TaxTMI 
TaxTMI 
2016 (4) TMI 710
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....the addition of Rs. 36,336/- being charges paid to Stock Exchanges treating same as a penalty on account of infringement of law . 03. That on the facts and in the circumstances of the case, the learned Commissioner of Income Tax (Appeals)-VI, Kolkata has erred in law in upholding the addition of Rs. 57,500/- treating the same 'as a Prior Period Expenses though the crystallization of liability occurred during the period of assessment. 04. That the appellant craves to add, alter and / or delete any grounds of appeal at later stage, if necessary." 3. The brief facts of the case are that the assessee is a company and it is a registered stock broker of CSE, BSE and NSE. The assessee filed its return on 13.11.2006 declaring a total income of Rs. 76,51,070/-. During the year under consideration, the assessee moved an application for obtaining Deposit based Membership of Bombay Stock Exchange Limited. The said membership was Trading Membership of the cash segment of Bombay Stock Exchange. As per the terms and conditions stipulated for the membership, the assessee apart from deposit of Rs. 1 crore was required to pay the following amount to Bombay Stock Exchange Ltd:- 1) Bas....
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.... on the case laws reported in 291 ITR 193 and 282 ITR 601 and sought to allow the ground no.1. The ld. DR relied on CIT(A) order and case laws of Hon'ble Jurisdictional High Court of Calcutta reported in 276 ITR 567 and prayed to dismiss the ground no.1. 7. Heard both representatives and perused the materials available on record and considered the case laws relied on by both the sides. The facts in the case are not disputed. The only question arises for our consideration is that the payments made to Bombay Stock Exchange towards broker contingency fund and admission fees, both are stated to be non-refundable are capital expenditure or revenue expenditure. In this regard, the assessee relied on two judgements of Hon'ble Delhi High Court and Hon'ble Delhi High Court and Hon'ble Madras High Court. Hon'ble Delhi High Court held in the case of Neset Holdings Pvt. Ltd. -vs- CIT reported in [2006] 282 ITR 601 held that amounts paid to stock exchange as a non-refundable deposits for acquiring OTC membership is a revenue expenditure. The Hon'ble Madras High Court in the cases of CIT-vs- S.Venkata Subramanian and Kamat Kumar V Shah reported in 291 ITR 193 held that the admission fee and c....
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....he business and, therefore, it would be an expenditure of capital in nature. The mere fact that although incidental, the expenditure would certainly help in the business of the assessee and may also help in profit-making, would not be sufficient to treat the same as revenue expenditure because it still retains the character of capital expenditure since the expenditure is directly related to the acquiring of right of carrying on of the business or to ensure the source of carrying on of the business.-Punjab State Industrial Development Corpn. Ltd. vs. CIT (1997) 140 CTR (SC) 594 : (1997) 225 ITR 792 (SC) and Brooke Bond India Ltd. vs. CIT (1982) 28 CTR (Cal) 345 : (1983) 140 ITR 272 (Cal) relied on; Atherton vs. British Insulate & Helsby Cables Ltd. 10 Tax Cases 155, Halstorm's Property Ltd. vs. Federal Commissioner of Taxation 72 CLR 634 and Lord Clyde Robert Addie & Sons' Colleries Ltd. vs. IRC 8 Tax Cases 671 applied; CIT vs. New India Sugar Mills (1992) 107 CTR (Cal) 280 distinguished. 17. To incur expenditure by way of development fee was to ensure the source for operating in the floor of the Exchange without which it was not possible for him to carry on the business and, the....
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....or various types of defaults of Rs. 33,336/- as per the trading norms issued by the stock exchanges. The question that now arises is whether this amount was a payment in the nature of penalty in terms of section 37 of the Act. 12. The AO disallowed the payment of the said sum of Rs. 36,336/- observing it to be a penalty and it is an infringement of law. This order was confirmed by the CIT(A). According to CIT(A) that the assessee did not file any copy of ledger and any such evidence regarding the nature of penalties and violation committed by the assessee. 13. Having aggrieved, the assessee before us by this ground no.2. The assessee submitted that it is a stock exchange penalty and such bodies having no authority of law, the amounts being paid towards various defaults cannot be treated as penalty. It does not constitute any violation of law and relied on a case law CIT-vs- Murarilal Ahuja & Sons reported in 177 ITR 228. The ld. DR relied on AO's order. 14. We may refer to the definition of penalties in Corpus Juris Secundum, Volume 70, page 387 which contains a comprehensive definition of the word "Penalty is an elastic term with many different shades of meaning. The term....
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....ed the AO to delete Rs. 13,967 from the total income 18. In the aforesaid order the assessee paid penalty for delay in payment of the dues and for various other obligations arising out of carrying on business activities and the ITAT agreed with view taken by the CIT-A that that the penalty charges cannot be said to be for infringement of any law. In the present case also the assessee paid penalty for various defaults during the course of business transactions, therefore, we are of the opinion the aforesaid order applicable to the facts on hand. 19. We also find a similar was answered in the case of GOLDCREST CAPITAL MARKETS LTD. vs. INCOME TAX OFFICER by ITAT, MUMBAI 'B' BENCH reported in (2010) 130 TTJ 0446 the relevant portion of order is reproduced herein below: 10. We have heard the rival contentions and perused the orders carefully. The short question arising here is that whether violations of the Rules and Regulations of NSE Ltd. by its members could be treated as an offence or as an act prohibited by law. In case, it can be termed as an offence or an act prohibited by law, no doubt such expenditure would fall within the ambit of s. 37(1) of the Act. Rule. 1(1) o....