Saaketa Consultants Limited, Hyderabad, Hyderabad V. DCIT, Circle-3(1), Hyderabad, Hyderabad

ITA 306/HYD/2017

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2386 (ITAT-HYDERABAD)
• Duration Of Justice: 3 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-06-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 14-06-2017
• Assessment Year: 2005-2006
• Appeal Filed On: 22-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P V SUBBA RAJU
• Assessee Lawyers: B SHANTHI KUMAR
• Keywords: Question of law
• Section: 43B; 148

Judgement Text

ITA NO 306 OF 2017 SAAKETA CONSULTANTS P LTD HYDER ABAD PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S.RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO.306/HYD/2017 (ASSESSMENT YEAR: 2005-06) M/S. SAAKETA CONSULTANTS PRIVATE LIMITED HYDERABAD PAN: AADCS 2115 E VS DY. COMMISSIONER OF INCOME TAX, CIRCLE 3 (1) HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI B. SHANTHI KUMAR FOR REVENUE : SHRI P.V. SUBBA RAJU, DR O R D E R PER SMT. P. MADHAVI DEVI, J.M. THIS IS ASSESSEES APPEAL FOR THE A.Y 2005-06. IN T HIS APPEAL, THE ASSESSEE IS AGGRIEVED BY THE ORDER OF T HE CIT (A)-10 HYDERABAD DATED 31.08.2016 CONFIRMING THE DISALLOWA NCE MADE BY THE AO OF SEBI TURNOVER FEE PAID BY THE ASSESSEE DURI NG THE RELEVANT A.Y ON THE GROUND THAT IT PERTAINS TO THE EARLIER YEAR. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COMPANY, ENGAGED IN THE BUSINESS OF STOCK BROKING. IT FILED ITS RETURN OF INCOME FOR THE A.Y 2005-06 ON 1.11.2005 DECLARING A TOTAL INCOME OF RS.42,43,490. THE RETURN OF INCOME WAS PROCESSED U/ S 143(1) OF THE ACT ON 28.04.2006. THEREAFTER, THE AO PERUSED THE P &L A/C FILED BY THE ASSESSEE AND FROM SCHEDULE-10 THERETO OBSERVED THAT THE OPERATING, ADMINISTRATIVE AND OTHER EXPENSES SHOW THAT THE AS SESSEE HAS DEBITED A SUM OF RS.15,73,618 TOWARDS SEBI TURNOVER FEE PER TAINING TO THE DATE OF HEARING : 14 .0 6 . 2017 DATE OF PRONOUNCEMENT : 21 . 0 6 .2017 ITA NO 306 OF 2017 SAAKETA CONSULTANTS P LTD HYDER ABAD PAGE 2 OF 4 EARLIER YEARS. THE AO OBSERVED THAT THE ASSESSEE MA INTAINS ITS BOOKS OF ACCOUNTS ON MERCANTILE BASIS AND THAT THE COLUMN 21 OF FORM 3CD DOES NOT SPECIFY ANY AMOUNT AS PAYABLE U/S 43B OF THE AC T THAT COULD BE ALLOWED IN THE P&L A/C OF THE CURRENT YEAR. FORMING AN OPINION THAT THE INCOME HAS ESCAPED ASSESSMENT, A NOTICE U/S 148 WA S ISSUED TO THE ASSESSEE FOR THE A.Y 2005-06 ON 12.09.2008. IN RESP ONSE TO THE NOTICE, THE ASSESSEE APPEARED AND FURNISHED THE INFORMATION CALLED FOR. OBSERVING THAT THE ASSESSEE COULD NOT SUBSTANTIATE THE AMOUNT OF RS.15,73,618 UNDER THE HEAD SEBI TURNOVER FEE AS ALLOWABLE DURING THE RELEVANT YEAR, HE ADDED THE SAME TO THE RETURNE D INCOME AND BROUGHT IT TO TAX. AGGRIEVED, THE ASSESSEE PREFERRE D AN APPEAL BEFORE THE CIT (A) WHO CONFIRMED THE ORDER OF THE AO AND THE A SSESSEE IS IN SECOND APPEAL BEFORE US. 3. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE SEBI TURNOVER FEE IS ALSO IN THE NATURE OF THE STAT UTORY FEE AND HAS TO BE ALLOWED U/S 43B OF THE ACT IN THE YEAR IN WHICH THE FEE IS PAID. IN SUPPORT OF THIS CONTENTION, HE PLACED RELIANCE UPON THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. BLB LTD IN ITA NO.1878/2010 DATED 3.12.2010 WHEREIN IT HAS BEEN HE LD THAT THE SEBI TURNOVER FEE IS A FEE ALLOWABLE U/S 43B OF THE ACT . 4. THE LEARNED DR, ON THE OTHER HAND, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 5. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD, WE FIND THAT THE ISSUE HAS BEEN CONSIDERED AND DEALT WITH AT LENGTH BY THE HON'BLE DELHI HIGH COURT IN THE ABOVE CASE (CITED SUPRA) AND HAS BEEN HELD AS UNDER: 21. AFTER HEARING BOTH THE PARTIES, WE ARE OF THE V IEW THAT THE ASSESSEE ON QUERY REPLIED TO THE ASSESSING OFFI CER THAT ITA NO 306 OF 2017 SAAKETA CONSULTANTS P LTD HYDER ABAD PAGE 3 OF 4 THE SAID PAYMENT IN QUESTION WAS MADE AS ONE TIME SETTLEMENT FEES TO SEBI UNDER SECURITIES & EXCHANGE BOARD OF INDIA (INTERNAL LIABILITY REGULARIZATION S CHEME, 2004). AS PER THE SCHEME, ALL THE BROKERS OF BSE AN D NSE WERE REQUIRED TO PAY TURNOVER FEES AT A PRESCRIBED RATE FOR AN INITIAL PERIOD OF FIVE YEARS. FOR NON-PAYMENTS, SEBI HAS CHARGED INTEREST ON THE ABOVE PAYMENT. AGAINST THE SAID CHARGES THE BROKERS APPROACHED THE BOARD THAT THE FEE WAS ARBITRARY AND EXCESSIVE. IN THIS PROCESS OF CONFRONTATION BROKERS WENT TO THE COURT TO GET RELI EF AND MATTER WENT TO APEX COURT WHO VIDE ITS JUDGMENT DATED 01.02.2001 IN THE CASE OF BSE BROKERS FORUM V S. SEBI (SUPRA) HAS UPHELD THE REGULATIONS OF SEBI, HO LDING THE FEES AS REASONABLE AND VALID. AS A RESULT THERE OF, SEBI CAME OUT WITH A SCHEME FOR ONE TIME SETTLEMENT BY T HE BROKERS WHICH THEY WOULD BE ABLE TO AVAIL ONLY IF T HEY PAY THE REGISTRATION FEE ON THE ANNUAL TURNOVER FEES AL ONG WITH 20% OF THE TOTAL INTEREST BEFORE A SPECIFIED DATE I .E. 15.11.2004. THE ASSESSEE, IN THIS CASE, ALSO OPTED FOR ONE TIME SETTLEMENT, OWNED THE CONTENTION THAT SINCE TH E LIABILITY WAS QUANTIFIED DURING THE YEAR AND THEREF ORE THE EXPENSE WAS ALLOWABLE DURING THE YEAR UNDER CONSIDERATION. FURTHER, SINCE THE AMOUNT WAS PAID D URING THE YEAR, THE SAME WAS ALLOWED EVEN AS PER THE PROV ISIONS OF SECTION 43B OF THE ACT. THE AO ALSO DID NOT APPRECIATE THAT THE ASSESSEE WAS BOUND TO PAY THE ANNUAL REGUL ATORY FEES BASED ON TURNOVER TO SEBI AS PER ITS REGULATIO NS. 22. THE AFORESAID SUM IN QUESTION WAS PAID ON THE B ASIS OF THE NOTIFIED SCHEME DULY GAZETTED IN PART-II SCHEDU LE III PUBLISHED BY SECURITIES & EXCHANGE BOARD OF INDIA D ATED 15.07.2004 AND WAS DESIGNATED AS SEBI (INTEREST LIABILITY REGULATION) SCHEME, 2004. IN FACT, THE AS SESSING OFFICER HAS ALLOWED ` 10,14,847/- WHICH REPRESENTED THE PAYMENT MADE OUT OF CURRENT YEARS LIABILITY. HAVING OBSERVED THAT THE ASSESSING OFFICER HAS HOWEVER FRA MED AN ASSESSMENT ON 19.12.2007, WHERE HE HAS ALLOWED A S STATED ABOVE, THE CLAIM OF EXPENDITURE INCURRED BY WAY OF FEE AS AN ALLOWABLE DEDUCTION. 23. ACCORDING TO THE PERCEPTION OF THE INCOME TAX DEPARTMENT AS CONTAINED IN CIRCULAR NO.528 DATED 16.12.1988, THE DISALLOWANCE WAS TO COVER ANY AMOUN T 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, TH E AMENDMENT WAS MADE AND IT WAS CLARIFIED THAT SUCH A N AMOUNT WOULD ALSO BE ALLOWABLE ONLY ON ACTUAL PAYME NT ITA NO 306 OF 2017 SAAKETA CONSULTANTS P LTD HYDER ABAD PAGE 4 OF 4 IRRESPECTIVE OF THE PREVIOUS YEAR IN WHICH LIABILIT Y TO PAY SUCH SUM WAS INCURRED. IN VIEW THEREOF, THE AMENDME NT WAS MADE AND IT WAS CLARIFIED THAT SUCH AN AMOUNT W OULD ALSO BE ALLOWABLE ONLY ON ACTUAL PAYMENT IRRESPECTI VE OF THE PREVIOUS YEAR IN WHICH LIABILITY TO PAY SUCH SU M WAS INCURRED. 24. KEEPING IN VIEW THE ABOVE DISCUSSION, WE FIND T HAT NO QUESTION OF LAW HAS ARISEN IN THE INSTANT APPEAL. W E ARE NOT INCLINED TO INTERFERE WITH THE ORDER/JUDGMENT P ASSED BY THE ITAT. THE INSTANT APPEAL FILED BY THE REVENU E ACCORDINGLY DISMISSED WITH NO ORDER AS TO COSTS. 6. AS THE FACTS AND CIRCUMSTANCES IN THE CASE BEFOR E US ARE SIMILAR, RESPECTFULLY FOLLOWING THE ABOVE DECISION, EXACTLY ON THE SAME POINT, WE ALLOW THE ASSESSEES APPEAL AND DIRECT TH E AO TO ALLOW THE DEDUCTION OF SEBI TURNOVER FEE IN THE YEAR IN WHI CH IT IS PAID. 7. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST JUNE, 2017. SD/- SD/- (S.RIFAUR RAHMAN) ACCOUNTANT MEMBER (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED 21 ST JUNE, 2017. VINODAN/SPS COPY TO: 1 SHRI B. SHANTHI KUMAR, ADVOCATE, 111 TARAMANDAL COM PLEX, 5 - 9 - 13 SAIFABAD HYDERABAD 500004 2 DY. COMMISSIONER OF INCOME TAX, CIRCLE 3(1) SIGNATU RE TOWERS, KONDAPUR, HYDERABAD 3 CIT (A) - 10 HYDERABAD 4 PR. CIT 3 HYDERABAD 5 THE DR, ITAT HYDERABAD 6 GUARD FILE BY ORDER