TMI Blog2019 (11) TMI 1354X X X X Extracts X X X X X X X X Extracts X X X X ..... rroneous nor prejudicial to the interest of revenue i.e. involving any error or it is deviating from law. (as defined in Black's Law Dictionary). Since, the AO has acted in accordance with law and passed the assessment order, the same cannot be considered as erroneous and prejudicial to revenue, simply because AO has not elaborated various things in the body of the assessment order. Hence, we quash the revision order passed by PCIT and allow the appeal of the assessee on this issue - Appeal of the assessee is allowed - ITA No. 1790/Mum/2019 (Assessment Year 2015-16) - - - Dated:- 4-10-2019 - SRI MAHAVIR SINGH, JM AND SRI RAJESH KUMAR, AM Appellant by: S/shri Vijay Mehta And Rajesh Shah, ARs Respondent by: Shri M Dayasagar, CIT DR ORDER PER MAHAVIR SINGH, JM: This appeal by the assessee is arising out of the Revision order of Pr. Commissioner of Income Tax [in short PCIT] Mumbai in Appeal No. Nil dated 30.01.2019 passed u/s 263 of the Income-tax Act, 1961 (hereinafter the Act ). The Assessment was framed by the Dy. Commissioner of Income Tax, Circle 2(1)(1), Mumbai (in short DCIT/ AO) for AY 2015-16 vide dated 29.12.2017 under section 143(3) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of the Id. PCIT - 2 be quashed. 3. Brief facts are that the assessee filed its return of income on 27.11.2015 declaring total income of ₹ 24,48,63,440/-. Subsequently, it revised its return of income declaring the same income on 19.01.2016. The assessment u/s 143(3) of the Act was completed on 29.12.2017 assessing the total income at ₹ 31,05,79,241/- by making disallowance of ₹ 5,45,68,743/- on account of disallowance u/s 14A and an amount of ₹ 1,1 1,47,058/- on account of depreciation of assets (in the form of server). Subsequently, the PCIT, on examination of records, noted that the assessment order dated 29.12.2017, passed by the Assessing Officer is erroneous and prejudicial to the interest of the revenue due to the reasons stated here under: - a) ₹ 25,78,84,501/- had been reduced while computing taxable income as 'contribution towards settlement guarantee fund'. b) ₹ 6.75 Crore had been debited to P L a/c as contribution towards investors service fund. 4. We noted from the facts of the case that in the Show Cause notice issued u/s 263 of the Act, the PCIT have raised the following issues due to which he was of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties; to promote industrial development in the country through efficient resource mobilization by way of investment in corporate securities. BSE has been providing infrastructure facilities for trading in securities. All the Directors of BSE are Independent and Non-Executive. 6. BSE in response to the notices issued u/s. 143(2) and 142(1) of the Act, from time to time had uploaded online all the details on the Income Tax Portal as called for by the AO. After looking into each and every aspect of the income and expenses of BSE, assessment was completed. Details of notices issued and replied filed by BSE are filed in the assessee Paper Book. From these details, it can be seen that all the details as required by AO were uploaded online on the Income Tax Portal during the course of the assessment proceedings. It is proved beyond doubt that the AO had made a detailed and complete enquiry about each and every aspect of income and Expenditure of BSE and thereafter the AO completed the assessment in accordance with law. 7. As regards to the merits of the case are concerned, the Ld Counsel pointed out that the observation in para 4(a) of Show Cause Notice with respect to the amount co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of each stack exchange shall be subject to the following: 1. The MRC shall be fixed for a month. 2. By 15th of every month CC shall review and determine the MAC for the next month based on results of the daily stress test of the preceding month. 3. For every day of the preceding month uncovered loss numbers shall be estimated by the various stress tests for credit risk conducted by the CC for the segment and highest of such numbers shall be taken as worst case loss number for the day. 4. Average of all the daily worst case loss numbers determined in (3) above. 5. The MAC for next month shall be higher of the average arrived in at step 4 above and the segment MAC as per the previous review. Contribution to Core SGF: At any point of time, the contributions of various contributors to Core SGF of any segment shall be as follows: a. Clearing corporation shall contribute at least 50% of the MAC from its own funds which shall be considered as part of its Networth. b. Stock Exchange shall contribute at least 25% of the MAC (can be adjusted against transfer of profit by Stock Exchange as per Regulation 33 of SECC Regulations). c. The clea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It may be noted that BSE ltd has not gained any advantage of enduring nature or any capital asset is acquired as a result of contribution made mandatorily. The expenditure is incurred wholly exclusively for the purpose of business of BSE. It is submitted that, if the said amount is not allowed in this A. Y. then the same amount will be taxed twice; i.e. one when the amount contributed is disallowed and second when the said amount in whole or in part is shored with BSE Limited in subsequent assessment year when it is shared. In view of the above facts and in law, the said sum of 25,78,84,501/- contributed during the year is an allowable expenditure under Sec 37 (1) of the Income Tax Act, 1961 and has been claimed accordingly. A confirmation from the Indian Clearing Corporation Ltd. is attached as Annexure 22.2 (presently refer annexure 3). It may be noted that, in subsequent year i.e. F. Y. 2015-16 the said amount of ₹ 25,78,84,501/- contributed by BSE Limited to the Care SGF has been debited in the profit loss A/c under the head Prior period item and accordingly disallowed in the computation of income for FY 2015-16 Copy of computation is attached as Annexure 22.3 (pres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2,32,16,768 Total Annual Listing Fees received 61,80,35,509 The Exchange has charged all direct expenses incurred towards Investors Services to contribution to investor service fund and has also charged on a pro- rata basis other relevant expenses. It may be noted that this contribution to Investor Services Account is regulatory requirement and compulsory for stock exchange business operation since the issue of SEBI circular no Ref. SE/10118 dated October 12, 1992. The details of contribution of Investor Service Fund are as under: Particulars Amount (₹) Annual Listing fees for the year 61,80,35,509 29% of the above (as per SEBI requirement) 12,36,07,102 Expenditure incurred towards investor service activities (Charged to respective nature of expenses) 5,60,92,345 Charged to contribution to investor service fund 6,75,14,757 Total 12,36,07,102 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of deposit/ contingency reserve. According to us, the said issues were already examined by the AO during the course of assessment proceedings. During the course of assessment proceedings, it was explained that contribution by BSE to Core SGF is a mandatory payment and expenditure is neither of capital in nature nor it has any enduring benefit or personal in nature but incurred wholly and exclusively for the purpose of business and therefore allowable under section 37 of the Act. We are of the view that contingency means a future event or circumstances which is possible but cannot be predicted with certainty. In the present case the liability to pay/ contribute is certain and accrued as per the Circular of SEBI. The said amount is transferred to CSGF and has not remained with BSE; therefore, it cannot be said to be in a nature of contingency reserve. Secondly, the contribution cannot also be termed as deposit. Oxford dictionary defines deposit as place (something) somewhere for safekeeping . In the present case the amount is transferred to CSGF of Indian Clearing Corporation Limited (ICCL) and has not been kept for safekeeping. The amount transferred will be utilized by ICCL as per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -11 3,95,00,000 Yes Yes 6. 2011-12 3,99,00,000 Yes Yes 7. 2012-13 5,59,00,000 Yes Yes 8. 2013-14 6,05,00,000 Yes Yes 9. 2014-15 6,40,00,000 Yes Yes 10. 2015-16 12,3,00,000 Yes Yes (since revised u/s 263) The contribution has been made by assessee even in prior years and never disallowed by Department. For this proposition of consistency, Ld Counsel drew our attention to the decision of Hon ble Supreme Court in the case of Radhasoami Satsang v/s CIT 193 ITR 321(SC), wherein it was held as under: - 13. We are aware of the fact that strictly speaking res judicata does not apply to income-tax proceedings. Again, each assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ircumstances must exist to enable the Commissioner to exercise power of revision under this sub-section, viz., (i) the order is erroneous; (ii) by virtue of the order being erroneous prejudice has been caused to the interests of the Revenue. It has, therefore, to be considered firstly as to when an order can be said to be erroneous. We find that the expressions erroneous , erroneous assessment and erroneous judgment have been defined in Black's Law Dictionary. According to the definition, erroneous means involving error; deviating from the law . Erroneous assessment refers to an assessment that deviates from the law and is, therefore, invalid, and is a defect that is jurisdictional in its nature and does not refer to the judgment of the Assessing Officer in fixing the amount of valuation of the property. Similarly, erroneous Judgment means one rendered according to course and practice of court, but contrary to law, upon mistaken view of law, or upon erroneous application of legal principles. From the aforesaid definitions it is clear that an order cannot be termed as erroneous unless it is not in accordance with law. If an Income-tax Officer acting in accordan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T v. Mukur Corporation [1978] 111 ITR 312. We are of the opinion that the aforesaid interpretation given by the Calcutta High Court to the expression prejudicial to the interests of the Revenue is the correct interpretation. 16. We have also gone through the judgment of the Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. v/s CIT 243 ITR 83 (SC). Wherein Hon'ble Court has stated that the provision of Sec. 263 of the Act cannot be invoked to correct each and every type of mistake or error committed by the AO and that it is only when the order is erroneous that the section would be attracted. In other words, what has been emphasized by the Hon'ble Supreme Court is that every loss of revenue as a consequence of an order of the AO cannot be construed to be prejudicial to the interests of the revenue, unless it can be established that the assessment order is erroneous in as much as the same is unsustainable in law. Hence, we are also of the view that in order to set aside an order under section 263 there must exist two circumstances to enable your honor to exercise the power of revision, viz; the order passed by the AO has to be erroneous and by virtue ..... X X X X Extracts X X X X X X X X Extracts X X X X
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