Religare Securities Ltd., New Delhi V. DCIT, Circle- 21(1), New Delhi

ITA 6330/DEL/2017

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 2793 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 4 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-02-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2013-2014
• Appeal Filed On: 12-10-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ATIGU AHMED
• Assessee Lawyers: ROHIT JAIN; TEJASVI JAIN
• Keywords: Earning of tax free income; Wholly owned subsidiary; Rule 8D
• Section: 14A; 37(1); 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F: NEW DELHI (THROUGH VIDEO CONFERENCING) BEFORE, SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO.6330/DEL/2017 (ASSESSMENT YEAR 2013-14) M/S RELIGARE SECURITIES LTD., PAN:AAACF 1952D (NOW MERGED WITH RELIGARE ENTERPRISES LIMITED) PAN: AAACV 5888N 2 ND FLOOR, TOWER-A, PRIUS GLOBAL, PLOT NO.11, A-3,4,5 SECTOR-125, NOIDAI-201 301 (U.P.) VS. DY. CIT, CIRCLE-21(1), NEW DELHI. (APPELLANT) (RESPONDENT) ITA NO.6434/DEL/2017 (ASSESSMENT YEAR 2013-14) DY. CIT, CIRCLE-21(1), NEW DELHI. VS. M/S RELIGARE SECURITIES LTD., PAN:AAACF 1952D (NOW MERGED WITH RELIGARE ENTERPRISES LIMITED) PAN: AAACV 5888N 2 ND FLOOR, TOWER-A, PRIUS GLOBAL, PLOT NO.11, A-3,4,5 SECTOR-125, NOIDAI-201 301 (U.P.) (APPELLANT) (RESPONDENT) 2 ITA NOS.6330 & 6434/DEL/2017 M/S RELIGARE SECU RITIES LTD. VS. DCIT APPELLANT BY SH. ROHIT JAIN, ADV. & MS. TEJASVI JAIN, ADV. RESPONDENT BY SH. ATIGU AHMED, SR. DR DATE OF HEARING 01.12.2020 DATE OF PRONOUNCEMENT 25.02.2021 ORDER PER SUDHANSHU SRIVASTAVA, JM: ITA NO.6330/DEL/2017 IS THE ASSESSEEES APPEAL PREFERRED AGAINST ORDER DATED 28.07.2017 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-38, NEW DELHI {CIT (A)} FOR ASSESSMENT YEAR 2013-14 WHEREAS ITA NO. 6434/DEL/201 7 IS THE CROSS APPEAL BY THE DEPARTMENT FOR THE SAME YEAR. 2.0 THE BRIEF FACTS OF THE CASE ARE THAT TH E ASSESSEE COMPANY IS A MEMBER OF THE BOMBAY STOCK EXCHANGE AND NATION AL STOCK EXCHANGE AND IS ENGAGED IN THE BUSINESS OF THE PROV IDING BROKING AND DEPOSITORY SERVICES TO RETAIL CLIENTS. THE RETU RN OF INCOME WAS FILED DECLARING AN INCOME OF RS. 2,72,15,81,980/-. SUBSEQUENTLY, THE RETURN OF INCOME WAS REVISED DECLARING INCOME OF RS. 2,70,87,75,810/-. THE CASE WAS SELECTED FOR SCRUTIN Y AND, THEREAFTER, THE ASSESSMENT WAS COMPLETED AT AN INCOM E OF RS. 3 ITA NOS.6330 & 6434/DEL/2017 M/S RELIGARE SECU RITIES LTD. VS. DCIT 2,73,16,74,200/- AFTER MAKING ADDITIONAL DISALLOWANC E OF RS. 1,93,79,583/- U/S 14A OF THE INCOME TAX ACT, 1961 ( HEREINAFTER CALLED THE ACT) AND ANOTHER DISALLOWANCE OF RS.35,1 8,803/- BEING AMOUNT PAID TOWARDS FINES AND PENALTIES. 2.1 AGGRIEVED, THE ASSESSEE APPROACHED THE LD. FI RST APPELLATE AUTHORITY WHO PARTLY ALLOWED THE ASSESSEE S APPEAL BY DELETING RS. 1,93,79,589/- BEING THE ADDITIONAL DIS ALLOWANCE MADE BY THE ASSESSING OFFICER (AO) U/S 14A OF THE ACT. T HE LD. CIT (A), HOWEVER, UPHELD THE DISALLOWANCE PERTAINING TO AMOU NT PAID TOWARDS FINES AND PENALTIES. 2.2 NOW, AGGRIEVED BOTH THE ASSESSEE AS WELL AS TH E DEPARTMENT IS IN APPEAL BEFORE THE TRIBUNAL AND HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: ITA NO.6330/DEL/2017 1. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) [ CIT (A)] ERRED ON FACTS AND IN LAW IN CONFIRMING THE DI SALLOWANCE OF RS.35,18,803/- MADE BY THE ASSESSING OFFICER, BE ING AMOUNT PAID TO THE NATIONAL STOCK EXCHANGE OF INDIA LIMITED (NSE) HOLDING THE SAME TO BE CAPITAL IN NATURE. 4 ITA NOS.6330 & 6434/DEL/2017 M/S RELIGARE SECU RITIES LTD. VS. DCIT 1.1 THAT THE CIT (A) ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT THE AFORESAID CHARGES PAID TO NSE FOR DELAY IN MAKING CERTAIN TIMELY COMPLIANCES WERE NOT IN TH E NATURE OF FINE AND PENALTY FOR VIOLATION OF LAW. 1.2 THAT THE CIT (A) ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT THE AFORESAID CHARGES LEVIED BY N SE IN ACCORDANCE WITH ITS INTERNAL BYE LAWS WERE MERELY COMPENSATORY AND NOT PENAL IN NATURE. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR VARY FROM THE ABOVE GROUNDS OF APPEAL BEFORE OR AT THE TIME O F HEARING. ITA NO.6334/DEL/2017 1. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) HAS ERRED IN DELETING THE ADDITION OF RS.1,93,79,583/- MADE BY THE AO U/S 14A OF THE I.T. ACT, 1961, AS PER THE DISALLOWANCE COMPUTED IN TAX AUDIT REPORT. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) HAS ERRED IN DELETING THE DISALLOWA NCE U/S 14A OF RS.1,93,79,583/- IGNORING CBDT CIRCULAR NO.5 /2014 WHEREIN IT ISSUED A CLARIFICATION THAT RULE 8D READ WITH SECTION 14A OF THE ACT PROVIDES FOR DISALLOWANCE OF 5 ITA NOS.6330 & 6434/DEL/2017 M/S RELIGARE SECU RITIES LTD. VS. DCIT EXPENDITURE EVEN WHERE TAXPAYER IN A PARTICULAR YEA R HAS NOT EARNED ANY EXEMPT INCOME. 3. THE APPELLANT CRAVES TO BE ALLOWED TO ADD A NY FRESH GROUNDS OF APPEAL AND/OR DELETE OR MEND ANY OF THE GROUNDS OF APPEAL. 3.0 AT THE OUTSET, THE LD. AUTHORIZED REPRESENTATI VE (AR) SUBMITTED THAT THE ASSESSEE HAS FILED AN ADDITIONAL GROUND OF APPEAL AND REQUESTS ADMISSION OF THAT ADDITIONAL GR OUND IN TERMS OF RULE-11 OF THE INCOME TAX (APPELLATE TRIBUNAL) RULE S, 1963. HE DREW OUR ATTENTION TO THE ADDITIONAL GROUNDS WHICH RE AD AS UNDER: 2.0 THAT THE CIT (A) ERRED ON FACTS AND IN LAW I N UPHOLDING THE DISALLOWANCE UNDER SECTION 14A OF THE INCOME TA X ACT, 1961 (THE ACT) TO THE EXTENT OF RS.1,83,55,525/- . 2.1 THAT ON THE FACTS AND CIRCUMSTANCES OF THE C ASE, NO PART OF INTEREST EXPENDITURE COULD BE CONSIDERED FO R THE PURPOSE OF DISALLOWANCE UNDER SECTION 14A OF THE AC T, PARTICULARLY CONSIDERING THAT: (A) NO PART OF INTER EST ON BORROWED FUNDS WAS INCURRED IN RELATION TO EXEMPT I NCOME; AND (B) INTEREST INCOME, IN ANY CASE, FAR EXCEEDED INTEREST EXPENDITURE. 2.2 THAT ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, THE ASSESSING OFFICER/CIT(A) ERRED IN NOT APPR ECIATING 6 ITA NOS.6330 & 6434/DEL/2017 M/S RELIGARE SECU RITIES LTD. VS. DCIT THAT THE ENTIRE DIVIDEND OF RS.4,14,800/- WAS RECEI VED AS INCIDENTAL INCOME FROM THE BUSINESS OF TRADING IN S HARES AND THEREFORE, NO DISALLOWANCE UNDER SECTION I4A OF THE ACT WAS CALLED FOR. 2.3 WITHOUT PREJUDICE, ON FACTS AND CIRCUMSTANCE S OF THE CASE AND IN LAW, DISALLOWANCE UNDER SECTION 14A OF THE ACT CANNOT EXCEED, IN ANY CASE, EXEMPT DIVIDEND INCOME OF RS.4,14,800/- EARNED BY THE APPELLANT DURING THE RE LEVANT PREVIOUS YEAR. 3.1 THE AUTHORIZED REPRESENTATIVE SUBMITTED THAT T HIS GROUND IS ALSO RELATED TO THE DEPARTMENTS GROUND W HICH CHALLENGES THE ACTION OF THE LD. CIT (A) IN DELETING THE DISAL LOWANCE OF RS. 1,93,79,583/- MADE BY THE ASSESSING OFFICER U/S 14A OF THE ACT. IT WAS PRAYED THAT SINCE THIS GROUND DOES NOT RAISE ANY NEW ISSUE BUT RELATES TO AN ISSUE WHICH HAS ALREADY BEEN DELIBERAT ED UPON BOTH BY THE ASSESSING OFFICER AS WELL AS THE LD. CIT (A), T HE SAME SHOULD BE ADMITTED. 4.0 PER CONTRA, THE LD. SR. DEPARTMENTAL REPRESENT ATIVE (DR) HAS NO OBJECTION TO THE ADDITIONAL GROUND BEING ADM ITTED. 7 ITA NOS.6330 & 6434/DEL/2017 M/S RELIGARE SECU RITIES LTD. VS. DCIT 5.0 HAVING HEARD BOTH THE PARTIES ON THE ISSUE OF ADMISSION OF ADDITIONAL GROUND, WE DEEM IT APPROPRIATE TO ADM IT THIS ADDITIONAL GROUND AS THIS ISSUE WAS ALREADY BEFORE T HE LOWER AUTHORITIES AND NO FRESH ISSUE IS BEING SOUGHT TO B E RAISED BY THIS ADDITIONAL GROUND OF APPEAL. 6.0 THE LD. AUTHORIZED REPRESENTATIVE SUBMITTED TH AT DURING THE UNDER CONSIDERATION, THE ASSESSEE HAD RECEIVED DIVIDEND INCOME OF RS. 4,14,800/- FROM EQUITY SHARES HELD FOR TRADI NG PURPOSES AND THE DIVIDEND WAS CLAIMED AS EXEMPT U/S 10(34) OF TH E ACT. THE LD. AUTHORIZED REPRESENTATIVE FURTHER SUBMITTED THAT TH E ASSESSEE HAD REVISED ITS RETURN OF INCOME AND HAD SUO MOTO MADE A DISALLOWANCE OF RS.1,83,55,525/- U/S 14A OF THE ACT AND, SUBSEQU ENTLY, THE ASSESSING OFFICER PROCEEDED TO COMPUTE THE DISALLOWA NCE AT RS.3,77,35,108/- THUS, MAKING AN ADDITIONAL DISALLO WANCE OF RS.1,93,79,583/- OVER AND ABOVE THE SUO MOTO DISALLOWANCE OFFERED TO TAX BY THE ASSESSEE. THE LD. AUTHORIZED REPRESEN TATIVE FURTHER SUBMITTED THAT ON APPEAL, THE LD. CIT (A) AGREED WIT H THE CONTENTION OF THE ASSESSEE THAT DISALLOWANCE U/S 14A CANNOT EXC EED THE 8 ITA NOS.6330 & 6434/DEL/2017 M/S RELIGARE SECU RITIES LTD. VS. DCIT EXEMPT INCOME BUT RESTRICTED THE DISALLOWANCE TO THE AMOUNT OF THE SUO MOTO DISALLOWANCE MADE BY THE ASSESSEE. 6.1 THE LD. AUTHORIZED REPRESENTATIVE FURTHER SUBMITTED THAT SUBSEQUENTLY THE ASSESSEE WAS LEGALLY ADVISED THAT THE SUO MOTO DISALLOWANCE U/S 14A OF THE ACT WAS NOT BASED ON CORRECT INTERPRETATION OF THE RELEVANT PROVISIONS A ND THE PREVAILING LEGAL POSITION. THE LD. AUTHORIZED REPRESENTATIVE SUBMITTED THAT THE ASSESSEE HAD ERRED IN COMPUTING THE SUO MOTO DISALLOWANCE U/S 14A AND, THEREFORE, THE ISSUE OF DISALLOWANCE U/S 1 4A NEEDED TO BE EXAMINED AFRESH. IT WAS SUBMITTED THAT THE DISALLOW ANCE COMPUTED U/S 14A IS INCORRECT SINCE WHILE COMPUTING THE DISAL LOWANCE AS PER RULE 8D, INVESTMENTS NOT YIELDING DIVIDEND INCOME H AVE BEEN CONSIDERED BY THE LOWER AUTHORITIES. IT WAS SUBMITTE D THAT THE DIVIDEND INCOME OF RS. 4,14,800/- EARNED DURING THE YEAR WAS NOT EARNED FROM ANY OF THE INVESTMENTS AS APPEARING IN THE BALANCE SHEET BUT THE SAME WAS EARNED AS INCOME INCIDENTAL T O TRADING IN SHARES. IT WAS SUBMITTED THAT IT IS SETTLED LAW THAT WHILE CALCULATING AVERAGE INVESTMENTS IN RULE 8D (2)(II/(III) ONLY TH OSE INVESTMENTS WHICH ACTUALLY YIELDED TAX EXEMPT INCOME SHOULD HAVE BEEN TAKEN 9 ITA NOS.6330 & 6434/DEL/2017 M/S RELIGARE SECU RITIES LTD. VS. DCIT INTO CONSIDERATION. IT WAS SUBMITTED THAT AN IDENTIC AL ISSUE WAS DECIDED IN FAOVUR OF THE ASSESSEE BY THE ORDER OF T HE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEARS 2008-09 & 2 011-12, WHEREIN THE TRIBUNAL DIRECTED THE ASSESSING OFFICER TO COMPUTE DISALLOWANCE U/S 14A ONLY QUA THE INVESTMENTS WHICH HAVE YIELDED EXEMPT INCOME. 7.0 THE LD. SR. DEPARTMENTAL REPRESENTATIVE ( DR) SUBMITTED THAT THE ASSESSEE SHOULD NOT BE PERMITTED TO ARGUE FOR RE-COMPUTING THE DISALLOWANCE U/S 14A AFRESH AT THIS STAGE, SPECIALLY, WHEN THE ASSESSEE HAD HIMSELF DISALLOWED AN AMOUNT SUO MOTO AND, THEREAFTER, THE LD. CIT (A) HAD ALREADY RESTR ICTED THE DISALLOWANCE TO THE EXTENT OF SUO MOTO DISALLOWANCE MADE BY THE ASSESSEE. 8.0 ON A QUERY FROM THE BENCH, BOTH THE PARTIES A GREED THAT FOLLOWING THE ORDERS OF THE TRIBUNAL FOR ASSES SMENT YEARS 2008-09 AND 2011-12 IN ASSESSEES OWN CASE, A SIMILA R DIRECTION MAY BE GIVEN IN THIS YEAR ALSO. 9.0 WITH RESPECT TO ASSESSEES GROUND NOS.1 TO 1. 2 CHALLENGING THE DISALLOWANCE OF NON-COMPLIANCE CHARG ES PAID TO 10 ITA NOS.6330 & 6434/DEL/2017 M/S RELIGARE SECU RITIES LTD. VS. DCIT NATIONAL STOCK EXCHANGE (NSE) AMOUNTING TO RS. 35,1 8,803/-, IT WAS SUBMITTED THAT DURING THE YEAR UNDER CONSIDERATI ON THE ASSESSEE HAD INCURRED EXPENDITURE AGGREGATING TO RS . 46,06,304/- DISCLOSED UNDER THE HEAD FINES AND PENALTIES AND TH E ASSESSEE HAD SUO MOTO DISALLOWED AN AMOUNT OF RS.3 ,76,890/- BEING AGGRE GATE OF SUMS PAID TO AUTHORITIES OTHER THAN NSE, AS NOT ADM ISSIBLE FOR DEDUCTION. IT WAS FURTHER SUBMITTED THAT THE ASSESSI NG OFFICER, HOWEVER, ALSO DISALLOWED THE AMOUNT OF RS. 35,18,80 3/- BEING CHARGES PAID TO NSE, U/S 37(1) OF THE ACT. THE LD. AUTHORIZED REPRESENTATIVE SUBMITTED THE ASSESSEE IS A MEMBER OF THE NATIONAL STOCK EXCHANGE OF INDIA (NSE) AND IS ENGAGED IN P ROVIDING SECURITIES BROKING SERVICES TO INSTITUTIONS AND DEP OSITARY SERVICES TO RETAIL CLIENTS. AS A MEMBER OF THE NSE, THE ASSESSE E IS REQUIRED TO COMPLY WITH THE RULES, REGULATIONS AND BYE-LAWS ISSU ED BY THE NSE FOR ITS MEMBERS. SUCH RULES, REGULATION AND BYE-LAWS CAN BE CONSIDERED AS REGULATIONS FOR MAINTAINING THE GENER AL DISCIPLINE OF THE EXCHANGE. IT WAS SUBMITTED THAT IN THE EVENT OF DELAY IN COMPLIANCE/ TOTAL NON-COMPLIANCE OF THE BYE-LAWS, N SE LEVIES A FINE ON ITS MEMBERS, WHICH IS PURELY ROUTINE AND COMPENSA TORY IN 11 ITA NOS.6330 & 6434/DEL/2017 M/S RELIGARE SECU RITIES LTD. VS. DCIT NATURE AND DOES NOT AMOUNT TO VIOLATION OF ANY LAW. OUR ATTENTION WAS DRAWN TO A COPY OF THE LEDGER ACCOUNT GIVING BREA K-UP OF PAYMENT OF RS. 35,18,803 TO NSE ON VARIOUS DATES. 9.1 THE LD. AR SUBMITTED THAT THE ASSESSEE HAD PAI D THE AFORESAID AMOUNT TO NSE FOR FOLLOWING PROCEDURAL NO N-COMPLIANCES: (I) PENALTY FOR NON SETTLEMENT OF DUES LEVIED BY NSCCL, A WHOLLY OWNED SUBSIDIARY OF NSE; (II) PENALTY LEVIED BY THE NSE FOR NON- MAINTENANCE OF COMPLETE KYC DOCUMENTS FOR FEW CLIENTS; (III) PENALTY FOR OPERATION OF TRADING TERMINAL OT HER THAN BY THE REGISTERED USER; (IV) PENALTY FOR FUNDING CLIENT TRANSACTIONS; (V) PENALTY FOR REPORTING OF MARGINS COLLECTED FROM CLIENTS IN ADVANCE; (VI) PENALTY FOR NON-UPDATION OF CTCL DETAILS; 9.2 THE LD.AR SUBMITTED THAT ALL THE AFORESAID CH ARGED LEVIED BY NSE ARE OF DISCIPLINARY NATURE BEING LEVI ED TO ENSURE TIMELY COMPLIANCE OF THE BY-LAWS OF NSE AND THAT THE AFORESAID 12 ITA NOS.6330 & 6434/DEL/2017 M/S RELIGARE SECU RITIES LTD. VS. DCIT PAYMENTS WERE NOT FOR VIOLATION OF ANY LAW AS PRESCR IBED IN EXPLANATION TO SECTION 37(1) OF THE ACT. IT WAS FURT HER SUBMITTED THAT NSE IS A LIMITED COMPANY FORMED UNDER THE PROV ISIONS OF THE COMPANIES ACT, WITH AN INDEPENDENT BOARD AND IT IS S UBJECT TO THE PROVISIONS OF THE SECURITIES CONTRACTS (REGULATION) ACT, AND THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992. T HE BOARD OF NSE HAS POWER FOR PENALISING DISOBEDIENCE OR CONTRA VENTION OF ITS RULES, BY-LAWS AND REGULATIONS BY ITS MEMBER. THOUGH BOARD OF DIRECTORS OF NSE HAS NOMINEES OF THE SEBI, BUT NSE IS NOT A STATUTORY BODY. IT WAS ALSO SUBMITTED THAT NON-OBSER VATION OF INTERNAL REGULATIONS OF STOCK EXCHANGE CANNOT BE TR EATED AS VIOLATION OF ANY STATUTORY RULE, SO AS TO BE DISALL OWED UNDER SECTION 37(1) OF THE ACT. 9.3 THE LD. AUTHORIZED REPRESENTATIVE ALSO SUBMIT TED THAT AN IDENTICAL ISSUE HAD BEEN DECIDED IN FAVOUR OF THE ASSESSEE IN THE CASE OF DCIT VS. VLS FINANCE LTD. BY THE DELHI TRIBUNAL AND REPORTED IN 104 TAXMANN.COM 294 (DELHI TRIBUNAL). T HE LD. AUTHORIZED REPRESENTATIVE SUBMITTED THAT SIMILAR AD JUDICATIONS IN FAVOUR OF THE ASSESSEES HAD ALSO BEEN DONE BY THE C HANDIGARH 13 ITA NOS.6330 & 6434/DEL/2017 M/S RELIGARE SECU RITIES LTD. VS. DCIT BENCH OF THE TRIBUNAL AND THE MUMBAI BENCH OF THE T RIBUNAL. THE LD. AUTHORIZED REPRESENTATIVE ALSO SUBMITTED THAT T HE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. PRASAD AND CO., R EPORTED IN 341 ITR 480 (DELHI) HAD HELD THAT FINES PAID FOR VIOLAT ING NSE RULES WAS AN ALLOWABLE DEDUCTION AS THE AMOUNTS WERE PAID DURI NG THE COURSE OF BUSINESS OF THE ASSESSEE AND WERE NOT FOR INFRING EMENT OF ANY LAW. 10.0 IN RESPONSE, THE LD. SR. DEPARTMENTAL RE PRESENTATIVE (DR) SUBMITTED THAT THE IMPUGNED AMOUNT HAD BEEN MENTION ED AS DISALLOWABLE EVEN BY THE TAX AUDITOR OF THE COMPANY IN THE TAX AUDIT REPORT BUT THE ASSESSEE HAD NOT DISALLOWED TH E SAME SUO MOTO IN THE COMPUTATION OF TAXABLE INCOME. IT WAS SUBMIT TED THAT IN VIEW OF THE QUALIFICATION MADE BY THE TAX AUDITOR, THE A MOUNT WAS CORRECTLY DISALLOWED BY THE ASSESSING OFFICER. 11.0 WE HAVE HEARD THE RIVAL CONTENTIONS AND HAVE ALSO PERUSED THE MATERIAL ON RECORD. AS FAR AS THE ISSU E OF DISALLOWANCE OF NON-COMPLIANCE CHARGES AMOUNTING TO RS.35,18,803 /- PAID TO NATIONAL STOCK EXCHANGE IS CONCERNED, IT IS SEEN TH AT THE LD. AUTHORIZED REPRESENTATIVE HAS GIVEN A DETAILED BREA K UP AND 14 ITA NOS.6330 & 6434/DEL/2017 M/S RELIGARE SECU RITIES LTD. VS. DCIT DESCRIPTION OF THE VARIOUS AMOUNTS CONSTITUTING THE IMPUGNED TOTAL AMOUNT OF RS.35,18,803/- AND HAS VEHEMENTLY ARGUED THAT THESE PENALTIES AND FINES LEVIED BY NATIONAL STOCK EXCHAN GE WERE MORE IN THE NATURE OF REGULATORY/DISCIPLINARY FEES AND WERE NOT IN THE NATURE OF ANY PENALTY LEVIED FOR VIOLATION OF ANY L AW. HOWEVER, THE FACT REMAINS THAT THE SUBMISSIONS REGARDING THE ACT UAL NATURE OF FINES AND PENALTIES LEVIED BY NSE WERE NOT EXPLAINE D BEFORE THE LOWER AUTHORITIES. THE FACT ALSO REMAINS THAT IN TH E TAX AUDIT REPORT, THE AUDITOR, IN HIS OWN WISDOM, HAS STATED TH AT THIS AMOUNT WAS LIABLE TO BE DISALLOWED AND ADDED BACK TO THE IN COME OF THE ASSESSEE. IN OUR CONSIDERED OPINION, INTEREST OF SU BSTANTIVE JUSTICE WOULD BE MET IF THE ASSESSEE IS ALLOWED AN OPPORTUNI TY TO EXPLAIN AND ESTABLISH BEFORE THE ASSESSING OFFICER AS TO HO W THESE AMOUNTS DO NOT FALL WITHIN THE MISCHIEF OF SECTION 37(1) OF THE ACT. WE, ACCORDINGLY, RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO EXAMINE THE MATTER AFRESH AFTER GIVING PROPER OPPORTUNITY TO THE ASSESSEE TO PRESENT ITS CASE. TH US, GROUND NOS.1 TO 1.2 STAND ALLOWED FOR STATISTICAL PURPOSES. 15 ITA NOS.6330 & 6434/DEL/2017 M/S RELIGARE SECU RITIES LTD. VS. DCIT 11.1 AS FAR AS THE ASSESSEES ADDITIONAL GROUND I S CONCERNED WHICH CHALLENGES THE DISALLOWANCE MADE U/S 14A OF THE ACT, IT IS SEEN THAT IN ASSESSMENT YEAR 2008-09 IN ITA NO.2282 /DEL/2013, VIDE ORDER DATED 13.12.2019, ON THE ISSUE OF DISALL OWANCE U/S 14A OF THE ACT, THE CO-ORDINATE BENCH OF THE TRIBUNAL I N PARA 5.4 OF THE SAID ORDER HAD CONSIDERED THE ISSUE OF DISALLOWANCE AND REMITTED THE ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER TO WORK OUT OF THE DISALLOWANCE BY CALCULATING AVERAGE INVESTMENTS UNDE R RULE 8D(2)(II)/(III) BY TAKING ONLY THOSE INVESTMENTS WHI CH HAVE ACTUALLY YIELDED DIVIDEND INCOME DURING THE RELEVANT YEAR AN D ALSO DIRECTED THAT IF THE SAME EXCEEDED THE DIVIDEND INCOME THEN TO RESTRICT THE SAME TO THE EXTENT OF EXEMPT INCOME ONLY. SIMILARLY , IN ASSESSMENT YEAR 2011-12 IN ITA NOS.230/DEL/2017 AND 574/DEL/20 17, VIDE ORDER DATED 31.07.2020, VIDE PARA 18 OF THE SAID OR DER, THE ISSUE OF DISALLOWANCE U/S 14A OF THE ACT HAD AGAIN RESTORED T HE ISSUE TO THE FILE OF THE AO WITH THE DIRECTION TO ASCERTAIN THE I NVESTMENT WHICH HAVE YIELDED DIVIDEND INCOME AND TO CONSIDER ONLY T HOSE INVESTMENTS FOR COMPUTING THE AVERAGE VALUE OF INVE STMENTS. THEREFORE, ON IDENTICAL FACTS AND WITH CONSENT OF BO TH THE PARTIES, 16 ITA NOS.6330 & 6434/DEL/2017 M/S RELIGARE SECU RITIES LTD. VS. DCIT WE DEEM IT APPROPRIATE TO RESTORE THIS ISSUE ALSO TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO INCLUDE ONLY T HOSE INVESTMENTS WHICH HAVE YIELDED DIVIDEND INCOME FOR COMPUTING THE AVERAGE VALUE OF INVESTMENTS FOR THE PURPOSE OF COMPUTING T HE AMOUNT OF DISALLOWANCE U/S 14A OF THE ACT. THE ASSESSING OFFI CER IS DIRECTED TO OFFER REASONABLE OPPORTUNITY TO THE ASSESSEE TO PRESENT ITS CASE BEFORE PROCEEDING TO RE-COMPUTE THE DISALLOWANCE. S INCE THIS GROUND ALSO RELATES TO THE GROUND RAISED IN THE DEP ARTMENTS APPEAL, THE DEPARTMENTS GROUND ALSO STANDS RESTORE D TO THE FILE OF THE AO WITH SIMILAR DIRECTIONS. THUS, ASSESSEES AS WELL AS DEPARTMENTS GROUNDS STAND ALLOWED FOR STATISTICAL PURPOSES. 12.0 IN THE FINAL RESULT, THE APPEAL OF THE ASSESS EE AS WELL AS THE DEPARTMENT STAND ALLOWED FOR STATISTICAL PURPOS ES. ORDER PRONOUNCED ON 25 TH FEBRUARY, 2021. SD/- SD/- (N.K. BILLAIYA) (SUDHANSHU SRIVASTAVA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 25/02/2021 PK/PS 17 ITA NOS.6330 & 6434/DEL/2017 M/S RELIGARE SECU RITIES LTD. VS. DCIT COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI