The Cit City-4 Mumbai v. Reliance Share And Stock Brokers

K.J. IN THE HIGH COURT OF JUDICATRE AT BOMBAY ORDINARY ORIGINAL CIVIL JRISDICTION INCOME TAX APPEAL NO.148 OF 2005 The CIT City-4 Mumbai ..Appellant Versus Reliance Share and Stock Brokers pvt.Ltd., ..Respondents ---- Mr.B.M.Chatterji with Mrs.P.P.Bhosale and Mr.P.S.Sahadevan for the appellant. Mr.J.D.Mistry with Mr.Sanjiv M.Shah for the respondents. ---- Coram : F.I.Rebello & R.S.Mohite,JJ Coram : F.I.Rebello & R.S.Mohite,JJ Date : 18.03.2008. PC 1. The question as framed reads as under :- "Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the sum of Rs.3,59,93,740/- has been wrongly assessed as the assessee’s business/trading receipts chargeable to tax ?" 2. Certain rules were made under the provisions of the Securities Contract Act. Regulations were also made. Under regulation-10, fee has been paid by the stock broker. This regulation was the subject : 2 : matter of a challenge before the Supreme Court. The Supreme Court thereafter, disposed off the petition by reducing the fee which the stock broker has to pay in terms of the schedule-3 (regulation-10) of SEBI (Stock Brokers & Sub-Brokers) Regulations 1992. It was the case of the assessee to meet the eventuality they had collected monies from their clients and that amount is the subject matter of the present appeal. After the Supreme Court decided the matter that amount was returned by the assessee to their clients. 3. The A.O. had taxed the amount in hands of the assessee. Appeal preferred by the assessee was dismissed. In the 2nd appeal preferred before the ITAT the learned ITAT held in paragraph-31 as under :- " Be that as it may we find that the question of the provisions of section 43B arises only if the amounts collected by the assessee are considered to be trading receipts of the assessee. Then the question would arise as to whether the assessee can claim deduction on the ground of liability to pay the fee to SEBI. As we have held that the assessee did not have any absolute right over the amounts collected by it and the same were lying : 3 : with the assessee only on account of uncertainty over the extent of liability owed to SEBI and therefore the same did not constitute any trading receipts in the hands of the assessee the further question relating to the applicability of the provisions of section 43B has been rendered academic and we need not go into the same. We find also that during the year under consideration the operation of the levy itself had been stayed." . The learned Tribunal therefore held that sum of Rs.3,59,93,740/- has been wrongly assessed for the A.Y. and accordingly allowed the appeal. 4. At the hearing of the appeal on behalf of the revenue certain contentions were sought to be raised. Our attention was drawn to the observation in the order of the Commissioner (Appeals) which has observed that the amount was used by the assessee. In our opinion, that would be irrelevant. In the instant case, there is no dispute that the amount was collected by the assessee from their clients and that after the judgment of the Supreme Court that amount has been returned. In these circumstances, the finding by the Tribunal that the said amount does not constitute income of the assessee cannot be faulted. We may point out that the Tribunal also : 4 : relied on the judgment in the case of CIT V/s.Seksaria Biswan Sugar Factory Pvt.Ltd., reported in 195 ITR 778. 5. In our opinion, the question of law as framed would not arise and consequently, appeal dismissed. (R.S.Mohite,J) (F.I.Rebello,J) (R.S.Mohite,J) (F.I.Rebello,J) In our opinion, that would be irrelevant. In the instant case, there is no dispute that the amount was collected by the assessee from their clients and that after the judgment of the Supreme Court that amount has been returned. In these circumstances, the finding by the Tribunal that the said amount does not constitute income of the assessee cannot be faulted. We may point out that the Tribunal also : 4 : relied on the judgment in the case of CIT V/s.Seksaria Biswan Sugar Factory Pvt.Ltd., reported in 195 ITR 778. 5. In our opinion, the question of law as framed would not arise and consequently, appeal dismissed. (R.S.Mohite,J) (F.I.Rebello,J) (R.S.Mohite,J) (F.I.Rebello,J) (R.S.Mohite,J) (F.I.Rebello,J)