TaxTMI 
TaxTMI 
2006 (5) TMI 532
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....K. Sodhi, Presiding Officer Whether stockbrokers who have converted their individual / partnership membership into a corporate entity prior to April 1, 1997 are entitled to the fee continuity benefit in terms of paragraph 4 of Schedule III to the Securities and Exchange Board of India (Stock Brokers and Sub-Brokers) Regulations, 1992 (hereinafter called "the Regulations") is the short question that arises for consideration in this bunch of 67 appeals filed by the stock brokers under Section 15T of the Securities and Exchange Board of India Act, 1992 (for short "the Act") challenging the action of the Securities and Exchange Board of India (for short "the Board") denying them the said benefits. Since the answer to the question involved de....
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....n the manner provided in the Regulations. 4.Regulation 10 provides that every applicant eligible for the grant of a certificate shall pay such fees and in such manner as is specified in schedule III to the Regulations. Since the answer to the question posed in the earlier part of the order depends upon the interpretation of paragraph 4 in schedule III the same is reproduced hereunder along with some other relevant paragraphs: "I.Fees to be paid by the Stock Broker. 1. Every stock broker shall subject to paragraphs 2 and 3 of this Schedule pay registration fees in the manner set out below: (a)where the annual turnover does not exceed rupees one crore during any financial year, a sum of rupees five thousand....
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....dition that the erstwhile individual or partner shall be the whole-time director of the corporate member so converted and such director will continue to hold a minimum of 40 per cent shares of the paid-up equity capital of the corporate entity for a period of at least three years from the date of such conversion. Explanation: It is clarified that the conversion of individual or partnership membership card of the exchange into corporate entity shall be deemed to be in continuation of the old entity and no fee shall be collected again from the converted corporate entity for the period for which the erstwhile entity has paid the fee as per the regulations. 4A 5. If a stock broker fails to remit fees in accordan....
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....e with effect from which the benefit is to be given. The policy of the government and that of the Board has been to encourage the individuals and other members of the exchanges to corporatise themselves with a view to bring about more transparency in their functioning. It is in this background that paragraph 4 in schedule III was inserted with effect from 21.1.1998 to exempt the corporate entity from paying fee to the Board for the period for which it had already been paid by the individual or partnership prior to its conversion. It provides that when an individual or a partnership converts itself into a corporate entity, it shall be exempted from payment of registration fee for the period for which the erstwhi....
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.... issues which came up for discussion before the Board was the broker fee payable in terms of paragraph 4 of schedule III to the Regulations and it extended the benefit of fee continuity to all brokers who had corporatised themselves prior to April 1, 1997. This, in our view, was the correct interpretation of paragraph 4 and the explanation thereto makes it all the more clear. However, by a circular dated March 28, 2002, the Board restricted the benefit of exemption contained in paragraph 4 and restricted the same to the corporate members who were converted on or after April 1, 1997. As already observed above, the plain language of the paragraph does not restrict such benefits to the brokers who were corporatised after April 1, 1997. By rest....
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....d was in error in restricting the benefits of paragraph 4 to brokers who became corporate entities on or after 01/04/1997. The answer to the question posed in the earlier part of the order has to be in the affirmative. 6.In this view of the matter, the impugned demand notices denying the benefit of exemption and requiring the brokers to deposit the fee even for the period for which the erstwhile individual / partnership member had paid cannot be sustained. 7.The appellant in appeal No. 310 of 2004 pointed out during the course of the hearing that there was a partnership firm which was carrying on the broking business since the year 1991 with two partners and that it got corporatised in the year 1996 and that both the erstwhile p....