TaxTMI 
TaxTMI 
2009 (1) TMI 553
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....ad debited in its P&L a/c for the relevant previous year a sum of Rs. 3,85,511 on account of bad delivery and other charges. When explanations were sought, it was stated by the assessee as under : "Bad delivery charges are levied by National Stock Exchanges on account of the following- (ii) Change in shareholding pattern enclosed herewith debit note from NSE Rs. 1,00,000 (iii) Miscellaneous Rs. 35,511 The NSE of India is not a Government body or authority. It is an independent body. Thus fines and penalties levied by the NSE cannot be treated as infraction of law and hence no disallowance is called for." 5. From the letter issued by NSE of India, AO noted that fine of Rs. 2,50,000 was imposed for trades executed in the shares of M/s Sun Earth Ceramics Ltd. and M/s Roofit Industries Ltd., which were 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 req....
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....ulations. It was further noted by the learned CIT(A) that violation of cl. 30 of membership undertaking for the capital market segment of the exchange was also a violation of r. 4(C) in Appendix 222 of SEBI Rules, 1992. However, as regards fines totalling Rs. 6,093, learned CIT(A) came to a conclusion that AO was unable to show how it was in the nature of penalty for infraction of law. Thus, he sustained the disallowance of Rs. 3-1/2 lakhs by deleting the balance disallowance of Rs. 6,093. Now before us the learned Authorised Representative submitted that NSE was a company incorporated under the Companies Act and its rules and bye-laws could not be equated to any statutory rules or regulations. He specifically referred to r. 1(1) of the Rules of NSE of India Ltd. According to him. the board of directors of NSE (I) Ltd. 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 ....
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....92. The powers of the Board of NSE Ltd. to make bye-laws, rules and regulations is subject to the directives under these enactments and also the trading regulations prescribed by RBI from time to time. The appointments to the board of directors of the NSE Ltd. has to be done as per the provisions of articles of association of NSE Ltd. The Board is having power for penalizing any disobedience or contravention of its rules, bye-laws and regulations by its member. No doubt, the board of directors of NSE has therein nominees of SEBI, but, in our opinion, this by itself would not make NSE a statutory body on par with SEBI. Members of NSE Ltd. are bound through the articles of association to abide by the rules, regulations and bye-laws of the NSE Ltd. Nevertheless, such rules, regulations and bye-laws can be considered as regulations 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....
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.... 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. Learned CIT(A) has given a clear finding that the payments made by the assessee 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 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,....
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....o the mandate of this provision. Therefore, in the interest of justice, we deem it fit to remit the matter back to AO for consideration afresh in the light of decision of Special Bench in Daga Capital Management (P) Ltd. (supra). Ordered accordingly. In its ground No. 2, assessee is aggrieved that software expenses of Rs. 96,900 was considered by the AO as capital in nature. Assessee had incurred Rs. 96,900 for acquisition of software which the AO treated to be a fixed asset. However, he allowed depreciation @ 25 per cent thereof. Aggrieved by this, assessee moved in appeal before CIT(A) who confirmed the order of AO. When the matter came up before us, the learned counsel for assessee brought to our attention that allowability of software expenditure Was considered by Special Bench of this Tribunal in the case of Amway India Enterprises 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 En....
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....olumes of business and the employees could not be hired and fired just like that. It was submitted by the assessee, that it had submitted all details and employees particulars before the AO and the disallowances were made without justification. Learned CIT(A) accepted assessee's contention since according to him, there was proper reason for increase in salaries. It was noted by the learned CIT(A), that for four employees, salaries were paid in the preceding previous year only for a small period, whereas in the relevant previous year, such salaries were paid for the full year. Now before us, learned Departmental Representative strongly supported the order of the AO. According to him, when there was drastic drop in income of the assessee, it was unreasonable to claim an increased cost. Per contra, the learned Authorised Representative pointed out paper 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 learn....