TMI Blog2009 (1) TMI 553X X X X Extracts X X X X X X X X Extracts X X X X ..... e by the disciplinary bench of the NSE was admittedly for violation of the regulation of NSE Ltd., and neither the AO nor the CIT(A) has been able to point out how such violation or breach of regulations could be treated on par with the breach of a rule under the SEBI enactment. Therefore, we are of the considered opinion that there was no violation of law by the assessee and the fine paid were only for non-observation of internal regulations of stock exchange. We find no reason to interfere in the order of CIT. In the result, grounds 1 and 2 of the assessee are allowed whereas the sole effective ground raised by the Revenue is dismissed. Disallowance of salary - HELD THAT:- Assessee has furnished full information regarding salary payments. The comparative year-wise cost furnished by the assessee before CIT(A) clearly show that the increase in salary was due to higher payments paid to individual employees and also on account of the reason that such payments were made for full year in majority of the cases. Payments of salaries and employment of staff are the prerogative of a businessman and if he feels that employees should be paid well so as to get optimum productivity it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re in violation of regn. 4.6.2 of Part A of capital market segment and r. 4(e) of Chapter IV of rules of the exchange. It was also noted by the AO that the fine of Rs. 1,00,000 was imposed on the assessee by NSE for adopting changes in the dominant promoter group which resulted in the dilution of the holding of the dominant promoter group in the assessee company below the required minimum, which was in violation of the cl. 30 of the membership undertaking given by the assessee for capital market segment of the exchange and also in violation of r. 4(C) of the SEBI (Stock Brokers and Sub-Brokers Regulations) Act, 1992. AO found that both these fines were levied by the Disciplinary Action Bench of the NSE. The corresponding debit notes issued by NSE for these fines had one para which runs as under : "4. In case of late payment, interest @ 18 per cent p.a. calculated on a daily basis will be charged from the respective due dates for the delayed period i.e., till the date of payment. Late payment may also attract withdrawal of trading facility pursuant to Circular No. NSE/F A/2571 dt. 29th May, 2001." AO, therefore, based on the above came to a conclusion that these fines were p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. was constituted in accordance with the provisions of articles of association of NSE Ltd. and such Board was empowered to organize, control, manage, regulate and facilitate the operation of the exchange and transactions by trading members of the exchange. According to him, r. 1(3) empowered the Board to make bye-laws, rules and regulations for all matters relating in the conduct of the business of exchange and the transactions between members inter se and also to control and define such transactions. According to him, the fine levied on the assessee for trades executed in the shares of M/s Roofit Industries Ltd. and M/s Sun Earth Ceramics Ltd. fell under un-business like conduct specified in r. IV(4)(e) of the Rules of NSE Ltd. It was stressed by him that the levy of fine was not for any fraudulent or fictitious dealings. Learned Authorised Representative also referred to the Trading Regulation Part A of NSE and according to him, such regulations were framed by the Board of NSE Ltd. in accordance with the powers vested on it through the articles of association. Learned counsel also referred to regns. 4.6.1 and 4.6.2 which according to him, were rules to be observed by trading mem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egulations for controlling the internal inter se obligations and rights of the members and NSE Ltd. Though every member of NSE Ltd. would be obliged to abide by such rules and regulations, a violation thereof cannot be treated as violation of a statutory law or rule. Fines and penalties levied for violation on account of unfair trading practice as specified in regn. 4.6 of the NSE Regulations and un-business like conduct as specified in r. IV(4)(e) of the NSE Rules cannot be equated with violation of a statutory rule or law. Though, the learned CIT(A) has referred r. 4C in Appendix 222 to SEBI Rules, 1992, this rule only specifies the condition to be satisfied for the SEBI Board to grant a certificate to a stock broker. It is true that working of stock exchanges can be regulated by SEBI under the SEBI enactment but violation of rules and regulations framed by such stock exchanges cannot be per se considered as violation of any provision of SEBI enactment. The fine imposed on the assessee by the disciplinary bench of the NSE was admittedly for violation of the regulation of NSE Ltd., and neither the AO nor the learned CIT(A) has been able to point out how such violation or breac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... infirmity in the order of the learned CIT(A) calling for an interference." In the result, we delete the disallowance of Rs. 2-1/2 lakhs and Rs. 1 lakh respectively being the fine paid by assessee to M/s NSE Ltd. As for the learned CIT(A) s decision to delete the disallowance to the extent of Rs. 6,093, we find no reason to interfere. In the result, grounds 1 and 2 of the assessee are allowed whereas the sole effective ground raised by the Revenue is dismissed. Grounds 3 and 4 of the assessee are general in nature and do not need any adjudication. In the result, appeal of the assessee stands allowed and appeal of the Revenue stands dismissed. Now we take the cross-appeals for asst. yr. 2002-03. First we take up assessee s appeal. Ground No. 1 of the assessee is regarding disallowance of expenditure of Rs. 2,989 and interest Rs. 56,809. These disallowances were made by the AO under s. 14A of the Act. According to the AO, these expenses related to earning of dividend income which was exempted from tax. AO had from the computation of income noted that assessee had dividend income of Rs. 59,798 which was claimed exempt under s. 10(33) of the Act. assessee explained that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vs. Dy. CIT (2008) 114 TTJ (Del)(SB) 476 : (2008) 4 DTR (Del) (SB)(Trib) 1 : (2008) 111 ITD 112 (Del)(SB) and detailed guidelines laid down regarding treatment of software expenses. We have verified the orders and heard the rival contentions. We are of the opinion that, in the light of decision of Special Bench in the case of Amway India Enterprises (supra), treatment of software expenses needs to be considered afresh by the AO. Special Bench has laid down detailed guidelines for considering various types of software expenses and the treatment to be given. Therefore, in the interest of justice, we set aside the orders of AO and learned CIT(A) and remit the matter back to AO for dealing with the issue in line with the guidelines laid down by the Special Bench in Amway India Enterprises case (supra). Ground No. 2 of the assessee is allowed for statistical purposes. Ground No. 3 of the assessee is regarding disallowance of SEBI turnover charges. Learned counsel for the assessee submitted that he was not pressing this ground. Therefore, ground No. 3 is dismissed as not pressed. Ground Nos. 4 and 5 of the assessee are general in nature and do not need any adjudication. In the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... book page Nos. 29 and 30 which gave the details of salary paid by the assessee for financial years 2000-01 and 2001-02 respectively. He pointed out that the salaries paid to various employees had substantially gone up during the relevant previous year as compared to the preceding year. A comparative analysis was also shown by the learned Authorised Representative to justify the increase in salary. According to him, for the preceding previous year, sixteen employees were given salary only for part of the year whereas for the relevant previous year except for three employees, all others were paid for the full year. Therefore, according to him, the increase was justified. We have perused the orders and heard the rival contentions. Assessee has furnished full information regarding salary payments. The comparative year-wise cost furnished by the assessee before learned CIT(A) vide paper book page Nos. 11 and 12 clearly show that the increase in salary was due to higher payments paid to individual employees and also on account of the reason that such payments were made for full year in majority of the cases. Payments of salaries and employment of staff are the prerogative of a busines ..... X X X X Extracts X X X X X X X X Extracts X X X X
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