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TMI Blog2011 (5) TMI 987X X X X Extracts X X X X X X X X Extracts X X X X ..... xchange penalty, notional loss on futures and options, etc. He also recomputed the rebate under section 88E of the Act, by apportioning part of the expenditure to share transactions, in respect of which security transactions tax was paid. 3. Aggrieved, the assessee carried the matter before the first appellate authority, wherein the Commissioner (Appeals) granted part relief. 4. On the issues where the first appellate authority confirmed the order of the Assessing Officer, the assessee has filed appeal and wherever the relief was granted to the assessee, the Revenue has filed the appeal. 5. We have heard the learned Counsel, Mr. Vipul Joshi, appearing on behalf of the assessee, as well as the learned Departmental Representative, Mr. Ajit Kumar Sinha. 6. Before us, learned Counsel filed a paper book consisting of 117 pages. He also filed a chart giving issues in brief and the arguments. 7. We first take up assessee's appeal in ITA no.6437/Mum./2009. 8. Ground no.1, is on the issue of disallowance of depreciation claimed on Bombay Stock Exchange Membership Card. 9. The Assessing Officer's view is that, since the demutulization of stock exchange card takes place this year, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng a substantive assessment, we delete this addition and allow the ground raised by the assessee. 13. The next ground is on the issue of disallowance of SEBI fees. This issue relates to fees and interest payable to SEBI for the earlier years. There was a dispute and it was ultimately settled in June 2006. 14. Before us, both the parties agreed that this liability crystallized in assessment year 2007-08. In view of this mutual agreement, we hold that the liability on this account crystallized only in assessment year 2007-08 and the same should be allowed in that year only. This ground is, thus, dismissed. 15. The next ground is on the issue of disallowance under section 14A of the Act. 16. As mutually agreed between the parties, we set aside the issue to the file of Assessing Officer for denovo adjudication in line with the judgment of Hon'ble Jurisdictional High Court in Godrej & Boyce Mfg. Co. Ltd. v/s DCIT & Anr. (2010) 328 ITR 081 (Bom.). 17. The next ground is on the issue of manner of computing rebate under section 88E of the Act. 18. The Assessing Officer, at Para-9/Page-10 of his order, extracted the section and held that the amount which is eligible for rebate und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act, reads as follows:- "[Rebate in respect of securities transaction tax. 88E. (1) Where the total income of an assessee in a previous year includes any income, chargeable under the head "Profits and gains of business or profession", arising from taxable securities transactions, he shall be entitled to a deduction, from the amount of income-tax on such income arising from such transactions, computed in the manner provided in sub-section (2), of an amount equal to the securities transaction tax paid by him in respect of the taxable securities transactions entered into in the course of his business during that previous year: Provided that no deduction under this sub-section shall be allowed unless the assessee furnishes along with the return of income, evidence of payment of securities transaction tax in the prescribed form: Provided further that the amount of deduction under this sub-section shall not exceed the amount of income-tax on such income computed in the manner provided in sub-section (2). (2) For the purposes of sub-section (1), the amount of income-tax on the income arising from the taxable securities transactions, referred to in that sub-section, shall be equa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vy of income tax. Hence, for all these reasons, we reject the contentions of the assessee and dismiss this ground. 23. In the result, assessee's appeal is allowed in part. 24. Now, we take up Revenue's appeal in ITA no.6441/Mum./2009. 25. The first ground is on the issue of disallowance of penalty paid to Stock Exchanges in view of Explanation-1 to section 37(1) of the Act. Commissioner (Appeals) has also held that Stock Exchanges are not Government or Semi Government bodies and violation of regulations of Stock Exchanges is not in fraction of law and, hence, no disallowance can be made under section 37(1). 26. In our considered opinion, this decision has to be upheld as it is in line with various orders of the co-ordinate benches of this Tribunal some of which are listed below:- ¨ Kaira Can Company Ltd v/s DCIT, (2010) 2 ITR (Trib.) 20 (Mum.). The penalty for non-compliance of SEBI Regulation Scheme, 2002, awas allowed as expenditure. It was held that compliance of law is incident of every business carried on by a person. Therefore, any payment made for the purpose of compliance or non-compliance of the provisions of law would tantamount to payment incidental to the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in the regular course of business that cannot also be termed as penal in nature. Similarly, fine paid for delay in making the deliveries of shares due to deficiencies in the documents like nonmatching of signatures, etc. cannot be considered penal in nature; irregularities of this type cannot be ruled out in such type of business and any fine paid for those irregularities 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. Therefore, considering the totality of the facts of the present case, in the instant case, although some violations of the conditions prescribed by the NSE were there but those violations occurred in the regular course of business and cannot be considered as infraction of any statutory law. So, the expenses incurred by the assessee in regular course of business were allowable. 27. Learned Departmental Representative, on the other hand, relied on the decision of Delhi Bench of the Tribunal in ACIT v/s Subhash Chandra Shorewala, (2004) 91 TTJ 57 (Del.), and prayed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee by the decision of a coordinate bench of the Tribunal in Edelweiss Capital Ltd. (supra), wherein the Bench observed as follows:- "…….. There is no dispute that the assessee holds derivatives as its stocki-in-trade and there is also no dispute that the principle "cost or market price, whichever is lower" in valuing the derivatives. When the derivatives are held as stock-in-trade then whatever rules apply to the valuation of stock-in-trade will have to be necessarily apply to their valuation also. It is a well settled position in law that "while anticipated loss is taken into account in valuing the closing stock, anticipated profit in the shape of appreciated value of the closing stock is not brought into the account, as no prudent trader would care to show increased profit before its realization. This is the theory underlying the rule that the closing stock is to be valued at cost or market price whichever is the lower, and it is now generally accepted as and established rule of commercial practice and accountancy". This is what the Supreme Court held in the case of Chainrup Sampatram v/s Commissioner of Income Tax, West Bengal, (1953) 24 ITR 481 (SC), speaking ..... X X X X Extracts X X X X X X X X Extracts X X X X
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