PUNEET SECURITIES P.LTD, MUMBAI V. ASST CIT CIR 4(2), MUMBAI

ITA 1212/MUM/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 8409 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-11-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 12-08-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 12-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SACHCHIDANAND DUBEY
• Section: 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH C, MUMBAI BEFORE SHRI SANJAY ARORA, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER ITA NO. 1212/MUM/2013 ASSESSMENT YEAR: 2009-10 M/S. PUNEET SECURITIES PVT. LTD. 105/4, GF, BOMBAY SAMACHAR MARG FORT MUMBAI 400 023 PAN:AAACP 2313 C VS. ASST. CIT CIR. 4(2) MUMBAI (APPELLANT) (RESPON DENT) ASSESSEE BY : MS. VINITA SHAH REVENUE BY : SHRI SACHCHIDANAND DUBEY DATE OF HEARING : 17 . 11 . 2014 DATE OF ORDER : 21 . 1 1 .2014 O R D E R PER AMIT SHUKLA, JM: THIS APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AG AINST ORDER DATED 24.12.2012, PASSED BY THE LD.CIT(A) -8, MUMBAI, FOR THE QUANTUM OF ASSESSMENT PASSED U/S 143(3), FOR THE A. Y. 2009-10, MAINLY ON THE FOLLOWING GROUNDS OF APPEAL:- ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTI ON OF LEARNED ASSESSING OFFICER IN DISALLOWING THE CLAIM OF TRANS ACTION CHARGES OF RS.12,72,440/- U/S 40(A)(IA) OF THE INCOME TAX A CT, 1961 ON THE ALLEGED PLEA THAT THE COMPANY HAS NOT DEDUCTED THE TDS U/S 194J, WITHOUT APPRECIATING THE FACT THAT THE ASSESS EE HAD DEDUCTED THE TDS U/S 194C OF THE INCOME TAX ACT, 19 61. ITA NO. 1212/MUM/2013 M/S. PUNEET SECURITIES PVT. LTD. ASSESSMENT YEAR: 2009-10 2 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE LEARNED CIT(A) HAS FAILED TO APPRECIATE THE FACT TH AT THE DISALLOWANCES U/S 40(A)(IA) OF THE INCOME TAX ACT, 1961 IS TO BE MADE ONLY IN THE EVEN OF NON DEDUCTION OF THE TDS A ND NOT FOR SHORT DEDUCTION OF TDS. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE LEARNED CIT(A) HAS ERRED IN NOT FOLLOWING THE DECIS ION OF JURISDICTIONAL TRIBUNAL, ON WHICH THE APPELLANT WAS RELIED DURING THE APPELLATE PROCEEDINGS BEFORE HONBLE CIT(A). 2. BRIEF FACTS OF THE CASE ARE THAT, THE ASSESSEE I S ENGAGED IN THE BUSINESS OF STOCK BROKING AND TRADING IN SHARES. TH E ASSESSEE HAS DEBITED AN AMOUNT OF RS.12,72,440/- ON ACCOUNT OF T RANSACTION CHARGES, WHICH WERE PAYABLE TO STOCK EXCHANGE ON ACCOUNT OF SERVICES PROVIDED WITH REGARD TO TRANSACTIONS IN SECURITIES EXCHANGE. ASSESSING OFFICER NOTED THAT, THE ASSESSEE HAS NOT DEDUCTED TDS U/S 1 94J, THEREFORE, SAME IS DISALLOWABLE U/S 40(A)(IA). BEFORE THE ASSE SSING OFFICER, THE ASSESSEES CASE WAS THAT IT HAS DEDUCTED TDS U/S 19 4C AND THEREFORE, NO DISALLOWANCE SHOULD BE MADE. HOWEVER, THE LD.AO HELD THAT THE TDS HAS TO BE DEDUCTED UNDER THE RIGHT SECTION OF THE I NCOME-TAX AND THE HONBLE BOMBAY HIGH COURT IN THE CASE OF KOTAK SEC URITIES LTD. REPORTED IN (2012) 340 ITR 333, HAS HELD THAT THE TRANSACTION CHARGE IS A FEES FOR TECHNICAL SERVICE S AND THEREFORE, THE ASSESSEE SHOULD HAVE DEDUCTED TDS U/S 194J. ACCORDI NGLY, HE DISALLOWED THE ENTIRE SUM OF RS.12,72,440/- U/S 40( A)(IA). 3. THE LD.CIT(A) HAS CONFIRMED THE SAID DISALLOWANC E ON THE GROUND THAT HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF KOTAK SECURITIES LTD. (SUPRA) HAS HELD THAT TRANSACTION CHARGES PAID IS C OVERED UNDER FEE FOR ITA NO. 1212/MUM/2013 M/S. PUNEET SECURITIES PVT. LTD. ASSESSMENT YEAR: 2009-10 3 TECHNICAL SERVICES, ON WHICH TDS U/S 194J IS TO BE DEDUCTED. THEREFORE, DISALLOWANCE HAS RIGHTLY BEEN MADE BY THE AO. 4. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT, DISALLOWANCE U/S 40(A)(IA) CAN ONLY BE MADE WHEN AS SESSEE HAS NOT DEDUCTED TAX AT ALL OR AFTER DEDUCTION HAS NOT BEEN PAID. HERE IN THIS CASE THE ASSESSEE HAS DEDUCTED TDS, THOUGH UNDER 19 4C, AS THE ASSESSEE WAS UNDER A BONA FIDE BELIEF THAT TAX WAS DEDUCTABLE U/S 194C AND NOT U/S 194J. THE CONTROVERSY, WHETHER THE TRAN SACTION CHARGES ARE FEE FOR TECHNICAL SERVICES OR NOT HAS BEEN SETTLED BY THE BOMBAY HIGH COURT IN THE CASE OF KOTAK SECURITIES LTD. MUCH AFT ER THE DATE OF FILING OF RETURN OF THE ASSESSEE, WHICH WAS ON 06.11.2009. FU RTHER HE RELIED UPON SERIES OF DECISIONS OF THE TRIBUNAL, WHEREIN IT HAS BEEN CONSISTENTLY HELD THAT NO DISALLOWANCE U/S 40(A)(IA) CAN BE MADE IF T HERE IS A SHORT DEDUCTION OF TAX OR TDS HAS BEEN DEDUCTED UNDER DIF FERENT SECTIONS. THE LISTS OF SUCH DECISIONS ARE AS UNDER:- I. DCIT VS. CHANDABHOY AND JASSOBHOY 49SOT 448 ITAT MU MBAI II. DCIT CIR-33, KOLKATA VS S.K. TEKRIWAL 48 SOT 515 IT AT KOLKATA III. APOLLO TYRES LTD. VS. DCIT 155 TTJ 470 ITAT COCHIN IV. EGS SURVEY P. LTD VS. ACIT 10(3), ITA NO. 6281/M/20 11 ITAT MUMBAI V. ACIT VS. K.S. AIYAR & CO. ITA NOS. 282/M/2013, 7127 /M/2012, 283/M/2013 & 7128/M/2012 ITAT MUMBAI VI. UE TRADE CORPORATION (INDIA) LTD. VS. DCIT 2302/DEL /2011 ITAT DELHI 5. ON THE OTHER HAND LD. DR STRONGLY RELIED UPON OR DER OF THE AO AS WELL AS THE LD.CIT(A) AND SUBMITTED THAT, THE TDS H AS TO BE DEDUCTED UNDER THE CORRECT PROVISION OF THE ACT AND IF SUCH DEDUCTION HAS NOT ITA NO. 1212/MUM/2013 M/S. PUNEET SECURITIES PVT. LTD. ASSESSMENT YEAR: 2009-10 4 BEEN MADE IN ACCORDANCE WITH THE ACT, THEN DISALLOW ANCE U/S 40(A)(IA) CAN BE MADE 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND ALSO PER USED THE RELEVANT FINDINGS GIVEN IN THE IMPUGNED ORDER. ADMITTEDLY, T HE ASSESSEE HAS DEDUCTED TDS ON TRANSACTION CHARGES PAYABLE TO STOC K EXCHANGE U/S 194C. THE DEPARTMENTS CASE IS THAT, TDS SHOULD HAV E BEEN DEDUCTED U/S 194J, AS THE TRANSACTION CHARGES FALLS WITHIN T HE AMBIT OF FEES FOR TECHNICAL SERVICES, AS LATER ON HELD BY THE HONBL E BOMBAY HIGH COURT IN THE CASE OF CIT VS. KOTAK SECURITIES LTD. (SUPRA) A ND THEREFORE, DISALLOWANCE U/S 40(A)(IA) IS TO BE MADE. THE CONDI TIONS AS LAID DOWN U/S 40(A)(IA) FOR MAKING THE DISALLOWANCE IS THAT, THE TAX ON THE AMOUNT PAID OR PAYABLE WHICH IS DEDUCTIBLE AT SOURCE UNDE R CHAPTER XVII B AND SUCH A TAX, HAS NOT BEEN DEDUCTED OR AFTER DEDUCTIO N HAS NOT BEEN PAID ON OR BEFORE THE DUE DATE SPECIFIED IN 139(1). IN O THER WORDS, THERE ARE ONLY CONDITIONS FOR DISALLOWANCE U/S 40(A)(IA), FIR STLY, TAX WHICH WAS DEDUCTABLE HAS NOT BEEN DEDUCTED AND SECONDLY, AFTE R DEDUCTION HAS NOT BEEN PAID. IF BOTH THE CONDITIONS ARE SATISFIED TH EN ONLY DISALLOWANCE U/S 40(A)(IA) CAN BE MADE. THE SECTION DOES NOT ENV ISAGES THAT, IF THE ASSESSEE HAS DEDUCED THE TAX UNDER WRONG PROVISIONS OF THE ACT OR THERE IS A SHORT DEDUCTION OF TAX THEN ALSO, IT ENTAILS D ISALLOWANCE UNDER SECTION 40(A)(IA). THERE IS NOTHING IN THE SECTION TO TREAT THE ASSESSEE AS DEFAULTER FOR CLAIMING A DEDUCTION, WHERE THERE IS A SHORT FALL IN DEDUCTION. THIS PROPOSITION HAS BEEN UPHELD BY THE HONBLE KOLKATA HIGH COURT IN THE CASE OF CIT VS. S.K. TEKRIWAL REPORTED IN (2014) 361 ITR 432 (KOL). IN THIS CASE THE ASSESSEE HAS DEDUCTED TAX U/S 194 C INSTEAD OF 194J, THE HONBLE HIGH COURT HELD THAT THE EXPEN SES CANNOT BE ITA NO. 1212/MUM/2013 M/S. PUNEET SECURITIES PVT. LTD. ASSESSMENT YEAR: 2009-10 5 DISALLOWED U/S 40(A)(IA) MERELY ON ACCOUNT OF SHORT DEDUCTION OF TAX AT SOURCE. SIMILAR VIEW HAS BEEN TAKEN BY THE CO-ORDIN ATE BENCHES IN THE CASES RELIED UPON BY THE LEARNED COUNSEL, WHICH HAS BEEN REFERRED IN THE FOREGOING PARA. ACCORDINGLY, WE HOLD THAT NO DISALL OWANCE U/S 40(A)(IA) CAN BE MADE MERELY BECAUSE ASSESSEE HAS DEDUCTED TD S UNDER SECTION 194C INSTEAD OF SECTION 194J. THUS THE GROUND RAISE D BY THE ASSESSEE IS ALLOWED. 7. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 21 ST DAY NOVEMBER, 2014. SD/- SD/- (SANJAY ARORA) (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 21.11.2014 *SRIVASTAVA COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR C BENCH //TRUE COPY// BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.