Indiabulls Securities Limited Vs DCIT (ITAT Delhi)
Margin Deficiency Fee Allowed as Deduction -Explanation to Section 37(1) Not Attracted; ITAT Rules Margin Shortfall Payments Are Business Deductions; Regulatory Margin Fees Not Penal: ITAT Allows Deduction Under Section 37(1)
Delhi Tribunal allowed the appeal, holding that charges levied by the Stock Exchange for margin shortfall are not penal in nature & hence allowable as business expenditure u/s 37(1).
Assessee had claimed ₹1.22 crore paid to the Stock Exchange for shortfall in margin money. CPC, Bengaluru, disallowed it while processing u/s 143(1), treating it as a “penalty”. CIT(A) upheld the disallowance, terming it a violation of law.
Tribunal noted that the issue stood covered by the Delhi High Court decision in CIT vs Stock & Bond Trading Co. (ITA No.4117/2010, order dated 14.10.2021), which held that such payments are not for any offence or activity prohibited by law, but merely arise from regulatory mechanisms ensuring discipline in market operations.
Following that binding precedent, Tribunal held that Explanation to section 37(1) was wrongly invoked & such payments were commercial expenses incurred in the course of business. Accordingly, the addition was deleted & appeal fully allowed
FULL TEXT OF THE ORDER OF ITAT DELHI
