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TMI Blog2021 (3) TMI 321X X X X Extracts X X X X X X X X Extracts X X X X ..... he AO with a direction to include only those investments which have yielded dividend income for computing the average value of investments for the purpose of computing the amount of disallowance u/s 14A - AO is directed to offer reasonable opportunity to the assessee to present its case before proceeding to re-compute the disallowance. Since this ground also relates to the ground raised in the Department s appeal, the Department s ground also stands restored to the file of the AO with similar directions. Disallowance of non-compliance charges amounting paid to National Stock Exchange - HELD THAT:- As seen that the Ld. Authorized Representative has given a detailed break up and description of the various amounts constituting the impugned total amount and has vehemently argued that these penalties and fines levied by National Stock Exchange were more in the nature of regulatory/disciplinary fees and were not in the nature of any penalty levied for violation of any law. The fact remains that the submissions regarding the actual nature of fines and penalties levied by NSE were not explained before the Lower Authorities. The fact also remains that in the tax audit report, the au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore the Tribunal and has raised the following grounds of appeal: ITA No.6330/Del/2017 1. That the Commissioner of Income Tax (Appeals) [ CIT (A)] erred on facts and in law in confirming the disallowance of ₹ 35,18,803/- made by the Assessing Officer, being amount paid to the National Stock Exchange of India Limited ( NSE ) holding the same to be capital in nature. 1.1 That the CIT (A) erred on facts and in law in not appreciating that the aforesaid charges paid to NSE for delay in making certain timely compliances were not in the nature of fine and penalty for violation of law. 1.2 That the CIT (A) erred on facts and in law in not appreciating that the aforesaid charges levied by NSE in accordance with its internal bye laws were merely compensatory and not penal in nature. The appellant craves leave to add, alter, amend or vary from the above grounds of appeal before or at the time of hearing. ITA No.6334/Del/2017 1. That on facts and circumstances of the case, the Ld. CIT (A) has erred in deleting the addition of ₹ 1,93,79,583/- made by the AO u/s 14A of the I.T. Act, 1961, as per the disallowance computed in Tax Audit Report. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e same should be admitted. 4.0 Per contra, the Ld. Sr. Departmental Representative (DR) has no objection to the additional ground being admitted. 5.0 Having heard both the parties on the issue of admission of additional ground, we deem it appropriate to admit this additional ground as this issue was already before the lower authorities and no fresh issue is being sought to be raised by this additional ground of appeal. 6.0 The Ld. Authorized Representative submitted that during the under consideration, the assessee had received dividend income of ₹ 4,14,800/- from equity shares held for trading purposes and the dividend was claimed as exempt u/s 10(34) of the Act. The Ld. Authorized Representative further submitted that the assessee had revised its return of income and had suo moto made a disallowance of ₹ 1,83,55,525/- u/s 14A of the Act and, subsequently, the Assessing Officer proceeded to compute the disallowance at ₹ 3,77,35,108/- thus, making an additional disallowance of ₹ 1,93,79,583/- over and above the suo moto disallowance offered to tax by the assessee. The Ld. Authorized Representative further submitted that on appeal, the Ld. CIT (A) ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,803/-, it was submitted that during the year under consideration the assessee had incurred expenditure aggregating to ₹ 46,06,304/- disclosed under the head fines and penalties and the assessee had suo moto disallowed an amount of ₹ 3 ,76,890/- being aggregate of sums paid to Authorities other than NSE, as not admissible for deduction. It was further submitted that the Assessing Officer, however, also disallowed the amount of ₹ 35,18,803/- being charges paid to NSE, u/s 37(1) of the Act. The Ld. Authorized Representative submitted the assessee is a member of the National Stock Exchange of India ( NSE ) and is engaged in providing securities broking services to institutions and depositary services to retail clients. As a member of the NSE, the assessee is required to comply with the rules, regulations and bye-laws issued by the NSE for its members. Such rules, regulation and bye-laws can be considered as regulations for maintaining the general discipline of the exchange. It was submitted that in the event of delay in compliance/ total non-compliance of the bye-laws, NSE levies a fine on its members, which is purely routine and compensatory in nature and does not a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s were paid during the course of business of the assessee and were not for infringement of any law. 10.0 In response, the Ld. Sr. Departmental Representative (DR) submitted that the impugned amount had been mentioned as disallowable even by the Tax Auditor of the company in the tax audit report but the assessee had not disallowed the same suo moto in the computation of taxable income. It was submitted that in view of the qualification made by the tax auditor, the amount was correctly disallowed by the Assessing Officer. 11.0 We have heard the rival contentions and have also perused the material on record. As far as the issue of disallowance of non-compliance charges amounting to ₹ 35,18,803/- paid to National Stock Exchange is concerned, it is seen that the Ld. Authorized Representative has given a detailed break up and description of the various amounts constituting the impugned total amount of ₹ 35,18,803/- and has vehemently argued that these penalties and fines levied by National Stock Exchange were more in the nature of regulatory/disciplinary fees and were not in the nature of any penalty levied for violation of any law. However, the fact remains that the su ..... X X X X Extracts X X X X X X X X Extracts X X X X
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