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

ITA 437/VIZ/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 5306 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-12-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 04-12-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 04-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, VISHAKHAPATNAM BEFORE S/SHRI B. RAMAKOTAIAH (AM) & SAKTIJIT DEY (JM) I.T.A. NO.437/VIZ/2012 ASSESSMENT YEAR : 2009 - 2010 ACIT, CIRCLE - 4(1), VISAKHAPATNAM VS. STEEL CITY SECURITIES LTD.,D.NO.49 - 52/5/4, SRI KANYA TOWERS, SHANTI PURAM, VISAKHAPATNAM PAN/GIR NO. : AAECS 0970 L ( APPELLANT ) .. ( RESPONDENT ) C.O.NO.11/VIZ/2013 (ARISING OUT OF I.T.A. NO.437/VIZ/2012 ) ASSESSMENT YEAR : 2009 - 2010 STEEL CITY SECURITIES LTD.,D.NO.49 - 52/5/4, SRI KANYA TOWERS, SHANTI PURAM, VISAKHAPATNAM VS. ACIT, CIRCLE - 4(1), VISAKHAPATNAM PAN/GIR NO. : AAECS 0970 L CROSS OBJECTOR .. (APPELLANT) APPELLANT BY : SHRI MANOJ KUMAR CROSS OBJECTOR BY : SHRI G.V.N.HARI DATE OF HEARING : 0 4/12/2013 DATE OF PRONOUNCEMENT : 0 6 /12/2013 O R D E R PER SAKTIJIT DEY, JM THE DEPARTMENT HAS FILED THIS APPEAL FOR ASSESSMENT YEAR 2009 - 2010 AGAINST ORDER DATED 25.10.2012 OF LD CIT(A) - VISAKHAPATNAM . 2 2. THE ONLY GROUND RAISED BY THE DEPARTMENT IS AS TO WHETHER, ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LD CIT(A) IS JUSTIFIED IN ALLOWING THE ASSESSEES CLAIM OF EXPENDITURE OF RS.1,51,46,746/ - INCURRED BY WAY OF COMMISSION OF SUB - BRO KERS , WHO ARE NOT REGISTERED WITH S ECURITIES AND EXCHANGE BOARD OF INDIA. 3 . BRIEFLY STATED THE MATERIAL FACTS ARE LIKE THIS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD CLAIMED EXPENDITURE TOWARDS BUSINESS DEVELOPMENT WHICH INCLUDES PAYMENTS MADE TO SUB - BROKERS. HE ALSO NOTICED THAT SOME OF THE SUB - BROKERS WERE REGISTERED WITH SEBI AND OTHERS WERE NOT. RELYING ON THE SEBI REGULATIONS 1992 AND SEBI RULES, 1992, THAT NO SUB - BROKERS, WITHOUT A CERTIF ICATE ISSUED BY SEBI SHALL CARRY OUT SUB - BROKERS BUSINESS, THE ASSESSING OFFICER DISALLOWED THE CLAIM OF EXPENDITURE MADE TO UNREGISTERED SUB - BROKERS. IN THE FIRST APPEAL, LD CIT(A) FOLLOWING T HE ORDER OF HIS PREDECESSOR FOR THE ASSESSMENT YEARS 2006 - 07 , WHICH HAS ALREADY BEEN UPHELD BY THE ITAT VIDE ORDER DATED 13.8.2010 AND ALSO SUCCEEDING ASSESSMENT YEARS IN THE CASE OF THE ASSESSEE, DIRECTED THE AO TO ALLOW THE PAYMENTS MADE TO UN - REGISTERED SUB - BROKERS. HENCE, THE REVENUE IS IN APPEAL BEFORE US. 4 . AT THE TIME OF HEARING, LD A.R. PLACED ON RECORD THE DECISION S 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 EXPENDITURE PAID TO UNREGISTERED SUB - BROKERS HAS BEEN ALLOWED TO THE ASSESSE E. LD A.R. SUBMITTED THAT FOR ALL THESE ASSESSMENT YEARS, THE REVENUES APPEALS HAVE BEEN REJECTED BY THE TR IBUNAL ON SIMILAR FACTS. LD D.R. COULD NOT CONTROVERT THIS FACT NOR WAS ABLE TO BRING TO OUR NOTICE ANY DECISION OF A HIGHER COURT. THEREFORE, HAVING CONSIDERED THE SUBMISSIONS OF THE PARTIES AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE DECISIONS PLACED BY LD A.R. BEFORE US , W E 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, WHEREIN THE TRIBUNAL HAS, INTER ALIA, OBSERVED AS FOLLOWS: 3 WE HA VE 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 P AYMENTS WERE ADMITTEDLY MADE TO THE SUB - BROKERS WHO HAS RENDERED 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 - BROKER WAS AUTHROISED TO CARR Y 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 RULES, HE CAN BE PENALIZED UNDER THE SEBI RULES BUT FOR THE REASONS THAT SUB - BROKER HAS ACTED OR CARRIED O N HIS BUSINESS IN CONTRAVENTION TO THE SEBI RULES, PAYMENTS MADE TO IT CANNOT BE DISALLOWED, AS IT WAS INCURRED FOR THE BUSINESS PURPOSE. WE ALSO FIND THAT THIS VIEW OF THE TRIBUNAL HAS BEEN FOLLOWED IN SUCCEEDING ASSESSMENT YEARS IN THE CASE OF THE ASSES SEE. WE OBSERVE THAT THE CIT(A) IN THE IMPUGNED ORDER HAS FOLLOWED THE DECISION OF THE TRIBUNAL IN DELETING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. IN FACT, IT WOULD ALSO APPEAR FROM 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 HONBLE HIGH COURT. HENCE, W E SEE NO REASONS TO TAKE ANY OTHER VIEW OF TH E MATTER THAN THE VIEW TAKEN BY THE CIT(A) AND, ACCORDINGLY, UPHOLD THE IMPUGNED ORDER. 5 . THE ASSESSEE HAS FILED CROSS OBJECTION IN SUPPORT OF THE ORDER OF THE CIT(A). SINCE, WE HAVE UPHELD THE ACTION OF THE CIT(A), THE CROSS OBJECTION FILED BY THE ASSESSEE IS RENDERED INFRUCTUOUS. 4 6 . IN THE RESULT, APPEAL OF THE REVENUE AND CROSS OBJECTION OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 6/12/2013 . . SD/ - S D/ - ( B.RAMAKOTAIAH ) ( SA KTIJIT DEY ) ACCOUNTANT MEMBER JUDICIAL MEMBER VISHAKHAPATNAM DATED 6 / 12/2013 PARIDA , SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT : ACIT, CIRCLE - 4(1),VISAKHAPATNAM 2. THE CROSS OBJECTOR: STEEL CITY SECURITIES LTD.,D.NO.49 - 52/5/4, SRI KANYA TOWERS, SHANTI PURAM, VISAKHAPATNAM 3. THE CIT(A) - VISAKHAPATNAM 4. CIT CONCERNED 5. DR, ITAT, VISHAKHAPATNAM 6. GUARD FILE. BY ORDER SR.PS, ITAT, VISHAKHAPATNAM //TRUE COPY//