Sri Mangalam Investors, Hooghly V. ACIT, CIR-2, Burdwan, Burdwan

ITA 850/KOL/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 100162 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 7 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-12-2015
• Appeal Filed By: Assessee
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 05-05-2014
• Court: TRIBUNAL
• Section: 143(3); 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH: KOLKATA [BEFORE SHRI MAHAVIR SINGH, JM] I.T.A NO.850/KOL/2014 ASSESSMENT YEAR: 2008-09 SHRI MANGALAM INVESTORS VS. ASSISTANT COMMISSIO NER OF INCOME-TAX, (PAN: ABGFS5316J) CIRCLE-2, BURDWAN ( APPELLANT ) ( RESPONDENT ) DATE OF HEARING: 10.12.2015 DATE OF PRONOUNCEMENT: 16.12.2015 FOR THE APPELLANT: SHRI SOMNATH GHOSH, ADVOCATE FOR THE RESPONDENT: SHRI TANUJ NIYOGI, JCIT, SR. DR ORDER THIS APPEAL BY ASSESSEE IS ARISING OUT OF ORDER OF CIT(A), DURGAPUR VIDE APPEAL NO. 447/CIT(A)/ASL/ACIT/CIR-2/BWN/2010-11 DATED 31. 03.2014. ASSESSMENT WAS FRAMED BY ACIT, CIRCLE-2, BURDWAN U/S. 143(3) OF TH E INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSME NT YEAR 2008-09 VIDE HIS ORDER DATED 31.12.2010. 2. THE ONLY ISSUE IN THIS APPEAL OF ASSESSEE IS AGA INST THE ORDER OF CIT(A) IN CONFIRMING THE ACTION OF AO MAKING ADDITION OF RS.1 ,75,602/- BEING THE EXPENDITURE PAID ON ACCOUNT OF FUND SHORTAGE AMOUNTING TO RS.21 ,751/-, LATE PAYMENT CHARGES OF UCC AMOUNTING TO RS.39,160/- AND LATE CHARGES DELIV ERY TO THE TUNE OF RS. 1,14,681/- BY INVOKING THE EXPLANATION TO SECTION 37(1) OF THE AC T BEING IN THE NATURE OF PENALTY. 3. I HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. I FIND THAT ALL THE THREE ITEMS I.E. THE EXP ENSES OF FUND SHORTAGE AMOUNTING TO RS.21,761/-, CHARGES ON UCC AMOUNTING TO RS.39,160/ - AND CHARGES FOR LATE DELIVERY TO THE TUNE OF RS.1,14,681/- ARE TREATED BY THE ASSESS EE AS EXPENSES RELATED TO THE BUSINESS. AS THE ASSESSEE IS DEALING IN COMMODITY AND EQUITY TRADING I.E. SHARE BUSINESS THESE PAYMENTS ARE MADE TO STOCK EXCHANGE AS LATE PAYMENT CHARGES OR FUND SHORTAGE CHARGES. I FIND THAT IN PURSUANCE OF ITS ACTIVITIE S THE ASSESSEE HAD TO UNDERTAKE VARIOUS TRANSACTIONS ON BEHALF OF ITS CLIENTS DEALING IN MU LTI COMMODITY EXCHANGE. ACCORDING TO LD. COUNSEL, THE ASSESSEE HAD IN CERTAIN INSTANCES FAILED TO MAINTAIN THE FUNDS REQUIRED FOR PAYMENT, HAD FAILED TO OBTAIN UNIQUE CLIENT COD E WITHIN STIPULATED TIME IN RESPECT OF 2 ITA NO.850/K/2014 SRI MANGALAM INVESTORS AY 2008-09 CERTAIN CLIENTS AND/OR MAKE DELIVERY OF THE REQUISI TE COMMODITIES WITHIN THE SCHEDULED TIME AND ON FAILURE TO ACT WITHIN SUCH PARAMETERS, AS REQUIRED UNDER BYE LAWS, THE MULTI COMMODITY EXCHANGE OF INDIA IMPOSED PENALTY CHARGES IN ACCORDANCE THEREWITH. ACCORDING TO ASSESSEES COUNSEL, IN THE INSTANCE CA SE, INCURRING OF THE EXPENDITURE ON PENALTY ON THREE COUNTS AGGREGATING TO RS.1,75,602/ - WAS NOT FOR AN OFFENCE OR IS PROHIBITED BY LAW AS BEING OPPOSED TO PUBLIC POLICY . ACCORDING TO HIM, THE BYE LAWS OF THE MULTI COMMODITY EXCHANGE OF INDIA CONTAINS SPEC IFIC CLAUSES FOR IMPOSITION OF PENALTY IN CASE OF FAILURE TO ACT WITHIN THE PARAME TERS AS SPECIFIED THEREIN WHICH DID NOT PARTAKE THE CHARACTER OF PAYMENT OF PENALTY FOR BRE ACH OF ANY LAW OF THE LAND BUT IS SIMPLY A COMPENSATION FOR BREACH OF COMPLIANCE OF C ONDITIONS. I FIND THAT IN THE INSTANT CASE, THERE WERE SPECIFIC REQUIREMENTS TO BE COMPLI ED WITH IN CARRYING ON ITS ACTIVITIES AND THE FAILURE THEREOF HAS LED TO THE IMPOSITION O F PENALTY. THUS, THESE RIGHTS AND OBLIGATIONS AROSE IN COURSE OF CARRYING ON OF THE B USINESS OF THE ASSESSEE. THEREFORE, THE PENALTY WHICH WAS CHARGED UPON THE ASSESSEE, IN THE INSTANT CASE, COULD UNDER NO CIRCUMSTANCES BE REGARDED AS PAYMENTS WHICH WERE OP POSED TO PUBLIC POLICY OR ON ACCOUNT OF INFRACTION OF LAW. I FURTHER FIND THAT AS LONG AS THE PAYMENT MADE IS FOR THE PURPOSES OF THE BUSINESS, AND THE PAYMENT MADE IS N OT BY WAY OF DEFAULT ON ACCOUNT OF INFRACTION OF ANY LAW OF THE LAND AND/OR OPPOSED TO PUBLIC POLICY, THE SAME WOULD BE ALLOWABLE AS A DEDUCTION. THEREFORE, THE CHARGES LE VIED UPON THE ASSESSEE TO COMPLY WITH THE PROVISIONS OF REGULATIONS OF THE MULTI COM MODITY EXCHANGE OF INDIA WHICH ARE DIRECTLY CONNECTED OR INTRINSICALLY RELATED WITH TH E CARRYING ON OF ITS BUSINESS WHICH UNEQUIVOCALLY QUALIFIES AS AN ALLOWABLE DEDUCTION U /S. 37(1) OF THE ACT. I HOLD ACCORDINGLY. APPEAL OF ASSESSEE IS ALLOWED. 4. IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED. 5. ORDER IS PRONOUNCED IN THE OPEN COURT ON 16.12 .2015. SD/- (MAHAVIR SINGH) JUDICIAL MEMBER DATED :16TH DECEMBER, 2015 JD.(SR.P.S.) 3 ITA NO.850/K/2014 SRI MANGALAM INVESTORS AY 2008-09 COPY OF THE ORDER FORWARDED TO: 1. APPELLANT SRI MANGALAM INVESTORS, C/O, SHRI S OMNATH GHOSH, ADVOCATE, SEVEN BROTHERSLODGE, P.O. BUROSHIBTALA , P.S. CHINSURAH, DIST. HOOGHLY, PIN-712 105 2 RESPONDENT ACIT, CIR-2, BURDWAN.. 3. THE CIT(A), DURGAPUR 4. 5. CIT , DURGAPUR DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, ASSTT. REGISTRAR .