2005 (8) TMI 729 - AT - Income Tax

Summary

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

Analysis:
The appeal before the Appellate Tribunal ITAT Mumbai involved the interpretation of section 43B of the Income-tax Act concerning SEBI turnover charges. The dispute arose when the CIT(A) held that the turnover charges payable to SEBI were not covered under the provisions of section 43B of the Income-tax Act. The Assessing Officer disagreed, stating that any sum payable by the assessee by way of tax, duty, cess, or fees under any law should be allowed as a deduction only when actually paid. The Assessing Officer argued that SEBI turnover charges fell under this category and disallowed the deduction claimed by the assessee. The CIT(A), however, relying on a judgment of the Calcutta High Court, allowed the claim of the assessee. The revenue then appealed to the Tribunal, contesting the decision of the CIT(A) and supporting the Assessing Officer's stance.

The Tribunal examined the contentions of both parties and analyzed the nature of SEBI turnover charges. It noted that SEBI, as a regulatory body created under the Securities and Exchange Board of India Act, 1992, had the authority to levy fees or charges for carrying out its functions. The Tribunal observed that the turnover charges paid to SEBI could be considered as cess, duty, or tax payable by the assessee under section 43B of the Income-tax Act. The Tribunal highlighted that SEBI's powers, functions, and regulatory role established it as an authority empowered by law to collect such charges. In contrast, the assessee argued that turnover charges did not fall under the category of tax, duty, cess, or fees as per the provisions of section 43B(a) of the Income-tax Act.

After a thorough examination, the Tribunal concluded that SEBI turnover charges were akin to tax, duty, cess, or fees payable under a law, specifically the Securities and Exchange Board of India Act, 1992. It emphasized that the charges were not a one-time payment but were based on a percentage of turnover, making them recurrent in nature. The Tribunal disagreed with the CIT(A)'s decision, ruling in favor of the revenue and setting aside the CIT(A)'s order. Consequently, the Tribunal allowed the appeals of the revenue, upholding the Assessing Officer's disallowance of the deduction claimed by the assessee for SEBI turnover charges.

In summary, the Tribunal's judgment clarified that SEBI turnover charges were considered as dues payable under the law, falling within the ambit of section 43B of the Income-tax Act. The decision underscored the regulatory authority of SEBI and the recurrent nature of the charges based on turnover, distinguishing them from one-time fees.