The High Court addressed an income tax appeal concerning whether amounts collected from clients and subsequently returned constituted taxable trading receipts. The Court held the legal question did not arise.
Income Tax Appeal dismissed; Tribunal's finding upheld; sum held not to be income.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
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
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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
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)
3 issues framed by the court
Whether the sum collected from clients and returned after Supreme Court judgment constitutes assessee's taxable trading receipts.
Whether section 43B is applicable where amounts did not constitute trading receipts.
Whether the Tribunal was right in allowing the appeal regarding under-assessed income.
Colour shows how this judgement treated each authority
CIT v. Seksaria Biswan Sugar Factory Pvt. Ltd.Relied on¶27
CIT V/s. Seksaria Biswan Sugar Factory Pvt.Ltd., 195 ITR 778
2 provisions across 2 enactments
The CIT City-4 Mumbai
Reliance Share and Stock Brokers pvt.Ltd.
F.I. Rebello
R.S. Mohite
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court