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TMI Blog2008 (1) TMI 453X X X X Extracts X X X X X X X X Extracts X X X X ..... amed as respondent in this appeal. 4. Briefly stated facts of the case are that the assessee-company, engaged in the business of share broking, filed return declaring its income at Rs. 12,84,091. While making the assessment, it was inter alia found by the Assessing Officer that in Schedule "K" to the Profit Loss Account, the assessee debited an amount of Rs. 18,06,000 towards SEBI turnover fee under the head 'Operating and Administration' expenses. When asked, it was explained by the assessee that the assessee through its letter dated 24-8-2001 requested the SEBI to adjust the amount due from them against security deposit available with it. It was, therefore submitted that the claim for deduction of turnover fee of Rs. 18,06,000 be allowed. However, the Assessing Officer was of the view that the amount was not paid by March, 2001 as stipulated under section 43B of the Act, he disallowed the deduction claimed of Rs. 18,06,000 and added the same to the income of the assessee, and accordingly completed the assessment on a total income of Rs. 32,43,000, vide order dated 12-9-2003 passed under section 143(3) of the Act. 5. Assessee, being aggrieved preferred appeal before the lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter is also equivalent to issuance of cheque and it has been clarified by the Board in CBDT Circular No. 261 dated 8-8-1979 and Circular No. 265, dated 11-4-1980, that if a cheque or a draft is tendered for payment of Government dues and the same is honoured on presentation, the payment is deemed to have been made on the date on which the cheque was handed over. The learned counsel for the assessee also relied on the decision of the Hon'ble Supreme Court in CIT v. Ogale Glass Works Ltd. [1954] 25 ITR 529 and of the Ahmedabad Bench decision of the Tribunal in Pratibha Syntex Ltd. v. Jt. CIT [2002] 81 ITD 118. He, therefore, submitted that the order passed by the CIT(A) in deleting the disallowance be upheld. 9. We have carefully considered the rival submissions of the parties and perused the material available on record. We find that there is no dispute that the assessee is maintaining its account books on mercantile basis. The assessee claimed the amount of deduction of SEBI turnover fee of Rs. 18.06 lakhs on the ground that the matter was crystalised in March, 2001 and therefore, the company provided for the same in the books of account in the year under consideration. However, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of such payment is furnished by the assessee along with such return." 11. Main provisions of section 43B have been clarified by the Board vide CBDT Circular No. 372, dated 8-12-1983 (1984) 146 ITR 9 (St.), relevant portion of which reads as under: "35.3 To curb this practice, the Finance Act has inserted a new section 43B to provide that deduction for any sum payable by the assessee by way of tax or duty under any law for the time being in force or any sum payable by the assessee as an employer by way of contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of employees shall irrespective of the previous year in which the liability to pay such sum was incurred, be allowed only in computing the income of that previous year in which such sum is actually paid by the assessee." 12. The scope and effect of the amendment made in the first proviso to section 43B, reproduced above, inserted by the Finance (No. 2) Act, 1998 have been clarified by the CBDT by its Circular No. 772, dated 23-12-1998 (1999) 235 ITR 35 (St.) at page 56, as follows:- "23. Certain expenses to be allowed only on payment: 23.1 Under the existing prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... due security deposit, or any amount of such security deposit was refundable to the assessee, at the relevant point of time. There is also no material on record to suggest that the delay in adjustment of the said amount of Rs. 18.06 lakhs which was stated to have been adjusted in June, 2003, was not attributable to the assessee. As regards the assessee's plea that the said letter dated 24-8-2001 to SEBI for adjustment of turnover fee is equivalent to issuance of cheque, reliance was placed on the Board's Circular No. 261, dated 8-8-1979 and Circular No. 265, dated 11-4-1980, reported in Vol. 3 at pages 5440-5441 of the 5th Edition of the Chaturvedi Pithisaria's Income-tax Law, wherein it has been clarified that if a cheque or a draft is tendered for payment of Government dues and the same is honoured on presentation, the payment is deemed to have been made on the date on which the cheque was handed over. However, we find that the said circulars are relating to the acceptance to the payment of taxes by crossed cheques. Moreover the said letter of the assessee cannot be considered as equivalent to cheque inasmuch as a cheque is a negotiable instrument governed by the Negotiable Inst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Apart from the implication of an agreement arising from such business usage the assessee expressly requested the Government to "remit" the amounts of the bills by cheques. This, on the authorities cited above, clearly amounted in effect to an express request by the assessee to send the cheques by post. The Government did act according to such request and posted the cheques in Delhi. It can scarcely be suggested with any semblance of reasonable plausibility that cheques drawn in Delhi and actually received by post in Aundh would in the normal course of business be posted in some place outside British India. This Posting in Delhi, in law, amounted to payment in Delhi. In this view of the matter the referred question should, with respect, have been answered by the High Court in the affirmative. We, therefore, allow the appeal and answer the question accordingly. In view of the fact that the appellant has failed in the main argument but has succeeded on a new one we think no order should be made as to costs except that each party should bear and pay his or its own costs before us as well as before the High Court." In the case before us, the question as to whether the letter dated 24- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preme Court in the case of J.B. Boda Co. (P.) Ltd. cited by the learned counsel fully supports the view taken by us. The assessee in this case was a Reinsurance Broker and made remittance of reinsurance premium to foreign reinsurers after retaining his commission. The Supreme Court held that the commission retained is "income received in convertible foreign exchange" and formal remittance to foreign company and receipt thereafter is not necessary for the purpose of relief under section 80-O of the Income-tax Act. Their Lordships held- 'A two-way traffic is unnecessary. To insist on a formal remittance first and thereafter to receive the commission from the foreign reinsurer, will be an empty formality and a meaningless ritual on the facts of the case.' The learned DR has next relied on the Supreme Court decision in the case of CIT v. A. Krishnaswami Mudaliar [1964] 53 ITR 122 wherein it has been held that an assessee ought to get the advantage and suffer the disadvantage of the method of accounting employed by him. This decision in our opinion reinforces the conclusion arrived at by us above that the method of accounting regularly followed by the assessee, which is in accorda ..... X X X X Extracts X X X X X X X X Extracts X X X X
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