TMI Blog2010 (3) TMI 907X X X X Extracts X X X X X X X X Extracts X X X X ..... ry 29, 2010, passed by the Income-tax Appellate Tribunal ("the ITAT") proposing the following questions of law that under section 88E of the Act, the assessee is entitled for payment of incometax of profits and gains of business or profession arising from taxable securities transaction computed in the manner provided in sub-section (2) of an amount equal to the security transaction tax paid in respect of the taxable securities transaction. "(a) Whether the Income-tax Appellate Tribunal was correct in law in allowing deduction of Rs. 3,84,01,630 to the assessee being the SEBI registration fee holding that the same was statutory fee, allowable as deduction under section 43B of the Act ? (b) Whether the provisions 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ound to pay annual regulatory fees based on turnover to the SEBI, (ii) the liability was contested before the court and, therefore, the same was unascertained till the appeal was pending, (iii) with the final verdict by the hon'ble Supreme Court in the year 2001, the whole of the liability (principal + interest) became ascertained liability, (iv) since the liability became final and got crystallized in February, 2001, the same was to be claimed by the assessee in the assessment year 2001-02, (v) since the liability got finalized and crystallized even on payment basis as it belonged to prior period, (vi) by making the payment 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 asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng a statutory liability was allowable under section 43B of the Act. Accordingly, in the present case, the Income-tax Appellate Tribunal held that the same as "fee" is falling under section 43B in the year under consideration as the payment was made during the year. 11.The Income-tax Appellate Tribunal has come to the conclusion on the following basis : (i) The SEBI is a nodal agency for regulating the stock market, brokers, sub-brokers, and other brokers and intermediaries who have registered themselves 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the meaning of section 43B(a) of the Act, rather it was a contractual liability as whosoever wanted to become member of stock exchange, he was under an obligation to pay registration fee to the SEBI. 13. On the other hand, the learned counsel Mr. C. S. Aggarwal, senior advocate appeared on behalf of the assessee, who submits as under : (i) The assessee is a public limited company, mainly dealing 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 expen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esented the payment made out of current year's liability. The Assessing Officer, however, framed an assessment on December 19, 2007, whereby allowing the claim of expenditure incurred by way of "fee" as an allowable deduction. In fact, while making the disallowance the Assessing Officer did not consider the provisions of section 43B 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 submitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and falls under section 43B of the Income-tax Act. 22. After hearing both the parties, we are of the view that the assessee on a query replied to the Assessing Officer that the said payment in question was made as one-time settlement fees to the SEBI under 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 regi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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