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April 2012

(2011) 130 ITD 287/9 taxmann.com 69 (Mum.) Ashok Kumar Damani v. Addl. CIT A.Y.: 2005-06. Dated: 3-12-2010

By C. N. Vaze, Shailesh Kamdar, Jagdish T. Punjabi, Bhadresh Doshi
Chartered Accountants
Reading Time 2 mins
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Allowability of penalty paid to stock exchange for violation of bye-laws of the stock exchange — The payment made to the stock exchange on account of short payment of margin money is only a compensatory payment under the rules of the stock exchange and not for infraction of law. Hence the same is allowable as revenue expenditure.

Facts:
The assessee had made short payment of margin money to the stock exchange. The penalty is levied by the stock exchange for the same which was paid by the assessee during the period under consideration. The AO disallowed the same on belief that the said expenditure is not an allowable expenditure being in the nature of penalty.

Before the Tribunal, the assessee relied on the decision of the Tribunal in ACIT v. Ramesh M. Damani, [ITA No. 5143 (Mum.) of 2006].

Held:
Following the judgment of the Mumbai Bench of the Tribunal in the case of ACIT v. Ramesh M. Damani, (supra), it is held that the payment had been made to stock exchange on account of short payment of margin money. This is only a compensatory payment under the rules of the stock exchange which is allowable as revenue expenditure as the same is not for infraction of law.

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