THE ACIT, CIRCLE - 4(1), Visakhapatnam V. M/s Steel City Sequeritys Ltd,., Visakhapatnam

ITA 135/VIZ/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1102 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 year(s) 1 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-06-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 24-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K RAVI
• Keywords: Business expenditure
• Section: 142(1)

Judgement Text

ITA NO.135/VIZAG/2014 M/S. STEEL CITY SECURITIES LTD., VSKP 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . , $ BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./I.T.A.NO.135/VIZAG/2014 ( / ASSESSMENT YEAR: 2010-11) ACIT, CIRCLE - 4(1), VISAKHAPATNAM VS. M/S. STEEL CITY SECURITIES LTD., VISAKHAPATNAM [PAN: AAECS 0970L ] ( % / APPELLANT) ( &'% / RESPONDENT) / APPELLANT BY : SHRI K. RAVI, DR / RESPONDENT BY : SHRI G.V.N. HARI, AR / DATE OF HEARING : 27.05.2016 / DATE OF PRONOUNCEMENT : 10.06.2016 / O R D E R PER G. MANJUNATHA, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER OF CIT(A), VISAKHAPATNAM DATED 14.2.2014 AND IT PERTAI NS TO THE ASSESSMENT YEAR 2010-11. 2 THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COMPANY WHICH IS ENGAGED IN THE BUSINESS OF SHARE BROKING A ND DEPOSITORY ITA NO.135/VIZAG/2014 M/S. STEEL CITY SECURITIES LTD., VSKP 2 SERVICES, FILED ITS RETURN OF INCOME FOR THE ASSESS MENT YEAR 2010-11 ON 15.9.2010 DECLARING TOTAL INCOME OF RS.12,98,21, 485/-. THE CASE HAS BEEN SELECTED FOR SCRUTINY AND ACCORDINGLY, NOT ICE U/S 143(2) & 142(1) OF THE INCOME TAX ACT, 1961 (HEREINAFTER CAL LED AS THE THE ACT) WERE ISSUED. IN RESPONSE TO NOTICES, THE AUT HORIZED REPRESENTATIVE OF THE ASSESSEE APPEARED FROM TIME T O TIME AND FURNISHED BOOKS OF ACCOUNTS AND OTHER DETAILS. DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A.O. NOTICED THAT THE A SSESSEE HAS INCURRED EXPENDITURE UNDER THE HEAD COMMISSION WHIC H WAS PAID TO SUB-BROKER APPOINTED TO FACILITATE THE BUSINESS OF THE ASSESSEE. THE A.O. FURTHER NOTICED THAT THE ASSESSEE HAS PAID COM MISSION TO SUB BROKERS WHO ARE REGISTERED WITH SEBI AND ALSO WHO A RE NOT REGISTERED WITH SEBI. THEREFORE, ISSUED A SHOW CAUSE NOTICE AN D ASKED TO EXPLAIN WHY COMMISSION PAID TO SUB BROKERS WHO WERE NOT REGISTERED WITH SEBI SHALL NOT BE DISALLOWED. IN RESPONSE TO SHOW-CAUSE NOTICE, THE ASSESSEE SUBMITTED THAT IT HAS PAID COMMISSION TO SUB BROKERS WHOSE APPLICATIONS ARE PENDING BEFORE THE SEBI. TH E ASSESSEE FURTHER SUBMITTED THAT A SIMILAR ADDITION HAS BEEN MADE BY THE A.O. FOR THE ASSESSMENT YEAR 2009-10. ON APPEAL BEFORE THE APPELLATE AUTHORITIES, THE APPELLATE AUTHORITIES HAVE DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. THEREFORE, THE SAME SHOULD BE ALL OWED AS BUSINESS ITA NO.135/VIZAG/2014 M/S. STEEL CITY SECURITIES LTD., VSKP 3 EXPENDITURE. THE A.O. AFTER CONSIDERING THE SUBMIS SIONS OF THE ASSESSEE HELD THAT THOUGH THE MATTER HAD BEEN DECID ED IN FAVOUR OF THE ASSESSEE FOR THE EARLIER ASSESSMENT YEARS, THE DEPARTMENT HAD NOT ACCEPTED THE DECISION OF THE JURISDICTIONAL TRI BUNAL AND HAD PREFERRED APPEAL BEFORE THE HIGH COURT FOR ALL THE PRECEDING YEARS AND THE SAME WAS PENDING FOR ADJUDICATION. TO KEEP THE ISSUE ALIVE FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, SIMILA R COMMISSION PAID TO THE SUB BROKERS WHOSE REGISTRATION APPLICATION W AS PENDING BEFORE THE SEBI WAS DISALLOWED. 3. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). BEFORE CIT(A), THE ASSESS EE REITERATED THE SUBMISSIONS MADE BEFORE THE A.O. THE CIT(A), BY FO LLOWING THE ITAT DECISION IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2009-10 DELETED THE ADDITIONS MADE BY THE A.O. AGGRIEVED BY THE CIT(A) ORDER, THE REVENUE IS IN APPEAL BEFORE US. 4. THE LD. A.R. FOR THE ASSESSEE, AT THE TIME OF HE ARING SUBMITTED THAT THE ISSUE INVOLVED IN THIS APPEAL IS SQUARELY COVERED BY THE DECISION OF ITAT, IN ASSESSEES OWN CASE FOR THE AS SESSMENT YEAR 2009-10. THE ITAT, UNDER SIMILAR CIRCUMSTANCES DECI DED THE ISSUE IN FAVOUR OF THE ASSESSEE. THE LD. D.R. ON THE OTHER HAND SUBMITTED THAT THOUGH THE MATTER HAD BEEN DECIDED IN FAVOUR O F THE ASSESSEE, ITA NO.135/VIZAG/2014 M/S. STEEL CITY SECURITIES LTD., VSKP 4 THE DEPARTMENT HAD NOT ACCEPTED THE DECISION OF ITA T AND HAD PREFERRED FURTHER APPEAL BEFORE THE HIGH COURT AND THE SAME WAS PENDING FOR ADJUDICATION. SINCE, THE ISSUE HAS NOT REACHED THE FINALITY THE ADDITION MADE BY THE A.O. SHOULD BE UPHELD. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MA TERIALS AVAILABLE ON RECORD. THE A.O. DISALLOWED THE COMMI SSION PAID TO SUB BROKERS FOR THE REASON THAT THE SUB BROKERS WERE NO T REGISTERED WITH THE SEBI. THE LD. A.R. FOR THE ASSESSEE AT THE TIM E OF HEARING SUBMITTED THAT THE ISSUE HAS BEEN COVERED IN FAVOUR OF THE ASSESSEE, IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2009 -10 AND SUBMITTED A COPY OF COORDINATE BENCH ORDER. WE NOTI CED THAT THE COORDINATE BENCH, IN ASSESSEES OWN CASE FOR THE AS SESSMENT YEAR 2009-10 CONSIDERED SIMILAR ISSUE AND DECIDED IN FAV OUR OF THE ASSESSEE. THE RELEVANT PORTION OF THE ORDER IS EXT RACTED HEREUNDER: 4. AT THE TIME OF HEARING, LD A.R. PLACED ON RECOR D THE DECISIONS OF CO- ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF THE ASSESSEE FOR ASSESSMENT YEARS 2006-07 TO 2008-09, WHEREIN, THE CLAIM OF EXP ENDITURE PAID TO UNREGISTERED SUB-BROKERS HAS BEEN ALLOWED TO THE AS SESSEE. LD A.R. SUBMITTED THAT FOR ALL THESE ASSESSMENT YEARS, THE REVENUES APPEALS HAVE BEEN REJECTED BY THE TRIBUNAL ON SIMILAR FACTS. LD D.R. COULD NOT CONTROVERT THIS FACT NOR WAS ABLE TO BRING TO OUR N OTICE ANY DECISION OF A HIGHER COURT. THEREFORE, HAVING CONSIDERED THE SUB MISSIONS OF THE PARTIES AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE DECISIONS PLACED BY LD A.R. BEFORE US, WE FIND THAT THE ISSUE IN THIS APPEAL IS SQUARELY COVERED BY THE COORDINATE BENCHS DECISION IN THE CASE OF THE ASSESSEE FOR ASSESSMENT YEAR 2006-07, WHEREI N THE TRIBUNAL HAS, INTER ALIA, OBSERVED AS FOLLOWS: ITA NO.135/VIZAG/2014 M/S. STEEL CITY SECURITIES LTD., VSKP 5 WE HAVE GONE THROUGH THE NATURE OF EXPENSES AND WE FIND THAT THESE EXPENSES WERE INCURRED FOR THE BUSINESS PURPOSE. THE REVENUE HAS NOT MADE OUT A CASE THAT THE PAYMENTS WERE MADE IN CONTRAVENTION TO SOME LEGAL PROVISIONS OR AGAINST THE PUBLIC POLICIES. THE PAY MENTS WERE ADMITTEDLY MADE TO THE SUB-BROKERS WHO HAS REN DERED SERVICES FOR THE ASSESSES AND FOR BUSINESS PURPOSES . AS SUCH, THESE PAYMENTS CANNOT BE DENIED U/S.37(1) OF THE ACT. A QUESTION IS ONLY LEFT OUT WHETHER THE SUB-B ROKER WAS AUTHROISED TO CARRY ON HIS BUSINESS UNDER THE SEBI RULES? IN THIS REGARD, WE ARE OF THE VIEW THAT IF THE SUB- BROKER HAS CARRIED ON ITS BUSINESS IN CONTRAVENTION TO THE RUL ES, HE CAN BE PENALIZED UNDER THE SEBI RULES BUT FOR THE REASO NS THAT SUB-BROKER HAS ACTED OR CARRIED ON HIS BUSINESS IN CONTRAVENTION TO THE SEBI RULES, PAYMENTS MADE TO I T CANNOT BE DISALLOWED, AS IT WAS INCURRED FOR THE BU SINESS PURPOSE. WE ALSO FIND THAT THIS VIEW OF THE TRIBUNAL HAS BEE N FOLLOWED IN SUCCEEDING ASSESSMENT YEARS IN THE CASE OF THE ASSE SSEE. WE OBSERVE THAT THE CIT(A) IN THE IMPUGNED ORDER HAS F OLLOWED THE DECISION OF THE TRIBUNAL IN DELETING THE DISALLOWAN CE MADE BY THE ASSESSING OFFICER. IN FACT, IT WOULD ALSO APPEAR F ROM THE ASSESSMENT ORDER THAT THE AO ALSO ACCEPTS THE FACT THAT THE ISSUE IS COVERED IN ASSESSEES FAVOUR BY THE ORDER OF THE COORDINATE BENCH BUT AS DECIDED NOT TO FOLLOW THE SAME ON THE GROUND THAT THE DEPARTMENT HAS CARRIED THE APPEAL BEFORE THE HO NBLE HIGH COURT. HENCE, WE SEE NO REASONS TO TAKE ANY OTHER VIEW OF THE MATTER THAN THE VIEW TAKEN BY THE CIT(A) AND, ACCOR DINGLY, UPHOLD THE IMPUGNED ORDER. 6. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE C ASE AND ALSO RESPECTFULLY FOLLOWING THE COORDINATE BENCH DECISIO N, IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2009-10, WE ARE OF THE VIEW THAT THE COMMISSION PAID TO SUB BROKERS WHO ARE NOT REGISTER ED WITH SEBI IS ALLOWABLE AS BUSINESS EXPENDITURE. THEREFORE, WE DI RECT THE A.O. TO DELETE THE ADDITIONS. ITA NO.135/VIZAG/2014 M/S. STEEL CITY SECURITIES LTD., VSKP 6 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 10 TH JUN16. SD/- SD/- ( . ) ( . ) (V. DURGA RAO) (G. MANJUNATHA) /JUDICIAL MEMBER /ACCOUNTANT MEMBER # /VISAKHAPATNAM: ' /DATED : 10.06.2016 VG/SPS )# *# /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT THE ACIT, CIRCLE-4(1), VISAKHAPA TNAM 2. / THE RESPONDENT M/S. STEEL CITY SECURITIES LTD. , D.NO.49-52/5/4, SRIKANYA TOWERS, SANTHIPURAM, VISAKHAPATNAM 3. + / THE CIT-2, VISAKHAPATNAM 4. + ( ) / THE CIT (A), VISAKHAPATNAM 5. # . , . , # / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // 12 . (SR.PRIVATE SECRETARY) . , # / ITAT, VISAKHAPATNAM