2005 (8) TMI 617 - AT - Income Tax

Applicability Of section 43B - Payment to SEBI - Maintained accounts on mercantile basis - Whether the SEBI turnover charges are required to be paid by the assessee under any law or Act ? - HELD THAT - Undisputedly, the SEBI turnover charges is payable on the basis of the turnover undertaken by the assessee. It is not a fixed amount which has to be paid by the assessee to acquire a licence or the permission to do business of share broker. It depends upon the turnover of the assessee. Admittedly, the SEBI is a creature of the Act, namely, the Securities and Exchange Board of India Act, 1992. Through section 11 of this Act, a duty has been cast on the Board to protect the interests of the investors in securities and to promote the development and to regulate the securities market by such measures as it think fit. The Board may issue the instructions to regulate the business in a stock exchange and the Securities Market. The Board has also armed with the same powers as are vested in the civil court under the Civil Procedure Code, 1908 while trying a suit in respect of certain matters. The Board is also conferred with the powers to issue directions and conduct investigations in certain matters and also to grant registration to a stock broker, sub-broker and share transfer agent, etc. The Board is also empowered to levy penalty in case of default by any person who is required to do a particular act as per the instructions of the Board. The decisions of the Board are subject to an appeal before the Securities Appellate Tribunal meaning thereby, the Board is a creature of an Act and is an authority under the Law to collect fees or charges notified by it. It is not a case where a one time licence fees or the charges are required to be paid by the assessee. It is a case where particular percentage of turnover is to be charged as turnover charges by the SEBI. We are therefore, of the view that the turnover charges is also in the nature of the tax, duty, cess or fees payable under a law. Nothing had been brought on record during the course of the hearing by the assessee to prove that the said turnover charges are not payable under the law enacted by the Central Government. Since the Board has been given all powers by the Government to regulate the business and to recover its dues, the turnover charges payable by the assessee is certainly a cess or duty to be payable under the law. We, therefore, do not find ourselves in agreement with the order of the CIT (A). Accordingly, we, set aside the order of the CIT (A) and restore that of the Assessing Officer. In the result, the appeals of the Revenue are allowed.

Summary

Issues:
- Interpretation of section 43B of the Income-tax Act regarding SEBI turnover charges.

Analysis:
1. The Revenue appealed against the Commissioner of Income-tax (Appeals) order, contending that SEBI turnover charges are not covered under section 43B of the Income-tax Act. The assessee argued that these charges were not paid due to a dispute with SEBI and members of the National Stock Exchange, and thus should be allowed as a deduction.

2. The Assessing Officer disagreed with the assessee's contention, stating that SEBI turnover charges are akin to tax, duty, cess, or fees under section 43B. He emphasized that the charges accrued as income when billed, and since SEBI is a regulatory body empowered to levy fees, the charges must be paid in the year they accrue.

3. The Commissioner of Income-tax (Appeals) allowed the assessee's claim, citing a judgment and differing from the Assessing Officer's interpretation. However, the Tribunal, after analyzing the provisions of the Securities and Exchange Board of India Act, 1992, concluded that SEBI turnover charges fall under the purview of section 43B as they are fees payable under the law.

4. The Tribunal noted that SEBI charges are not a one-time fee but a percentage of turnover, making them akin to tax, duty, cess, or fees under the law. The Tribunal disagreed with the Commissioner of Income-tax (Appeals) and upheld the Assessing Officer's decision, ruling in favor of the Revenue.

5. In conclusion, the Tribunal allowed the Revenue's appeals, holding that SEBI turnover charges are covered under section 43B of the Income-tax Act and must be paid as per the law, overturning the Commissioner of Income-tax (Appeals) decision.