These are two appeals filed by assessee and Department against order of CIT(A) relating to asst. yr. 2000-01. First we shall take up appeal of assessee in ITA No. 2324/Mum/2004. First ground relates to upholding action of AO in invoking provisions of s. 142(2A) of Act was not presses and therefore, same is dismissed as not pressed. Second ground relates to upholding disallowance of Rs. 13,74,975 made by AO under s. 43B for non-payment of provident fund. amount in question could not be paid for reason that assessee applied for code number with appropriate authorities and same was not allotted therefore, payment on account of provident fund could not be paid by assessee before due date. code number was allotted to assessee on 20th July, 2000 and immediately thereafter dues were paid on 28th July, 2000. AO as well as CIT(A) disallowed claim of assessee by observing that amount of provident fund was not deposited within due date prescribed under law. After considering submissions and perusing relevant material on record, we find that assessee deserves to succeed in its appeal as there was reasonable cause for not depositing amount in time because code number which is essential for making deposit was not allotted to assessee, therefore, same could not be deposited. As soon as code number was allotted to assessee, dues on account of provident fund were immediately deposited. We further noted that issue is covered by decision of Delhi Bench of Tribunal in case of Addl. CIT vs. Vestas RRB India Ltd. (2005) 93 TTJ (Del) 144: (2005) 92 ITD 1 (Del) wherein it has been held that if amount was deposited before filing return of income, no disallowance can be made under s. 43B of Act. Therefore, in view of above facts and circumstances of case, we hold that disallowance made by lower authorities was not justified. Accordingly, we delete same. Third ground relates to sustenance of addition of Rs. 2,01,996 which represents difference in total turnover recorded by assessee in its accounts and same has been reflected in data furnished by National Stock Exchange. Therefore, difference in accounts is liable to be added to total computation of income. CIT(A) also confirmed action of AO. After considering submissions and perusing relevant material on record, we find that difference on account of transaction in auction segment were as per assessee s books total turnover was Rs. 0.18 lakhs whilst as per data furnished by National Stock Exchange total purchase were Rs. 2.20 lakhs. full details of purchases of Rs. 2.20 lakhs were filed by assessee, copies of which are placed at pp. 21 to 31 of paper book. relevant bank statements disclosing amount debited in its accounts on account of purchases made for auction segment was also maintained, copy of which is placed at p. 20 of paper book. If these details are taken into consideration then there is no difference as is alleged by AO. Therefore, we are of view that addition made and sustained by CIT(A) were not justified as reconciliation filed by assessee was not taken into consideration by lower authorities. Accordingly, we delete addition of Rs. 2,01,996. Fourth ground relates to upholding action of AO in not allowing claim of brought forward business loss of Rs. 63,15,433 and unabsorbed depreciation of Rs. 17,10,316 by invoking provisions of s. 79 of Act on basis that entire shareholding of assessee company has been transferred during year. AO did not allow claim of brought forward business loss and unabsorbed depreciation in view of provisions of s. 79. CIT(A) also confirmed action of AO. After considering submissions and perusing other material on record, we find that assessee deserves to succeed in its appeal on this ground. We noted that assessee had claimed set-off of brought forward loss of Rs. 63,15,433 and brought forward unabsorbed depreciation of Rs. 17,10,316 in terms of s. 72 r/w s. 32(2) in computing its income for assessment year under consideration. AO denied claim by invoking provisions of s. 79 as according to him, there was change in shareholding as on last date of previous year in which loss was incurred and last date of previous year in which loss was sought to be set off. As stated above, CIT(A) has also confirmed action of AO for reasons recorded in para 9.3 of his order and come to conclusion that there was change in shareholding during financial year 1998-99, accordingly assessee was not to be allowed privilege of carry forward loss. We have seen entire gimmick of case. Few relevant facts are that unabsorbed business loss and unabsorbed depreciation for which set off is claimed was determined in assessment framed for asst. yr. 1998- 99. As on last date of previous year relevant to asst. yr. 1998-99, i.e. on 31st March, 1998, assessee was 100 per cent subsidiary of ITC Classic Finance Ltd. (ITC Classic). shares of ITC Classic were listed on recognized stock exchange in India and, therefore, ITC Classic was company in which public were substantially interested. As assessee was 100 per cent subsidiary of ITC classic, therefore, assessee company has to be treated as company in which public were substantially interested by virtue of provisions of s. 2(18)(b)(B)(c). amalgamation of ITC Classic with ICICI Ltd., took place w.e.f. June, 1998 and as consequence thereof shares of ITC Classic were delisted w.e.f. 1st June, 1998. As result of amalgamation shares held by ITC Classic in assessee company vested in ICICI Ltd., which is also company in which public were substantially interested. Thereafter in terms of scheme of amalgamation these shares were transferred to ITC Ltd., and subsequently ITC Ltd., transferred shares of assessee company to present shareholders of assessee company. This transfer took place on 15th Sept., 1999. Based on these facts issue arises as to whether provisions of s. 79 are applicable or not. Sec. 79 provides that "notwithstanding anything contained in Chapter VI, where change in shareholding has taken place in previous year in case of company, not being company in which public are substantially interested, no loss incurred in any year prior to previous year unless on last day of previous year shares of company carrying not less than 51 per cent of voting power were beneficially held by persons who beneficially held shares of company carrying not less than 51 per cent of voting power on last date of year in which loss was incurred." provisions of s. 79 are attracted to company which was not company in which public were substantially interested before change in shareholding took place and continued to remain so after such change in shareholding. It is clear from opening words of s. 79 where it is provided that "where change in shareholding has taken place in previous year in case of company, not being company in which public are substantially interested", is makes clear that provisions of s. 79 are not applicable where public are substantially interested. Admittedly prior to change in shareholding, assessee was company in which public was substantially interested inasmuch as its entire shareholding was initially held by ITC Classic. As per contention of learned Authorised Representative, thereafter assessee became 100 per cent subsidiary of ICICI and thereafter of ITC. No doubt, all three companies admittedly being companies whose share are listed on recognized stock exchange. There is no dispute that public were substantially interested in these three companies; therefore, being so, restrictive provisions of s. 79 cannot be applicable. However, it is not clear from fact of present case that now assessee company is 100 per cent subsidiary or not in which parental company was merged and thereafter shares of that company were merged to ITC Classic. To verify and ascertain factual position, we remit back issue to file of AO. If it is found that assessee is 100 per cent subsidiary of company in which public were substantially interested then it has to be held that provisions of s. 79 are not applicable otherwise AO will pass fresh order in accordance with law and after affording reasonable opportunity of being heard to assessee. We order accordingly. Fifth ground relates to charging of interest under s. 234B. This ground is consequential and therefore, AO is directed to allow consequential relief, if any to assessee. Regarding charging of interest under s. 234C, nothing has been mentioned in order, therefore, we restore this issue to file of AO to pass speaking order regarding charging of interest under s. 234C, after giving reasonable opportunity of being heard to assessee. Now, we will take up appeal of Department in ITA No. 4258/Mum/2004. First ground relates to in holding that income of Rs. 1,96,316 is dividend within meaning of s. 10(33) r/w s. 115-O and accordingly exempt under s. 10(33) of IT Act. AO disallowed Rs. 1,96,316 being dividend income received under s. 10(33) of Act on ground that assessee is trader in share stock exchange and as investor and that dividend received on share purchased in trading account is part of cost of share. CIT(A) allowed ground of assessee on basis that law does not distinguish between dividend which is received as trader and as well as investor. CIT(A) further observed that AO has misquoted term-cum-dividend used and has used it out of context and to that extent it has no relevance to situation and claim of assessee that dividend income was exempt under s. 10(33) was available irrespective of mode of receipt is in order. After considering orders of authorities below, we do not find any infirmity in findings of CIT(A). As per s. 10(33), any income by way of dividend referred to s. 115-O is exempt from tax. Sec. 115-O provides for levy of tax on distribution made by way of dividends by domestic company. Since distribution tax is collected from company distributing dividend, such dividend is exempt in hands of recipient. CBDT Circular No. 763 is very clear on issue wherein it has been held that clause has been inserted in s. 10 to exempt dividend income in hands of shareholders. Since assessee is shareholder, therefore, dividend income is exempt in hands of assessee. Accordingly, we do not see any substance in ground of Department. Second ground relates to deletion of addition of Rs. 4,75,335 being penalty charged by National Stock Exchange. AO has disallowed sum of Rs. 4,75,335 being penalty debited to P & L a/c by holding same is in violation of provisions of Act and accordingly same is not allowable as tax. CIT(A) deleted addition by holding that penalty charges which were charged by National Stock Exchange were on account of following reasons: Auction short delivery charges; Delivery margin pay-in-shortage; Bad delivery charges; Interest on aforesaid charges; Violation fines (Margin). penalty was charged by NSE on above shortcomings and shortcomings are such which can be stated that they were in violation of provisions of law. While deleting addition, CIT(A) has also taken into consideration various case laws relied upon by learned counsel for assessee before him. We have seen findings of CIT(A) and found that CIT(A) was justified in allowing ground of assessee. findings of CIT(A) are given at para 6.6 of his order which are as under: "I have carefully considered submission of appellant and facts on record. appellant was member of NSC and NSE did levy various charges for contractual violation. tax audit report pointed out that payment of Rs. 4,75,335 was made on account of penalty or fine charged by NSE of India Ltd. during course of business for various defaults like violation of gross exposure limit, short delivery, funds shortage, shortage of margin money, delay in bad delivery and other miscellaneous charges and assessee had submitted that these essential payments for violation for various contractual obligation particularly violation for various limits set by them, appellant had basically submitted that nature of expenses would show that expenditure involved was not for any purpose which was offence or which was prohibited by law. It was also argued that as per explanation given in Circular No. 772, dt. 23rd Dec., 1998 explaining provisions of Explanation to s. 37(1), above expenditure was not category of expenditure which would be hit by mischief of said section. Alternatively it was argued that payment are largely compensatory in nature charged by SSE for certain default and basically to compensate NSE for loss involved in process as transaction involved financial dealing. On that basis it was argued that payment being for purpose of violation of contractual obligation is part and parcel of transactions which are arising out of ordinary course of business and has to be allowed as routine expenditure incidental to carrying on of business under s. 37(1). In this connection it has been further argued that this is normal occurrence in NSE where there is delay and violations etc., which are routine for which appropriate compensation was provided and this payment is part of same and is regular business expenditure which is allowable, as in any other case. Considering entirety of situation, nature of practices and ground realities and fact that said expenditure was not hit by mischief of explanations. Sec. 37(1) as discussed earlier, I am of view that disallowance has to be deleted. In result appellant s plea as per ground of appeal No. 5 succeeds." Neither findings of CIT(A) could not be controverted by learned Departmental Representative nor any other material was brought on record to establish otherwise. Therefore, in view of reasoning given by learned CIT(A), we confirm his order on this issue. Third ground relates to deletion of addition of Rs. 57,35,720 made by A O being interest attributable to interest bearing loans taken but advanced interest-free loans to others/associate concerns. CIT(A) allowed ground of assessee by observing that AO himself verified and found that interest bearing fund has not been utilized for giving this interest-free money as propounded. It has been further observed by CIT(A) in para 8.7 of his order that AO has also given finding in remand report that interest bearing fund has been utilized for non-business purpose. So in other words it means that same has been utilized for business purposes and interest payments against same are allowable deductions under s. 36(1)(iii). After considering observations of CIT(A) and order of AO, w e do not find any reason to interfere with findings of CIT(A) as CIT(A) has given categorical finding that in impugned assessment AO has himself verified and has found that interest bearing fund has not been utilized for giving interest-free advances. Once it is found that interest bearing funds were not utilized for giving interest-free advances then it has to be taken that fund has been utilized for business purposes and deduction is allowable. Therefore, in view of above facts and circumstances of case, we confirm order of CIT(A) on this issue also. In result, appeal of assessee is partly allowed whereas appeal of Department is dismissed. *** CLASSIC SHARES & STOCK BROKING SERVICES LTD. v. DEPUTY COMMISSIONER OF INCOME TAX