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TMI Blog2007 (2) TMI 241X X X X Extracts X X X X X X X X Extracts X X X X ..... on the market trend and on certain dates there can be extraordinary increase in trading volume. On that increased trading volume, the concerned member also earns income in the shape of commission, etc. which is taxable so, the fine paid which was co-related with the increase in trading volume which crossed the fixed exposure limit, cannot be considered as infraction of law although irregularities are there, and for those irregularities, the assessee suffered and paid the fine but this payment cannot be termed as penal in nature. Similarly, late submission of margin certificate due to computer software problem, cannot be considered as infraction of law and if any fine is paid for such late submission, due to unavoidable circumstances in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee had paid following amounts on account of NSE violations and on account of fine and penalty : NSE violations (stock holding) Rs. 31,200 Fine stock expenses (Rs. 5,000 + Rs. 3,100) Rs. 8,100 Fines and penalty Rs. 29,030 Total Rs. 68,330 The AO asked the assessee to show-cause why those amounts should not be disallowed. The assessee submitted that the expenses were incidental to the business of the assessee and were compensatory in nature as such the expenses were rightly being claimed and were allowable. The AO did not accept the contention of the assessee and disallowed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osits taken from the clients against their exposures) on quarterly basis to the NSE. NSE has charged Rs. 9,300 (Rs. 6,200 + Rs. 3,100) due to the late submission of margin certificates. It was stated that NSE charged per day penalty for delay in submission of that margin certificate which is in normal course of business and not due to infraction of any law and that the late submission was due to unavoidable circumstances/computer software problem. It was further stated that NSE had prescribed the time-limit for delivery of shares to the NSE against sale of shares made by the member and Rs. 29,030 were charged on NSE accounts for non-delivery of shares or deficiencies in the documents in the deliveries of shares (bad delivery) which was in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtmental Representative for the Revenue strongly supported the orders of authorities below and further submitted that the SEBI had fixed certain norms for the working of different stock exchanges which in turn had framed rules and regulations to conduct the business smoothly, those rules and regulations are applicable to the members of respective stock exchange and if any violation is there that violation is in the nature of infraction of law, so, the penalties and fines levied in violation of guidelines were not allowable as business expenses, therefore, the AO was justified in making the disallowance and the learned CIT(A) rightly confirmed the disallowance. 8. We have considered the rival contentions and carefully gone through the mat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rities cannot be considered as infraction of any law. So, the payments made by the assessee in the regular course of business, cannot be termed as penal in nature, particularly when the assessee did not commit those irregularities intentionally and regularly. The AO disallowed the fine levied for the transactions where the trading volume reached or crossed the fixed exposure limit. Similarly, as regards to the deliveries or bad deliveries of the shares, it is not the case of the Department that the assessee was committing those mistakes intentionally and regularly. On the other hand, the contention of the learned counsel for the assessee that those deficiencies were unintentional and occurred in the regular course of business, cannot be bru ..... X X X X Extracts X X X X X X X X Extracts X X X X
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