Mangal Keshav Securities Ltd. v. Asstt. CIT

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The Tax Publishers2016 TaxPub(DT) 1090 (Mum-Trib) : (2016) 046 ITR (Trib) 0458 Mangal Keshav Securities Ltd. v. ACIT INCOME TAX ACT, 1961 --Business deduction under section 37(1)--Payment of fine/penaltyFine/penalty paid for procedural non-compliance--Not an offence or prohibited by law--Penalty/fine paid for procedural non-compliance is compensatory in nature and not punitive, and therefore, is allowable under section 37(1). Only penalties for offence or actions prohibited by law would be hit by Explanation to section 37 and disallowed.--Assessee was engaged in business of share/stock broking. It had paid certain amount as fine/penalty to SEBI. For non-maintenance of KYC forms, short collection of margin money, etc. AO disallowed the same stating penalty was covered under Explanation to section 37(1). Assessee took the plea that penalty paid was not due to 'violation' or 'offence” of any law, but had been paid for some procedural non-compliances which could not be constructed as an 'offence' or something 'which is prohibited by law'. *Held:* Procedural non-compliances were not unusual in assessee's business, for which it might pay some fines or penalties. These routine fines or penalties were 'compensatory' in nature, and not punitive. Only those payments which had been made for any purpose which is an 'offence' or which is 'prohibited by law' shall alone be hit by Explanation to section 37(1). Therefore, penalty/fine paid for procedural non-compliance would be allowed under section 37(1). Income Tax Act, 1961, Section 37(1) *REFERRED :* FAVOUR : In assessee's favour A.Y. : 2006-07 IN THE ITAT, MUMBAI 'B' BENCHE JOGINDER SINGH, J.M. & ASHWANI TANEJA, A.M. Mangal Keshav Securities Ltd. v. ACIT ITA No. 8047/Mum/2010 A.Y. 2006-07 29 September 2015 Assessee by: Nishan Thakkar & Prasant J. Thacker (AR) Revenue by: J.K. Garg (DR) ORDER SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2016 TaxPub(DT) 1090 (Mum-Trib) : (2016) 046 ITR (Trib) 0458

Mangal Keshav Securities Ltd. v. ACIT

INCOME TAX ACT, 1961

--Business deduction under section 37(1)--Payment of fine/penaltyFine/penalty paid for procedural non-compliance--Not an offence or prohibited by law--Penalty/fine paid for procedural non-compliance is compensatory in nature and not punitive, and therefore, is allowable under section 37(1). Only penalties for offence or actions prohibited by law would be hit by Explanation to section 37 and disallowed.--Assessee was engaged in business of share/stock broking. It had paid certain amount as fine/penalty to SEBI. For non-maintenance of KYC forms, short collection of margin money, etc. AO disallowed the same stating penalty was covered under Explanation to section 37(1). Assessee took the plea that penalty paid was not due to 'violation' or 'offence” of any law, but had been paid for some procedural non-compliances which could not be constructed as an 'offence' or something 'which is prohibited by law'. Held: Procedural non-compliances were not unusual in assessee's business, for which it might pay some fines or penalties. These routine fines or penalties were 'compensatory' in nature, and not punitive. Only those payments which had been made for any purpose which is an 'offence' or which is 'prohibited by law' shall alone be hit by Explanation to section 37(1). Therefore, penalty/fine paid for procedural non-compliance would be allowed under section 37(1).

Income Tax Act, 1961, Section 37(1)

REFERRED :

FAVOUR : In assessee's favour

A.Y. : 2006-07

IN THE ITAT, MUMBAI 'B' BENCHE

JOGINDER SINGH, J.M. & ASHWANI TANEJA, A.M.

Mangal Keshav Securities Ltd. v. ACIT

ITA No. 8047/Mum/2010

A.Y. 2006-07

29 September 2015

Assessee by: Nishan Thakkar & Prasant J. Thacker (AR)

Revenue by: J.K. Garg (DR)

ORDER