Swastika Commodities Pvt. Limited, Indore V. Assistant Commissioner of Income Tax Circle-5(1), Indore, Indore

ITA 602/Ind/2017

• Counselvise Citation: [2018] 112 COUNSELVISE.COM (IT) 5314 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-10-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 08-09-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: YOGEE SH MISHRA
• Keywords: Business expenditure
• Section: 271(1)(c); 143(3); 142(1); 205; 143(2); 37

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ITA NO.602/IND/2017 ASSESSMENT YEAR: 2012-13 SWASTIKA COMMODITIES PVT. LIMITTED 48, JAORA COMPOUND, M.Y.H. ROAD, INDORE-452001 / VS. ACIT, CIRCLE-5(1), INDORE ( APPELLANT ) ( RE VENUE) P.A. AACCS3050K APPELLANT BY NONE RESPONDENT BY SHRI YOGEE SH MISHRA SR. DR DATE OF HEARING: 17.10.2018 DATE OF PRONOUNCEMENT: 23.10.2018 / O R D E R PER MANISH BORAD, A.M: THIS APPEAL OF ASSESSEE PERTAINING TO A.Y. 2012-13 IS DIRECTED AGAINST THE ORDER OF LD. COMMISSIONER OF INC OME TAX(APPEALS)-II, INDORE, (IN SHORT CIT(A)), DATED 0 1.05.2018 WHICH IS ARISING OUT OF THE ORDER U/S 143(3) OF THE INCOME SWASTIK COMMODITIES P. LTD. 2 TAX ACT 1961(HEREINAFTER CALLED AS THE ACT) FRAMED ON 24.03.2015 BY ACIT-5(1), INDORE. 2. NON APPEARS AT THE ASSESSEES BEHEST. CASE HEARD WITH THE ASSISTANCE OF LD. DEPARTMENTAL REPRESENTATIVE (DR). 3. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: AS REGARDS ADDITION ON ACCOUNT OF PENALTY IMPOSED BY NCDEX AND MCX OF RS.23,000/- THIS GROUND OF APPEAL IS WITH REGARD TO DISALLOWANC E OF PENALTY IMPOSED BY NCDEX AND MCX OF RS.23,000/-. AS PENALTY IMPOSED BY NCDEX AND MCX IS FOR THE VIOLATI ON ITS BYLAWS AND REGULATION CANNOT BE TERMED AS VIOLA TION OF STATUTORY LAWS, DISALLOWANCE OF SAME BY THE ASSESSI NG OFFICER WAS UNJUSTIFIED IN LAW SO SAME SHOULD BE DE LETED AND ALLOWED AS DEDUCTION U/S 37 OF THE INCOME TAX A CT, 1961. FURTHER, THE ASSESSEE HAS NOT FURNISHED ANY INACCUR ATE PARTICULARS OF THE TOTAL INCOME AND HAS NOT SUPPORE SSE3D ITS TAXABLE INCOME AND HENCE THE PENALTY PROCEEDING U/S 271(1)(C) OF THE I.T. ACT, 1961 MUST NOT BE INITIAT ED. 4. BRIEF FACTS OF THE CASE AS CULLED OUT FROM THE RECO RDS ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGED I N THE BUSINESS OF COMMODITIES, BROKING AND TRADING. TH E INCOME OF RS. 26,88,080/- DECLARED IN THE E-RETURN F ILING ON 29.09.2012. THE CASE WAS SELECTED FOR SCRUTINY THROUG H CASS. NOTICES U/S 143(2) AND 142(1) OF THE ACT SERV ED UPON THE ASSESSEE. ASSESSMENT WAS COMPLETED AFTER MAKING ADDITION AT RS.23,000/- ON ACCOUNT OF PENALTY SWASTIK COMMODITIES P. LTD. 3 IMPOSED BY NCDEX & MCX AND DISALLOWANCE OF VARIOUS EXPENSES AT RS.1,15,700/-. INCOME ASSESSED AT RS.28,26,780/-. 5. AGGRIEVED THE PREFERRED AN APPEAL BEFORE THE LD. CI T(A) AND PARTLY SUCCEEDED. 6. NOW THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL RAI SING SOLE GRIEVANCE AGAINST FINDING OF LD. CIT(A) CONFIRMIN G THE ADDITION FOR DISALLOWANCE OF PENALTY IMPOSED AT RS. 23,000/- BY NCDEX & MCX. 7. THE LD. DR SUPPORTED THE ORDER OF THE LOWER AUTHO RITIES. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD PLACED BEFORE US. THE ASSESS EE DURING THE COURSE OF BUSINESS OF COMMODITIES BROKIN G AND TRADING PAID PENALTY OF RS.23,000/- LEVIED BY THE NCDE X & MCX. BOTH THE LOWER AUTHORITIES WERE OF THE VIEW THAT ALLEGED EXPENDITURE BEING PENALTY IN NATURE IS NOT ALLO WABLE AS BUSINESS EXPENDITURE U/S 37 OF THE ACT. 9. WE FIND THAT HON'BLE APEX COURT IN THE CASE OF CI T VS. AHMEDEABAD COTTON MFG.CO. LTD. [1994] 205 ITR 163 (SC) HELD THAT WH AT NEEDS TO BE DONE BY AN ASSESSING AUTHORITY UNDER THE I.T. ACT , 1961, IN EXAMINING THE CLAIM OF AN ASSESSEE THAT THE PAYMENT MADE BY SUCH ASSESSEE WAS A DEDUCTIBLE EXPENDITURE UNDER SECTION 37 OF THE I.T. ACT SWASTIK COMMODITIES P. LTD. 4 ALTHOUGH CALLED PENALTY IS, TO SEE WHETHER THE LAW OR SCHEME UNDER WHICH THE AMOUNT WAS PAID REQUIRED SUCH PAYME NT TO BE MADE, AS PENALTY OR AS SOMETHING AKIN TO PENALTY , THAT IS IMPOSED BY WAY OF PUNISHMENT FOR BREACH OR INFRACTI ON OF THE LAW OR THE STATUTORY SCHEME. IF THE AMOUNT SO PAID IS FOUND TO BE NOT A PENALTY OR SOMETHING AKIN TO PENALTY DU E TO THE FACT THAT THE AMOUNT PAID BY THE ASSESSEE WAS IN EX ERCISE OF THE OPTION CONFERRED UPON HIM UNDER THE VERY LAW OR SCHEME CONCERNED, THE ASSESSING AUTHORITY HAS TO REGARD SU CH PAYMENT AS BUSINESS EXPENDITURE OF THE ASSESSEE, AL LOWABLE UNDER SECTION 37 OF THE I.T. ACT, AS AN INCIDENT OF BUSINESS LAID OUT AND EXPENDED WHOLLY AND EXCLUSIVELY FOR TH E PURPOSES OF THE BUSINESS. 10. WE ALSO FIND THAT THE HON'BLE BOMBAY HIGH COURT I N THE CASE OF M/S. THE STOCK AND BOND TRADING COMPANY, I N ITANO.4117 OF 2010) WHILE ADJUDICATING SIMILAR ISSUE HELD THAT, AS REGARDS THE SECOND QUESTION IS CONCERNED, THE FINDING OF FACT RECORDED BY THE CIT(A) AND UPHELD B Y THE ITAT IS THAT PAYMENT MADE BY THE ASSESSEE TO THE STOCK EXCHANGE FOR VIOLATION OF THEIR REGULATION ARE NOT AN ACCOUNT OF AN OFFENCE WHICH IS PROHIBITED BY LAW. HENCE, TH E INVOCATION OF EXPLANATION TO SECTION 37 OF THE INCO ME TAX ACT, 1961 IS NOT JUSTIFIED. SWASTIK COMMODITIES P. LTD. 5 11. IN THE LIGHT OF THE ABOVE JUDGMENTS AND EXAMINING THE FACTS OF THE INSTANT APPEAL, WE FIND THAT THE IMPUGNED PENALTY HAS BEEN PAID TO NCDEX & MCX WHICH ARE RECOGNIZED COMMODITY EXCHANGES AND VARIOUS TYPE OF CHARGES IN THE NAME OF PENALTY ARE LEVIED ON THE MEMBER S SO AS TO SMOOTHLY CONDUCT THE BUSINESS ON COMMODITY EXCHANGES AND ALSO TO MAKE SURE THAT THE ASSESSEE ADHERES TO THE RULES AND REGULATIONS FORMED FOR CARRYING ON T HE TRANSACTIONS ON THE EXCHANGE. RESPECTFULLY, FOLLOWING THE ABOVE JUDGMENTS, WE ARE OF THE CONSIDERED VIEW THAT TH E ALLEGED AMOUNT CANNOT BE CATEGORIZED AS A PENALTY LEVIED FOR COMMITTING ANY OFFENCE WHICH IS PROHIBITED BY LA W, AND THEREFORE, THE SAME SHOULD BE ALLOWED AS BUSINESS EXPENDITURE U/S 37 OF THE I.T. ACT. THUS, GROUND RAI SED BY THE ASSESSEE IS ALLOWED. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 23 .10. 2018. SD/- (KUL BHARAT) SD/- (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER INDORE; DATED : 23 / 10/2018 CTX? P.S/. . . SWASTIK COMMODITIES P. LTD. 6 COPY TO: ASSESSEE/AO/PR. CIT/ CIT (A)/ITAT (DR)/GUAR D FILE. BY ORDER ASSISTANT REGISTRAR