PAID BY THE ASSESSEE-BROKERS TO THE S TOCK EXCHANGE WERE MERELY REIMBURSEMENT OF CHARGES PAID/PAYABLE BY THE STOCK EXCHANGE TO THE DEPARTMENT OF TELECOMMUNICATION (DOT). THE SAME HAD NO ELEMENT OF INCOME AND, CONSEQUENTLY, THE 15 ITA NO.638 & 1093/MUM/2012 (A.Y. 2008-09) LKP SECURITIES LTD. QUESTION OF DEDUCTION OF TAX ON SUCH PAYMENT DID NO T ARISE. THE LD. DR COULD NOT REBUT THESE AVERMENTS BY THE LD. AR. 11. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATE RIAL ON RECORD. THE DECISION BY THE HONBLE HIGH COURT IS SQUARELY ON THE POINT. THE HO NBLE HIGH COURT OBSERVES THAT THE TRIBUNAL RETURNING A FINDING AS TO THE RELEVANT CHA RGES BEING ONLY A REIMBURSEMENT OF THE RELEVANT EXPENSES, THERE IS NO CASE FOR DEDUCTION O F ANY TAX AT SOURCE. FURTHER, IN FACT, ON AN ENQUIRY BY THE BENCH WITH REFERENCE TO THE DECIS ION BY THE HONBLE HIGH COURT IN THE CASE OF CIT V. KOTAK SECURITIES LTD. [2012] 340 ITR 333 (BOM), ALSO DEALING WITH TAX DEDUCTIBILITY ON VARIOUS PAYMENTS TO THE STOCK EXCH ANGE, IT WAS CLARIFIED BY THE LD. AR THAT THE BOLT SYSTEM BEING ADOPTED BY THE BOMBAY STOCK EXCHANGE (BSE) ENTAILED PAYMENTS BY THE BROKERS ON THREE COUNTS, I.E., LEAS E RENT CHARGES, VSAT AND TRANSACTION CHARGES. THE DECISION BY THE HONBLE HIGH COURT IN THE CASE OF KOTAK SECURITIES LTD. (SUPRA), CONFIRMING THE DEDUCTIBILITY OF TDS U/S.19 4J, IS IN RESPECT OF TRANSACTION CHARGES ONLY. WE HAVE CLARIFIED THIS FACT ON GOING THROUGH THE DECISION. AS IT WOULD APPEAR TO US, THE STOCK EXCHANGE IS BILLED FOR THE TOTAL CHARGES ON THESE COUNTS (I.E., INCLUDING LEASE LINE AND VSAT CHARGES) BY THE DEPARTMENT OF TELECOM MUNICATION (DOT), WHICH IN TURN ALLOCATES THE SAME TO ITS DIFFERENT CONSTITUENTS (W HICH WOULD BE ON SOME DEFINITE/UTILIZATION BASIS), WITHOUT INCLUDING ANY CHARGE OF ITS OWN. THE PAYMENT TO THE STOCK EXCHANGE IS THUS, ONLY IN THE NATURE OF REIMB URSEMENT. EVEN AS, THEREFORE, IT MAY RESULT IN A TDS LIABILITY IN THE HANDS OF THE STOCK EXCHANGE (INASMUCH AS WHAT IT PAYS TO THE DOT IS ONLY THE LATTERS INCOME), IN-SO-FAR AS THE INDIVIDUAL BROKERS ARE CONCERNED, WHO MAKE THE PAYMENTS TO THE STOCK EXCHANGE, NO TAX IS DEDUCTIBLE INASMUCH AS THE SAME IS ONLY A REIMBURSEMENT OF THE CHARGES AS LEVI ED BY DOT. ACCORDINGLY, NO GROUND FOR DISALLOWANCE SURVIVES, AND THE ASSESSEE SUCCEED S IN RESPECT OF THE RELEVANT GROUNDS. 12. THE THIRD GROUND OF THE ASSESSEES APPEAL IS IN RESPECT OF DISALLOWANCE MADE U/S.14A R/W RULE 8D OF THE INCOME TAX RULES, 1962 ( THE RULES HEREINAFTER) IN THE SUM OF RS.7,45,563/-, HAVING BEEN SINCE CONFIRMED BY TH E FIRST APPELLATE AUTHORITY. THE BASIS 16 ITA NO.638 & 1093/MUM/2012 (A.Y. 2008-09) LKP SECURITIES LTD. OF THE DISALLOWANCE AS WELL AS ITS CONFIRMATION, IS THAT THE SAID PROVISIONS ARE MANDATORY FOR THE CURRENT YEAR. NO ARGUMENT, MUCH LESS MATERI AL, HAS BEEN BROUGHT BY THE ASSESSEE ON RECORD TO CONTROVERT THE REVENUES CLEAR STAND I NASMUCH AS THE ASSESSEE HAS MAINTAINED AVERAGE INVESTMENTS AT RS.351.51 LAKHS ( IN SHARES AND MUTUAL FUNDS) AS WELL AS INCURRED INTEREST EXPENDITURE AT RS.173.01 LAKHS FOR THE CURRENT YEAR. IN THE ABSENCE OF ANY INFORMATION WITH REGARD TO THE UTILIZATION OF T HE BORROWED FUNDS, THE GENERAL POOL OF FUNDS HYPOTHESIS, WHICH UNDERLIES THE RULE OF APPRO PRIATION OF EXPENDITURE ON THE BASIS OF THE PROPORTIONATE FINANCING OF ALL ASSETS, WHICH DE FINES THE RATIONALE OF RULE 8D, WOULD PREVAIL. THE REVENUE HAS RELIED IN SUBSTANTIATING I TS CASE ON THE DECISIONS IN THE CASE OF DHAPA & SONS VS. CIT [2011] 54 DTR 345 (CAL.) AND CIT VS. SMT. LEENA RAMACHANDRAN [2010] 45 DTR 372 (KER.), BESIDES BY THE SPECIAL BE NCH OF THE TRIBUNAL IN THE CASE OF DAGA CAPITAL MANAGEMENT [2008] 26 SOT 603 (MUM), SINCE UPHELD BY THE HONB LE JURISDICTIONAL HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. V. DY. CIT [2010] 328 ITR 81 (BOM.). WE, THEREFORE, FIND NO INFIRMITY IN THE IMPUGNED OR DERS AND, ACCORDINGLY, CONFIRM THE IMPUGNED DISALLOWANCE. 13. THE FOURTH AND THE FIFTH GROUNDS OF THE ASSESSE ES APPEAL ARE IN RESPECT OF NON ALLOWANCE OF THE SET OFF IN RESPECT OF: A) BROUGHT FORWARD LONG TERM CAPITAL LOSS (FROM A.Y. 2 003-04) ON SALE OF QUOTED EQUITY SHARES (NON STT) AT RS.41,36,974/- (GR. 4) A ND; B) LONG TERM CAPITAL LOSS ON SALE OF QUOTED EQUITY SHA RES (STT) FOR THE CURRENT YEAR AT RS.36,69,436/- (GR. 5); AGAINST LONG TERM CAPITAL GAIN ON SALE OF UNQUOTED EQUITY SHARES (NON STT) ARISING FOR THE CURRENT YEAR. THE RESPECTIVE CASES OF BOTH THE PART IES IN RESPECT THEREOF BEING THE SAME, THE SAME WERE ARGUED TOGETHER, AND ARE THEREFORE BE ING TAKEN UP FOR ADJUDICATION TOGETHER, EVEN AS BY THE FIRST APPELLATE AUTHORITY VIDE PARA 9 (PAGE 24) OF HIS ORDER. THE BASIS OF THE REVENUES DISAGREEMENT WITH THE ASSESS EE IS FIRSTLY, THAT THE LONG TERM CAPITAL GAIN IS SINCE, I.E., BY FINANCE (NO.2) ACT , 2004 (W.E.F. 01.10.2004), NOT PART OF THE TOTAL INCOME, BEING EXEMPT U/S. 10(38) OF THE ACT. SECONDLY, THERE IS NOTHING ON RECORD TO 17 ITA NO.638 & 1093/MUM/2012 (A.Y. 2008-09) LKP SECURITIES LTD. SHOW THAT THERE WAS BROUGHT FORWARD LOSS FOR A.Y. 2 003-04 , AS BEING CLAIMED BY THE ASSESSEE. NEITHER WAS THE SAME CLAIMED PER ITS COMP UTATION OF INCOME, NOR FINDS MENTION IN THE RELEVANT ASSESSMENT ORDER PASSED U/S.143(3) OF THE ACT. THE ASSESSMENT WAS IN FACT CONTESTED UP TO THE LEVEL OF THE TRIBUNAL, EVEN WHE RE THERE WAS NO REFERENCE TO ANY LOSS BEING CARRIED FORWARD. THE ASSESSMENT HAS ACCORDING LY ATTAINED FINALITY AND, AS SUCH, THE ASSESSEES CLAIM FOR BROUGHT FORWARD LOSS HAS NO BA SIS IN LAW. 14. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATE RIAL ON RECORD. AT THE OUTSET, IT MAY BE RELEVANT TO STATE THAT THE SAID FINANCE ACT, VIDE CHAPTER VII THEREOF, LEVIES TAX CALLED SECURITY TRANSACTION TAX (STT) ON LONG TERM CAPITAL ASSETS, BEING EQUITY SHARES IN A COMPANY OR A UNITS IN AN EQUITY ORIENTED FUND. TH AT IS, THE EQUITY SHARE TRANSACTIONS WHICH ARE SUBJECT TO STT WOULD NOT BE SUBJECT TO TA X UNDER ACT. AS SUCH, WE ARE UNABLE TO SEE AS TO WHAT INFIRMITY IN LAW ATTENDS THE REVE NUES CASE IN DENYING THE CLAIM OF LOSS ON TRANSACTIONS IN EQUITY SHARES SUBJECT TO STT (AT RS.36.69 LAKHS), AGAINST THE TAXABLE CAPITAL GAINS FOR THE CURRENT YEAR (NON STT); IT RE LYING AND DRAWING SUPPORT FROM THE DECISION BY THE APEX COURT IN THE CASE OF CIT VS. HARPRASAD & CO. P. LTD. [1975] 99 ITR 118 (SC). THE INCOME (AND LOSS, WHICH IS ONLY NEGAT IVE INCOME) FALLING UNDER CHAPTER III OF THE ACT AND, THUS, EXEMPT FROM THE LEVY OF THE T AX, WOULD NOT FORM PART OF THE COMPUTATION OF THE INCOME UNDER CHAPTER IV OF THE A CT. THAT IN FACT IS A FUNDAMENTAL PREMISE; THE BASIS OF SEC. 14A OF THE ACT . THE REVENUES CASE IN THIS REGARD IS UNEXCEPTIONAL, AND WE CONFIRM THE SAME. WITH REGARD TO THE OTHER LIMB OF THE MATTER, THE ASSESSEE HAS AGAIN FAILED TO BRING ANYTHING ON RECO RD TO REBUT THE CLEAR FINDINGS BY THE LD. CIT(A) THAT ITS ASSESSMENT FOR A.Y. 2003-04 HAS ATT AINED FINALITY, WITH THERE BEING NOT MENTION OF ANY LOSS WHICH REQUIRES TO BE CARRY FORW ARD, SO THAT THE FINDINGS BY THE REVENUE REMAIN UNCONTROVERTED. IT MAY BE CLARIFIED THAT THE CARRY FORWARD OF THE LOSSES IS SUBJECT TO CERTAIN CONDITIONS, VIZ. FILING OF THE R ETURN IN TIME, ITS ASSESSMENT, ETC. WHICH IN THE INSTANT CASE IS U/S.143(3) BEARING A DEFINITE F INDING IN THE MATTER. THIS GIVES A VESTED RIGHT TO THE ASSESSEE. ACCORDINGLY, WE FIND NO BASI S IN THE ASSESSEES CASE IN THIS REGARD AS WELL. 18 ITA NO.638 & 1093/MUM/2012 (A.Y. 2008-09) LKP SECURITIES LTD. 15. IN THE RESULT, BOTH THE REVENUES AND THE ASSES SEES APPEALS ARE PARTLY ALLOWED. 2 37 ' *23 / ! 4 6 !83 4 3 9: ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH MAY, 2013 6 4 5+ ;'7 4 < SD/- SD/- (DR. S. T. M. PAVALAN) (SANJAY ARORA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; ;' DATED : 17.05.2013 !.'../ ROSHANI , SR. PS 6 4 /3= >=+3 6 4 /3= >=+3 6 4 /3= >=+3 6 4 /3= >=+3/ COPY OF THE ORDER FORWARDED TO : 1. ,. / THE APPELLANT 2. /0,. / THE RESPONDENT . 3. ? ( ) / THE CIT(A) 4. ? / CIT - CONCERNED 5. =!B< /3' , , / DR, ITAT, MUMBAI 6. <'* C / GUARD FILE. 6' 6' 6' 6' / BY ORDER, D DD D/ // /9 9 9 9 (DY./ASSTT. REGISTRAR) , , , , / ITAT, MUMBAI