TMI Blog2012 (11) TMI 812X X X X Extracts X X X X X X X X Extracts X X X X ..... e expenditure – Disallow repairs and maintenance under various heads of accounts - aluminum patti work, net working charges, expenditure for administration department – Held that:- As concluding from the facts of the case that all these expenditure were incurred in the regular course of business, after hearing both the parties we see no justification in sustenance of such disallowance. Issue decides in favour of assessee Bad debts u/s 36 – Bad debts includes total debts amount or only brokerage in hand of share broker – Held that:- Following the decision in case of Shri Shreyas S. Morakhia (2012 (3) TMI 103 - BOMBAY HIGH COURT) that bad debt relating to transaction of shares in the hands of share broker is allowable u/s 36(1)(vii) r.w.s. 36(2) as the same is an amount which could not be recovered by the share broker from his client as brokerage receivable from client was part of the debt which was taken into account while computing the income. Issue decides in favour of assessee Disallowance of penalty u/s 37 – Nature of payment made to stock exchange - Whether payment made to stock exchange for violation of trading beyond exposure limit, late submission of margin certificate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act. 2 On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the disallowance of expenses amounting to Rs.53,27,355/- under section 14A r.w.rule 8D of the Act, made by the AO. 3. i. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition made on account of penalty of Rs.8,70,951/- on violation of the bye-laws of the stock exchange, which are statutory in character and thus amounted to infringement of law . ii. On the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in ignoring the fact that the penalty is imposed under SEBI [procedure for holding inquiry and imposing penalty by Adjudicating Officer] Rules 1995 which has a binding character . iii. On the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in ignoring the facts that non-adherence to statutory provisions is not an allowable expenditure iv. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in appreciating that it was not enough that the disbursement was made in the course of trade, but was also for the lawful purpose of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es, we are of the opinion that the matter should be restored back to the file of AO with a direction to readjudicate the issue as per the provisions of law by taking into consideration the aforementioned decision of Hon ble Bombay High Court in the case of Godrej Boyce Mfg. Co. (supra) We direct accordingly. The aforementioned ground relating to disallowance u/s. 14A revenue as well as assessee are treated as allowed for statistical purposes. 3. Ground No.1B of the assessee is stated to be covered by the earlier decision of the Tribunal for A.Y 2006-07 in the case of the assessee itself, which is dated 21/3/2012 in ITA No.1873/M/10, wherein similar disallowance of Rs.31,77,416/- was made on account of payments made to non-residents disallowed under section 40(a)(ia)of the Act on account of non-deduction of tax. For the sake of completeness the relevant portion of the order of the Tribunal is reproduced below: 8. Ground No.1.2 is with reference to disallowance under section 40(a)(i) of the Income Tax Act. Briefly stated the assessee made payment of Rs..31,77,416/- as professional fees paid to foreign party Aurbach Grayson Co (AGC) resident of New York, USA. On the basis of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Electronics 320 ITR 209. It was submitted that the Hon'ble Supreme Court in the case of GE India Technology Centre (P) Ltd 327 ITR 456 reversed the decision of the Hon'ble Karnataka High Court (supra) and held that the expression chargeable under the provisions of the Act in section 195(1) shows that the remittance has got to be of trading receipts, the whole or part of it is liable to tax in India. If tax is not so assessable, there is no question of tax at source being deducted. It was submitted that the assessee is covered by the provisions of the DTAA as there was no PE in India. On the basis of the CA certificate, the amount was remitted without any TDS. However, it was fairly submitted that arguments of the assessee are not examined by the CIT (A) as he followed the decision of the Karnataka High Court in the case of Samsung Electronics 320 ITR 209 to confirm the additions so made. 11. The learned Departmental Representative while admitting that the above decision of the Hon'ble Karnataka High Court was reversed by the Hon'ble Supreme Court submitted that the issue on merits requires examination. 12. Considering the arguments of the rival parties and examining the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these expenditure can be said to have been incurred on account of capital as these expenditure are routine expenditure incurred for the purpose of carrying on its normal course of business. It is the case of the assessee that these items are of trivial value and are being incurred in the regular course of business and no expenditure had given benefit of enduring nature to the assessee. All the details regarding these expenditure have been filed and copy of these evidences are placed at page 9 to 43 of the paper book. An amount of Rs. 1,08,381/- is paid to M/s. Thulasi Interiors on account of interior aluminum patti work at Santcruz Branch. Another amount of Rs.1,08,355/- is paid to INMAC Computers Pvt. Ltd. which is on account of net working charges for Kolhapur, Nashik and Bhopal. Another amount of Rs. 1,16,687/- is the expenditure of administration department with all supporting vouchers. 4.2. In this view of the situation, keeping in view the facts of the case and finding that all these expenditure were incurred in the regular course of business, after hearing both the parties we see no justification in sustenance of such disallowance, which is ordered to be deleted and this g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owance thereof shall be allowed. Therefore, for application of this Explanation, it is necessary there should be an expenditure relatable to an offence or for a purpose which is prohibited by law. Nothing has been brought to rebut the contentions of the assessee that NSE was an independent body and the bye laws made by it for the regulation of its members did not have the force of the law. Such bye-law could be, at the best be seen as private contracts entered between assessee and stock exchange and any violation, therefore, cannot be, in our opinion, equated with an offence or with an act prohibited by law, in the nature of assessee s business, as a member of NSE payments related to switching on the terminals, switched off for not abiding by the regulations of such exchange, or for delay in settlement or furnishing of data can only be considered as incidental. Ld. CIT(A) has given a clear finding that the payments made by the assesses to M/s. NSE could only be considered as compensatory since bye-laws of NSE were only procedural and violation could not be treated as a penalty falling within the mischief of Explanation to s.37(1) of the Act. We therefore, find no infirmity in the o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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