H.Nyalchand Financial Services Ltd., Ahmedabad V. THE Dy.CIT.,Cent.Circle-1(1), Ahmedabad

ITA 2848/AHD/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6650 (ITAT-AHMEDABAD)
• Duration Of Justice: 7 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 29-04-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 11-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R K DHANESTA
• Assessee Lawyers: VIJAY RANJAN
• Keywords: Capital expenditure
• Section: 37(1)

Judgement Text

ITA.2848/AHD/201 0 ASSESSMENT YEAR 2005-06 1 IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMED ABAD. ( BEFORE SHRI T.K. SHARMA AND SHRI A.K. GARODI A) I.T.A. NO. 2848/AHD/2010 (ASSESSMENT YEAR: 200 5-2006 ) H. NYALCHAND FINANCIAL SERVICES LTD., 304 ANAND CHAMBERS, NR. OLD HIGH COURT RLY CROSSING, AHMEDABAD. (APPELLANT) VS. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1(1) ROOM NO.339 3 RD FLOOR, AAYAKAR BHAVAN, AHMEDABAD. (RESPONDENT) PAN: AABCH 1528 G APPELLANT BY : SHRI VIJAY RANJAN. RESPONDENT BY : SHRI R.K.DHANESTA, SR. D. R. ( )/ ORDER PER: SHRI A.K. GARODIA , A.M. THIS IS AN ASSESSEES APPEAL DIRECTED AG AINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-I, AHMEDABAD D ATED 6-8-2010 FOR THE ASSESSMENT YEAR 2005-06. 2. ONLY ONE EFFECTIVE GROUND HAS BEEN RAISED BY THE ASSESSEE WHICH IS AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTA NCES OF THE CASE, THE CIT (A) ERRED IN UPHOLDING THE DISALLOWANCE OF RS. 2,60 ,711 PAID BY THE ASSESSEE AS A STOCK BROKER ETC. TO THE NATIONAL STOCK EXCHANGE (NSE) AS DEMANDED BY THE LATTER. ITA.2848/AHD/201 0 ASSESSMENT YEAR 2005-06 2 3. BRIEF FACTS ARE THAT IT IS NOTED BY THE ASSESSING OFFICER IN PARAGRAPH 5 OF THE ASSESSMENT ORDER THAT AN AMOUNT OF RS. 2,60,711/- HAS BEEN DEBITED TO THE PROFIT AND LOSS ACCOUNT ON ACCO UNT OF PENALTY TO NATIONAL STOCK EXCHANGE. THE ASSESSING OFFICER ASKED THE AS SESSEE TO EXPLAIN THE NATURE OF PENALTY IMPOSED AND TO FILE COPY OF PENAL TY ORDER ETC. IN REPLY, THE ASSESSEE EXPLAINED BEFORE THE ASSESSING OFFICER THA T THE LEVY IS FOR THE LATE SUBMISSION OF DATA TO THE REGULATORY AUTHORITY CALC ULATED ON PER DAY BASIS AND IT IS MERELY COMPENSATORY IN NATURE. IT IS ALSO SUBMITTED THAT IT IS NEITHER AN OFFENCE NOR A PAYMENT WHICH IS PROHIBITED BY LAW . THE ASSESSING OFFICER WAS NOT SATISFIED AND HE MADE DISALLOWANCE OF THIS AMOUNT ON THIS BASIS THAT SIMILAR EXPENDITURE WAS CLAIMED BY THE ASSESSEE IN FINANCIAL YEAR 2003-04 ALSO AND THE SAME WAS DISALLOWED BY THE ASSESSING O FFICER IN THAT YEAR ALSO. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LEARNED C.I.T. (A) BUT WITHOUT SUCCESS AND NOW THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 4. IT IS SUBMITTED BY THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE THAT LETTER DATED 1-2-2005 FROM NATIONAL STOCK EXCH ANGE OF INDIA LTD., (NSE) IS AVAILABLE ON PAGE-1 OF THE PAPER BOOK AND FROM THE SAME, IT WILL BE NOTED THAT DELAY IN UPLOADING THE DETAILS IN RESPEC T OF CTCL TERMINAL WOULD ATTRACT LATE SUBMISSION CHARGES @ RS. 100/- PER DAY PER CTCL TERMINAL. IT IS SUBMITTED BY HIM THAT THE PENALTY IS PAID ON THIS A CCOUNT AND HENCE, IT DOES NOT ATTRACT THE PROVISIONS OF EXPLANATION TO SECTIO N 37(1) AND HENCE, THE SAME SHOULD BE ALLOWED. REGARDING THE PRECEDING YEAR I. E. ASSESSMENT YEAR 2004-05, IT WAS SUBMITTED THAT IN THAT YEAR, THE DI SALLOWANCE WAS DELETED BY THE LD. CIT ( A) AND APPEAL OF THE REVENUE IN THAT YEAR AGAINST THE ORDER OF THE LD. C.I.T.(A) HAD BEEN DISMISSED BY THE TRIBUN AL ON THE BASIS OF LOW TAX ITA.2848/AHD/201 0 ASSESSMENT YEAR 2005-06 3 EFFECT IN ITA NO.3064/AHD/2007 DATED 14-9-2007. HE SUBMITTED THAT THE COPY OF THIS JUDGMENT IS AVAILABLE AT PAGE-7 OF THE PAPER BOOK. 5. AS AGAINST THIS, LD. D.R. OF THE REVENU E STRONGLY SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. IT WAS SUBMITTED T HAT AS PER THE JUDGMENT OF THE HONBLE APEX COURT RENDERED IN THE CASE OF MALW A VANASPATI & CHEMICAL CO. VS. C.I.T. REPORTED IN 225 ITR 383 (SC ), IT WAS HELD THAT PAYMENT U/S.17(3) OF M.P. GENERAL ST ACT, 1958 BEIN G IN THE NATURE OF PENALTY IS NOT AN ALLOWABLE DEDUCTION. IT IS SUBMIT TED THAT THE PRESENT ASSESSEE ALSO HAS MADE THE PAYMENT IN THE NATURE OF PENALTY AND HENCE, THE SAME IS NOT ALLOWABLE. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIO NS, PERUSED THE MATERIAL AND GONE THROUGH THE IMPUGNED ORDERS OF THE AUTHORITIES BELOW AND THE JUDGMENT CITED BY LD. D. R. OF THE REVENUE. FIRST OF ALL WE WOULD LIKE TO REPRODUCE THE PROVISIONS OF EXPLANATION TO SECTION 37(1) WHICH IS AS UNDER:- 37 (1) ANY EXPENDITURE (NOT BEING EXPEN DITURE OF THE NATURE DESCRIBED IN SECTIONS 30 TO 36 AND NOT BEING IN THE NATURE OF CAPITAL EXPENDITURE EXCLUSIVELY FOR THE PURPOSES OF THE BUS INESS OR PROFESSION SHALL BE ALLOWED IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION. [EXPLANATION FOR THE REMOVAL OF DOUBTS, IT IS HE REBY DECLARED THAT ANY EXPENDITURE INCURRED BY AN ASSESSEE FOR ANY PURPOSE WHICH IS AN OFFENCE OR WHICH PROHIBITED BY LAW SHALL NOT BE DEEMED TO H AVE BEEN INCURRED FOR THE PURPOSE OF BUSINESS OR PROFESSION AND NO DE RDUCTION OR ALLOWANCE SHALL BE MADE IN RESPECT OF SUCH EXPENDIT URE.] 7. FROM THE ABOVE PROVISIONS OF EXPLANATION TO SECTION 37(1),IT IS SEEN THAT WHERE THE EXPENDITURE IS INCURRED FOR ANY PURP OSE WHICH IS AN OFFENCE OR WHICH IS PROHIBITED BY LAW, THE SAME IS TO BE CONSI DERED AS NOT INCURRED FOR THE PURPOSE OF BUSINESS OR PROFESSION AND DEDUCTIO N IS NOT ALLOWABLE IN RESPECT OF SUCH EXPENDITURE. NOW WE HAVE TO SEE AS TO WHETHER THE PURPOSE ITA.2848/AHD/201 0 ASSESSMENT YEAR 2005-06 4 FOR WHICH PENALTY HAS BEEN INCURRED IN THE PRESENT CASE IS AN OFFENCE OR WHETHER THE SAME IS PROHIBITED BY LAW. WE FIND THAT IT HAS BEEN EXPLAINED BEFORE US THAT THE IMPUGNED PAYMENT HAS BEEN MADE B Y THE ASSESSEE TO NSE ON ACCOUNT OF LATE SUBMISSION OF DETAILS IN RESPECT OF CTCL TERMINAL. HENCE, IN OUR CONSIDERED OPINION, THE PURPOSE OF THIS PAYM ENT IS NOT AN OFFENCE AND IT IS NOT PROHIBITED BY ANY LAW. THE LD. D. R. OF THE REVENUE ALSO COULD NOT POINT OUT AS TO HOW THE PURPOSE OF THIS PAYMENT IS AN OFFENCE AND HOW SUCH PAYMENT IS PROHIBITED BY LAW. THERE IS NO FINDING OF THE ASSESSING OFFICER IN THIS REGARD THAT THE PURPOSE OF THIS PAYMENT IS AN OFFENCE OR THAT SUCH PAYMENT IS PROHIBITED BY LAW. THE LD. C.I.T. (A) HA S ALSO NOT GIVEN ANY FINDING IN THIS REGARD AND HE HAS SIMPLY CONFIRMED THE ASSESSMENT ORDER ON THIS ISSUE ON THE BASIS OF ANOTHER ORDER OF LD. CIT (A) IN THE CASE OF TORRAS INVESTMENTS. NO TRIBUNAL ORDER OR ORDER OF ANY HIG H COURT HAS BEEN BROUGHT TO OUR NOTICE BY EITHER SIDE WITH REGARD TO SIMILAR EXPENDITURE. THE JUDGMENT OF HONBLE APEX COURT CITED BY LD. D. R. OF THE REVENUE HAVING BEEN RENDERED IN THE CASE OF MALWA VANASPATI & CHEM ICALS COMPANY (SUPRA) IS NOT APPLICABLE IN THIS CASE BECAUSE THE FACTS ARE DIFFERENT. IN THAT CASE, THE VIOLATION WAS UNDER M.P. GENERAL S.T. ACT AND THE ASSESSE WITHOUT SUFFICIENT CAUSE IN THAT CASE FAILED TO COMPLY WITH THE REQUIREMENTS OF A NOTICE OR TO FURNISH THE RETURN. IN THAT CASE, IT W AS ALSO NOTED THAT THERE CAN BE NO DOUBT THAT THE PROVISION IS INTENDED TO HAVE PEN AL CONSEQUENCE UPON AN ASSESSEE WHO FAILS TO COMPLY WITH THE PROVISIONS OF STATUTE WITHOUT SUFFICIENT CAUSE. IN THE PRESENT CASE, IT WAS NOT SHOWN BY THE A.O. OR BY THE LD. D.R. OF THE REVENUE THAT THERE IS ANY PENAL CONSEQUENCE ON ACCOUNT OF LATE SUBMISSION OF DATA BY THE ASSESSEE AND HENCE, THIS JUDGEMENT OF HONBLE APEX COURT IS NOT APPLICABLE TO THE PRESENT CASE BE CAUSE THE FACTS ARE DIFFERENT. ITA.2848/AHD/201 0 ASSESSMENT YEAR 2005-06 5 8. AS PER THE ABOVE DISCUSSION, WE FIND THAT THE IMPUGNED PAYMENT DOES NOT ATTRACT THE PROVISIONS OF EXPLANATION TO SECTIO N 37(1) BECAUSE THE PURPOSE OF THE IMPUGNED PAYMENT IS NOT SHOWN TO BE AN OFFENCE AND NEITHER IT IS SHOWN THAT THIS PAYMENT IS PROHIBITED BY LAW AND HENCE, IN OUR CONSIDERED OPINION, THE IMPUGNED PAYMENT CANNOT BE DISALLOWED AS PER THE EXPLANATION TO SECTION 37(1). WE THEREFORE, DELETE THIS DISALLOWANCE. 9. AS A RESULT, APPEAL OF THE ASSESSEE IS A LLOWED. ORDER PRONOUNCED IN OPEN COURT ON 13 - 05- 2011 . SD/- SD/- (T.K. SHARMA) (A.K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER. AHMEDABAD. DATED: 13 -5 - 2011. S.A.PATKI. COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)-I, AHMEDABAD. 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD. ITA.2848/AHD/201 0 ASSESSMENT YEAR 2005-06 6 1.DATE OF DICTATION 2-5-2011 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 3/5/ 2011 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S 10 - 5 -2011. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 10 - 5 -2011 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 13 - 5 -2011 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 1 3 - 5 -2011. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..