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TMI Blog2010 (3) TMI 907X X X X Extracts X X X X X X X X Extracts X X X X ..... visions of section 43B are applicable to the SEBI registration fee ? (c) Whether the SEBI registration fee is statutory liability in the nature of 'fee' within the meaning of section 43B(a) of the Act ? (d) Whether the Income-tax Appellate Tribunal was correct in law in holding that the payment was made by the assessee during the year and, therefore, deduction was allowable in the year under consideration applying the provisions of section 43B of the Act ? (e) Whether the order passed by Income-tax Appellate Tribunal is perverse in law and on facts ?" 2. The facts in brief of this case are that the assessee filed the return declaring income at Rs. 8,92,070, which was revised on March 30, 2007, declaring income at Rs. 7,45,34,674. During the assessment proceedings, the Assessing Officer noticed that the assessee had claimed a sum of Rs. 3,94,16,470 being the SEBI registration fee as expense in the profits and loss account. The Assessing Officer required the assessee to justify as to why the same be not disallowed as it was in the nature of prior period expense. 3. The assessee replied that the said payment was made as one-time settlement fees to the SEBI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment in 2004, the assessee-company discharged its liability in the year 2004 though it accrued in the year 2001. 6. The Assessing Officer relied on the judgment of this court in Delhi Tourism and T. D. C. Ltd. v. CIT I. T. A. No. 634 of 2006-since reported in [2006] 285 ITR 114 (Delhi) wherein it was held that the assessee was not entitled to claim the deduction in the year under consideration for prior period expenses. On this basis, the Assessing Officer disallowed the deduction of Rs. 3,84,01,623 as claimed by the assessee. 7. The assessee being aggrieved by the aforesaid disallowance, preferred an appeal before the Commissioner of Income-tax (Appeals) on the contentions as under : (a) The disallowance of the expenditure incurred was neither justified on facts nor could have been disallowed in law since the said sum was to be allowed as a deduction under section 43B of the Act. (b) The Assessing Officer had erred in restricting the claim of rebate under section 88E of the Act, at Rs. 2,76,81,059 (as against the claim which should have been allowed on Rs. 8,35,86,315). (c) There was no dispute that the assessee had paid a sum o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lves with the SEBI. (ii) The SEBI Act, 1992, empowers the SEBI to levy "fee" for registration for registering brokers/sub-brokers called as the SEBI registration "fee". (iii) The SEBI Regulations also prescribe the basis for charging of the SEBI registration "fee" which is relatable to the turnover of the assessee. (iv) The brokers, however, were representing to the Board that the "fee" was arbitrary and excessive. (v) The brokers forum went to the Supreme Court who, vide its judgment dated February 7, 2011, upheld the regulations of the SEBI and held that the "fee" levied by the SEBI was reasonable and valid. (vi) In the meantime, the SEBI came out with one-time settlement "fee" along with interest for non-late payment of the SEBI registration "fee". There was a case of Lalit Kumar Marodia v. Union of India [2005] 123 Comp Cas 716 (Cal) ; [2005] 59 SCL 474 (Cal) wherein an interim order was passed by the High Court on May 20, 2004, where after the payment was made by the appellant. 12. The Revenue/Department has taken a ground that the order passed by the Income-tax Appellate Tribunal is not sustainable in law, inter alia, for the fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aling in buying and selling of shares on its own account. The company also acts as a share broker, and is a member of the National Stock Exchange and the Bombay Stock Exchange. (ii) On October 29, 2005, the assessee furnished its return of income declaring at Rs. 8,92,070. The assessee revised its return of income on March 30, 2007, and declared therein was at Rs. 7,43,34,674 as per the original profit and loss account. (iii) The Assessing Officer issued questionnaire directing the assessee to furnish certain details in compliance thereto, necessary details, as were directed were duly furnished by the assessee on August 6, 2007. 14. The assessee further filed additional reply dated October 15, 2007. In hissubmission made before the Assessing Officer, an amount claimed asan expenditure of Rs. 3,95,27,704 since represents "fee" is to be allowed as a deduction as provided under section 43B of the Income-tax Act. It was further stated that the amount paid aggregating to Rs. 3,94,16,470 was settlement "fee" payable to the SEBI and was the sum allowable as a deduction under section 43B of the Act. The Assessing Officer, however,disallowed a sum of R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act. In other words, the assessment had been framed at an income of Rs. 11,29,36,297 by disallowing the claim of expenditure aggregated at Rs. 3,84,01,623 out of the SEBI registration "fee" and otherwise accepting the income returned as per its revised computation of income. The Assessing Officer further did not correctly compute the rebate allowable under section 88E of the Act. 18. Counsel for the assessee has pointed out that the aforesaid sum of fee has been paid by the assessee-company before the due date, i.e., November 15, 2004, as per details. The said sum of expenditure incurred was paid on the basis of "quantification",made by the SEBI, in accordance with the scheme formulated on July 15, 2004, requiring the share brokers to make a payment on or before November 15, 2004. 19. The learned counsel for the assessee further submitted that it cannot be disputed that the said sum of expenditure had been incurred in the course of business and represents "fee" levied by the SEBI, which regulates the mechanism of stock market and protects the investors, stock brokers and other intermediaries for which registration "fee" is charged by it, in accordance wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Securities and Exchange Board of India (Interest Liability Regularisation) Scheme, 2004.As per the Scheme, all the brokers of the Bombay Stock Exchange and the National Stock Exchange were required to pay turnover fees at a prescribed rate for an initial period of five years. For non-payments, the SEBI has charged interest on the above payment. Against the said charges the brokers approached the Board that the fee was arbitrary and excessive. In this process of confrontation brokers went to the court to get relief and matter went to the apex court who, vide its judgment dated February 1,2001, in the case of B. S. E. Brokers Forum v. SEBI [2001] 104 Comp Cas 506 (SC) ; [2001] 3 SCC 482 has upheld the regulations of the SEBI, holding the fees as reasonable and valid. As a result thereof, the SEBI came out with a scheme for one-time settlement by the brokers which they would be able to avail of only if they pay the registration fee on the annual turnover fees along with 20 per cent. of the total interest before a specified date, i.e., November 15, 2004. The assessee, in this case, also opted for one-time settlement, owned the contention that s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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