A.D. Jain, Judicial Member. - This is assessee’s appeal for assessment year 1998-99. The concise grounds are as under :—

"1.The ld. CIT(A) grossly erred, both on facts and in law, in sustaining the disallowance of SEBI turnover fees of Rs. 22,91,000 under section 43B of the Income-tax Act, 1961. In doing so, the ld. CIT(A) has failed to appreciate that provisions of section 43B of the Income-tax Act, 1961 are not applicable to SEBI turnover fees and, hence, the same is allowable on accrual basis.

2.The ld. CIT(A) grossly erred, both on facts and in law, in sustaining the addition of Rs. 24,043 out of telephone expenses and Rs. 22,383 out of car expenses. In doing so, the ld. CIT(A) has failed to appreciate that no disallowance can be made by attributing any part of the expenditure to personal expenses in case of the companies which have a separate legal entity in the eyes of law. A company is an artificial juridical person and, therefore, it would be totally imaginative to attribute any part of the expenses of the company for personal expenses.

3.Without prejudice to above, the proportion of disallowance sustained by the ld. CIT(A) on account of personal usage is too high and the same should be brought down to reasonable and practically acceptable level.

4.The ld. CIT(A) has grossly erred, both on facts and in law, in holding that Explanation to section 73 is applicable to loss of Rs. 21,692 from purchase/sale of shares and the same can, therefore, be set off only against speculation profits, if any. In doing so, the ld. CIT(A) has failed to appreciate that the provisions of Explanation to section 73 cannot be blindly applied to any transaction of sale/purchase of shares by a company unless the same constitute part of business activity of the assessee-company."

2. Apropos ground No. 1, making the disallowance of SEBI turnover fee of Rs. 22,91,000 under section 43B of the Income-tax Act, the Assessing Officer observed that it had debited this sum in its profit and loss account; that it was only a provision in the account and no payment had been made during the year; and that it was a statutory liability disallowable under section 43B of the Act.

3. The ld. CIT(A), confirming the disallowance, observed that the SEBI is a statutory body; that stock brokers had to pay the turnover fees to the SEBI under the SEBI Regulations, 1992; that therefore, fee is a statutory liability; that the assessee had only made a provision in the accounts and no payment was made; and that under section 43B of the Act, a claim can be allowed on the payment basis, when the payment is actually made.

4. Before us, on behalf of the assessee, it was contended that the authorities below have failed to consider that the fee in question is actually not a fee; that a fee is charged for a special purpose to enable the agency and such fee has an element of a quid pro quo in it; that further, if the amount paid is neither a tax, nor a duty, nor a fee nor a cess, the provisions of section 43B are not attracted; that it is due to the express provision of the statute that SEBI becomes entitled to a certain amount fixed by it; that as observed in CIT v. Udaipur Distillary Co. Ltd. [2004] 268 ITR 305¹ (Raj.), notwithstanding the name used in section 43B, the items concerned must fall within the genus "taxation", to which, the expressions "tax", "duty", "cess", or "fee" as a group of its specie belong, namely, compulsory exaction in the exercise of the State’s power of taxation where levy and collection is duly authorized by law as distinct from an amount chargeable on principle as consideration payable under a contract.

5. The learned counsel for the assessee has contended that SEBI is providing services to the assessee; that the fee in question is being charged for this. Reference in this regard has been made to the judgment dated 1-2-2001 passed by the Hon’ble Supreme Court in the case of BSE Brokers Forum v. SEBI Transfer Case (Civil) No. 20 of 2000 and Writ Petition