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TMI Blog2016 (12) TMI 1721X X X X Extracts X X X X X X X X Extracts X X X X ..... e in India under scheme of demutualization, shall be the cost of acquisition of its original membership of the exchange - capital gain computed on sale of shares of BSE by taking the cost of acquisition and allowing indexation thereon as per provisions of law. - Decided against revenue - I.T.A. No. 1144/Mum/2015 - - - Dated:- 20-12-2016 - Shri Joginder Singh (JM) And Rajesh Kumar (AM) Appellant by : Ms. Mahua Sarkar Respondent by : Shri B B Jokhakar ORDER Per Rajesh Kumar, Accountant Member This is an appeal filed by the revenue. It is directed against order passed by Ld. CIT(A)-9, Mumbai dated 18.12.2014 for assessment year 2011-12. 2. Brief facts of the case are that the assessee filed its return of income on 15.9.2011 declaring total income of ₹ 3,23,97,806/- which was processed under section 143(1) of the Act and thereafter the case of the assessee was selected for scrutiny and accordingly notices u/s 143(2) and 142(1) were issued and served upon the assessee. Thereafter the assessment was completed under section 143(3) vide order dated 28.1.2014 by assessing the income of the assessee at ₹ 3,93,89,870/- by making various additions as sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In view of the above facts and decisions, the disallowance made by the AO amounting to ₹ 5,00,000/- and ₹ 16,31,704/- is directed to be deleted. The grounds of appeal are thus treated as allowed. 6. We have heard both the parties on the issue and perused the material placed before us including the impugned order. We find that the ld. CIT(A) has deleted the above addition by following the decision of Co-ordinate Bench of the Tribunal in the case of Reliance Share and Stock Brokers (P) in ITA No. 274/Mum/2013 (AY-2008-09) dated 22nd October, 2014, in which the similar issue has been decided in favour of the assessee. The relevant part of the above judgement is reproduced below : 14. On consideration of rival submissions, we notice that the case of the Ld A.R was that the amount of ₹ 50.00 lakhs was paid by the assessee by taking into consideration the business interest in order to settle the ongoing dispute and according to Ld A.R, the assessee never admitted or accepted the alleged irregularities. Thus, according to Ld A.R, the assessee has not committed any of the allegation made by the SEBI. Hence the amount of ₹ 50.00 lakhs paid by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cause of violation has been found. However, in the event of a serious and intentional violation, the process should not be completed till the fact finding process is completed whether by way of investigation or otherwise. 6.4 The Appellant further submitted that most of the irregularities referred to in the Order are procedural or administrative non- compliances of the various provisions of SEBI Act. The SEBI has been given the power by the Parliament of India to pass consent orders under the SEBI Act and the Depositories Act. It has also been specified that in the event of a serious and intentional violation the process should not be completed till the fact finding process is completed. The Appellant's case was decided without waiting for the final fact findings, suggesting that the case was one of routine abnormality. 6.5 The appellant also submitted that the SEBI while accepting the consent proposal of the Appellant has inter alia stated as under: You had vide consent application and letter dated 15th November, 2007 proposed, without admitting or denying the guilt, to offer 50,00,000/-(Rupees Fifty Lakhs only) as an aggregate amount towards settlement charge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in nature. It was also found that those violations were offered by payment of penalty as in the instant case. Therefore, impugned order of the Commissioner (Appeals) did not call for any interference. [Para 10] CASES REEFERED TO CIT v. Gwalior Rayon Silk Manufacturing (Wvg.) Co.Ltd [1999] 237 ITR 253/102 Taxman 433 (Born.) (para 5) and consolidated Coffee Ltd. v. Agricultural Income-tax Officer [2001] 248 ITR 417 (SC) - The Hon'bie ITAT in the case of Kaira Can Company Ltd. (32 DTR 485) has held that Payment, made under SEBI Regulation scheme, 2002 for failure to make disclosure as required under SEBI (Substantial Acquisition of shares and Takeovers) Regulations 1997 could not be treated as penalty as it is a payment for regularizing the default committed hence such payment can not be disallowed by invoking explanation to s. 37(1)., The Hon'ble Apex Court in the case of CIT Ahmedabad Cotton Mfg. Co. Ltd. [1993] 205 ITR 163 has held that, Penalty paid under option conferred on assessee under the concerned law or scheme itself is deductible What needs to be done by an assessing authority under the Income-tax Act in examining the claim of an assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s prohibited by law. Hence, the invocation of explanation to section 37 of the Income Tax Act, 1961 is not justified. In our opinion, in the facts and circumstances of the present case, no fault can be found with the decision of the [TAT. Accordingly, the second question cannot be entertained. 6.7 The Appellant submitted that in case of CIT v. Sales Magnesite (P.) Ltd. [1199-51214 ITR 1/81 Taxman 334 (Born.), it was held that, Commercial expediency must be decided from businessman's point of view. Even expenditure incurred voluntarily on the ground of commercial expediency and in order indirectly to facilitate the carrying on of the business would be deductible under this section. The question whether it was necessary or commercial expediency or not is a question that has to be decided from the point of view of the businessman and not by the subjective standard of reasonableness of the revenue. 6.8 In view of the above facts and judicial decisions, the Appellant submitted that fees paid to SEBI is allowable as business expense and not a penalty for infraction of law. 6.9 I have gone through the A.O.'s order as well as the appellant's submissions. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9,561/- on the sale of 70694 shares of BSE Ltd for a total consideration of ₹ 2,26,92,774/- and after claiming deduction of indexation cost of acquisition of ₹ 1,75,33,213/- by taking cost of shares at ₹ 81,62,438/- in the year 1997-98 which was the cost of acquisition of BSE card. In the month of August 2005, the BSE were underwent demutualization and corporatization under which the BSE card holders were allotted shares at ₹ 1 each wherein the assessee was also allotted shares. While computing the long term capital gain, the assessee has taken the cost of acquisition at ₹ 81,62,438/- as the cost of acquisition of 70694 shares and indexed the same. During the course of assessment proceedings, the AO vide order sheet entry dated 17.1.2014 asked the assessee as to why the period of holding of these shares should not be taken from the assessment year 2005-06 instead of assessment year 1997-98 which was responded by the assessee by stating that the period of holding of the card of BSE which was taken by the AO from 2005-06 has also to be taken into account as per the provision Clause (xiii) of section 47. The AO considered the reply of the assessee and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent have to be inflated to arrive at the indexed cost of acquisition and the indexed cost of improvement and then deduct the same from the sale consideration to arrive at the long-term capital gains. If indexation is linked to the period of holding and the law specifically allowed the inclusion of the prior period of holding despite the assets undergoing a change, the same is thus required to be included. In view of the forgoing the appellant's appeal is allowed. 3.3 Against the order passed by me in the case of G. Das Capital Markets Pvt. Ltd. in A.Y-2008-09, the department preferred an appeal before the Hon'ble IT AT, Mumbai and Hon'ble ITAT, Mumbai G Bench Mumbai in ITA No.3187/Mum/2013, dated 28-08.2014 has upheld the order passed by me. As the issue in the present appeal is identical to the one decided by the Hon ble ITAT G Bench in the case of G Das Capital Markets pvt ltd in AY 2008-09, the AO is accordingly directed to allow indexation benefit in line with the decision of the Hon ble ITAT in the case of G Das Capital Markets Pvt Ltd in AY 2008-09. The ground of appeal is thus allowed 10. We have heard the rival contentions and perused the material p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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