The Income Tax Commissioner Mumbai City-4 v. Angel Capital & Debit Market Ltd

IN THE HIGH COURT OF JDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTIONINCOME TAX APPEAL (L) NO. 475 OF 2011 The Income Tax Commissioner Mumbai City-4 Vs. Angel Capital & Debit Market Ltd. ...Appellant. ..Respondent Mr. Vimal Gupta for the Appellant.None for the Respondent. CORAM : J.P. DEVADHAR AND A.A. SAYED, JJ. DATE : 28TH JULY, 2011. P.C. 1.Three questions of law raised by the Revenue in this appeal, which reads thus: “(A) Whether on the facts and in the circumstances of the case and in law the Hon’ble Tribunal was justified in holding that VSAT and Lease Line charges paid to the Stock Exchange by the Assessee Company were allowable as a deduction from taxable Income even though the Assessee Company had failed to deduct TDS thereon? (B)Whether on the facts and in the circumstances of the case and in law the Hon’ble Tribunal was justified in holding that VSAT and Lease Line charges paid to the Stock Exchange by the Assessee Company were not paid in consideration of technical services rendered by the Stock Exchange within the meaning of Section194J read with Explanation 2 to Section 9(1)(vii) of the Income tax Act.? (C)Whether on the facts and in the circumstances of the case and in law the Hon’ble Tribunal was justified in deleting the disallowance made by the Assessing Officer of claim of the Assessing Company for a deduction of\payment of Rs. 6,51,240/- towards penalty paid to Stock Exchange even though such penalty payment was clearly disallowable under Explanation to Section 37(1) of the Income tax Act?” 2.As regards first two questions are concerned, the findings of fact recorded by the ITAT is that VSAT and Lease Line charges paid by the assessee to Stock Exchange were merely reimbursement of the charges paid/payable by the Stock Exchange to the Department of Telecommunication. Since the VSAT and Lease Line charges paid by the assessee do not have any element of income, deducting tax while making such payments do not arise. Hence, question Nos. (A) and (B) cannot be entertained. 3.As regards question (C) is concerned the finding of fact recorded by the ITAT is that the amount paid as penalty was on account of irregularities committed by the assessee’s clients. Such payments were not on account of any infraction of law and hence allowable as business expenditure. In such a case the explanation to section 37 would not apply. Accordingly question (C) raised by the Revenue cannot be entertained. 4,In the result the appeal is dismissed with no order as to costs. ( A.A. SAYED, J. ) ( J.P. DEVADHAR , J.)