TaxTMI 
TaxTMI 
2026 (7) TMI 682
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.... 22.03.2016. 2. The grounds of appeal taken by the assessee in the memorandum of appeal in form 36 are as follows: "1. The Ld. CIT(A) has erred on facts and in law in confirming the disallowance of expenditure of Rs. 10,730/- incurred on earning LIC commission income. 2 The Ld. CIT(A) has erred on facts and in law in confirming the disallowance of Rs. 5,37,471/- made by AO u/s 37 of the Act by not accepting the contention of the assessee that penalty levied by NCDEX for margin shortfall is not a payment for an offence OR prohibited by law and thus the same is an allowable business expenditure. 3. The Ld. CIT(A) has erred on facts and in law in confirming the disallowance of interest expenses of Rs. 28,74,727/- ....
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....s per the old CBDT circular No 648 dated 30/03/1993, in case of small agents claiming expenses on LIC commission without separate books, are entitled to deduction of 50% on first year commission and 15% on renewal, and where separate figures are not available, adhoc claim of 33% of gross commission are justified. Though the circular being an old one (where the applicability is restricted to gross commission receipts at Rs. 60,000/-), taking the same as a guiding principle, in this case where separate figures are not available, we find that 33% of gross is Rs. 42,454/- and the Ld CIT(A) has already allowed a deduction of Rs. 42,921/-out of the total claim of Rs. 53,651/-, which is perfectly in order, and no further deduction is allowable. ....
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....hange would levy a penalty upon the assessee. The Learned AR submitted that the said penalty is levied as per the terms and conditions entered with the Stock exchange with its members. It is only a practice of disciplining the members of stock exchange, i.e., it is only a deterrent under the usual business of carrying on the business by the members of stock exchange. The Ld A.R submitted that the said penalty cannot be equated with the penalty levied for infraction of any law and hence proviso to section 37(1) of the Act would not apply to the above said payment. Accordingly he submitted that learned CIT(A) was not justified in confirming the disallowance made by the Assessing Officer. The Learned AR submitted that an identical issue has be....
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....to section 37(1) which is aimed at providing deterrence for infraction of laws of the country. To the similar effect in the decision of Chandigarh Bench of the ITAT in the case of Master Capital Services Ltd. Vs. DCIT, 108 TTJ 389 wherein it was held that fines and penalties paid by the assessee to NSE for trading beyond exposer limit, late submissions of margin certificates and delay in making deliveries of shares due to deficiencies are payments made in regular course of business and not for infraction of law as envisaged in proviso to section 37(1). In our opinion, these decisions of the Tribunal are squarely applicable to the issue under consideration and respectfully following the same, we uphold the impugned order of the ld. CIT(A) de....
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.... and the same is not for any infraction of law. 11. We have heard the rival submissions and we are of the opinion that margin penalties are compensatory in nature and they do not violate the explanation 1 of provisions of section 37(1) and are neither an illegal act nor is it a statutory offence. Margin shortfalls are imposed by exchanges for breach of contractual obligations to maintain sufficient funds and does not violate any statutory law and is not a criminal offence. It is required to maintain NCDEX clearing and settlement lines and conduct commodity derivatives trading and as such the same is an expense wholly and exclusively for business purpose, and as such the disallowance made on this ground is hereby deleted. 12. This grou....
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.... 3.06 crores, as reflected and there are no advances given to any unrelated parties without charging interest. 17. He further submitted that the unsecured loans are wholly and fully utilised for the purpose of business, in as much, the closing stock ( inventories) as on year end is Rs. 52.09 crores and the outstanding sundry debtors as on year end was Rs. 30401 crores, which is indication enough that the entire unsecured borrowings being only Rs. 18.70 crores, are utilised in the business itself including interest charged on late payment for purchase, which also is directly related to business. 18. Moreover, the AO has examined the books of accounts and has not specifically pointed out any party from whom interest has not been charged....