DCIT 4(2), MUMBAI V. PELF INVESTMENT P. LTD, MUMBAI

ITA 1223/MUM/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 2650 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-12-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2005-2006
• Appeal Filed On: 23-02-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIRENDRA OJHA
• Assessee Lawyers: ADJTYA NEMANI
• Section: 40(a)(ia)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: MUMBAI BEFORE SHRI P M JAGTAP, ACCOUNTANT MEMBER AND SHRI R S PADVEKAR, JUDICIAL MEMBER ITA NO 1223/MUM/2009 (ASSESSMENT YEAR: 2005-06) DCIT -4(2), ROOM NO 647, 6TH FLOOR, AAYAKAR BHAVAN, M K ROAD, MUMBAI 400 020 VS M/S PELF INVESTMENT PVT LTD, 177-179, LAXMI HOUSE, KALBADEVI ROAD, MUMBAI -400 002 PAN: AAACP 6489 M APPELLANT RESPONDENT APPELLANT BY: SHRI VIRENDRA OJHA RESPONDENT BY: SHRI ADJTYA NEMANI ORDER PER P M JAGTAP, ACCOUNTANT MEMBER THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST TH E ORDER OF LEARNED CIT (A)- IV MUMBAI DATED 15.12.2008. 2. IN GROUND NO.1 TO 7, THE REVENUE HAS CHALLENGED THE ACTION OF THE LEARNED CIT (A) IN DELETING THE DISALLOWANCE OF RS 12,54,472/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF V-SAT CHARGES, LEASELINE CHARGES AND TRA NSACTION CHARGES PAID BY THE ASSESSEE TO THE STOCK EXCHANGE BY INVOKING THE PROV ISIONS OF 40(A)(IA). 3. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY WH ICH IS ENGAGED IN THE BUSINESS OF SHARES AND STOCK BROKING. THE RETURN O F INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 28.10.2005 DECLARI NG A TOTAL INCOME OF RS 24,87,700/-. IN THE PROFIT AND LOSS ACCOUNT FILED ALONG WITH THE SAID RETURN, THE AMOUNT PAID TO STOCK EXCHANGE ON ACCOUNT OF V-SAT C HARGES, LEASELINE CHARGES AND TRANSACTION CHARGES AGGREGATING TO RS 12,54,472/- W AS DEBITED BY THE ASSESSEE COMPANY. ACCORDING TO THE ASSESSING OFFICER, THE S AID CHARGES PAID BY THE ASSESSEE TO THE STOCK EXCHANGE WERE FOR THE SERVICES IN THE NATURE OF TECHNICAL AND MANAGERIAL. HE, THEREFORE, HELD THAT DEDUCTION OF TAX AT SOURCE SHOULD HAVE BEEN ITA 1223/M/2009 M/S PELF INVESTMENT PVT LTD 2 MADE BY THE ASSESSEE COMPANY FROM THE PAYMENTS MADE TO THE STOCK EXCHANGE TOWARDS THE SAID SERVICES AS PER THE PROVISIONS OF SECTION 194J AND SINCE NO DEDUCTION WAS MADE BY THE ASSESSEE, HE HELD THAT TH E AMOUNT PAID FOR THE SAID SERVICES WITHOUT DEDUCTION TAX AT SOURCE WAS LIABLE TO BE DISALLOWED U/S 40(A)(IA). THE MATTER WAS CARRIED BEFORE THE LEARNED CIT (A), WHO, HOWEVER, DELETED THE SAID DISALLOWANCE MADE BY THE ASSESSING OFFICER RELYING INTER ALIA ON THE DECISION OF MUMBAI BENCH OF ITAT IN THE CASE OF KOTAK SECURITIE S LTD REPORTED IN 25 SOT 440. AGGRIEVED BY THIS RELIEF ALLOWED BY LEARNED CIT (A) TO THE ASSESSEE, THE REVENUE HAS RAISED THIS ISSUE IN THE PRESENT APPEAL FIELD BEFOR E THE TRIBUNAL. 4. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT THE ISSUE UNDER CONSIDERATION IS SQUARELY COVERED BY THE DECISION OF CO-ORDINATE BENCH OF THI S TRIBUNAL IN THE CASE OF KOTAK SECURITIES LTD (SUPRA) WHEREIN IT WAS HELD THAT STO CK EXCHANGES DO NOT RENDER ANY MANAGERIAL OR TECHNICAL SERVICES TO THEIR MEMBERS A ND, THEREFORE, PAYMENTS MADE FOR SUCH SERVICES TO THEM BY THE MEMBERS CANNOT BE SUBJ ECTED TO DEDUCTION OF TAX AT SOURCE U/S 194J. IT WAS HELD BY THE TRIBUNAL THAT THE PROVISIONS OF SECTION 40(A)(IA) THEREFORE CANNOT BE INVOKED TO DISALLOW ANY PAYMENT MADE TO STOCK EXCHANGE BY THE MEMBERS FOR THE SERVICES RENDERED. THE DECISION OF THE TRIBUNAL IN THE CASE OF KOTAK SECURITIES LTD (SUPRA) THUS SQUARELY COVERS THE ISS UE IN FAVOUR OF THE ASSESSEE AND IN OUR OPINION, THE LEARNED CIT (A) WAS FULLY JUSTIFIE D IN DELETING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER ON ACCOUNT OF V-SAT CHARGE S, LEASELINE CHARGES AND TRANSACTION CHARGES U/S 40(A)(IA) BY FOLLOWING THE SAID DECISION. THE IMPUGNED ORDER OF LEARNED CIT (A) ON THIS ISSUE IS, THEREFOR E, UPHELD DISMISSING GROUND NO.1 TO 7 OF REVENUES APPEAL. 5. AS REGARD GROUND NO.8 RELATING TO THE DISALLOWAN CE ON ACCOUNT OF INTEREST PAID TO SEBI, IT IS OBSERVED THAT THE SAID DISALLOWANCE MADE BY THE ASSESSING OFFICER WAS DELETED BY THE LEARNED CIT (A) ON THE GROUND THAT T HE LIABILITY TO PAY 20% OF DISPUTED INTEREST TO SEBI HAD CRYSTALLIZED IN THE Y EAR UNDER CONSIDERATION IN VIEW OF THE TERMS OF THE RELEVANT SCHEME NAMELY SEBI (INTER EST LIABILITY REGULARISATION SCHEME), 2004. HE ALSO RELIED ON THE DECISION OF H ONBLE SUPREME COURT IN THE CASE ITA 1223/M/2009 M/S PELF INVESTMENT PVT LTD 3 OF MAHALAXMI SUGAR MILLS CO VS CIT WHEREIN IT WAS H ELD THAT INTEREST ON SEBI ALSO PARTAKES THE CHARACTER OF SEBI FEES ITSELF AND THE SAME IS THEREFORE ALLOWABLE ON THE BASIS OF ACTUAL PAYMENT U/S 43B. AT THE TIME OF HE ARING BEFORE US, THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS NOT BEEN ABLE TO PO INT OUT ANY INFIRMITY IN THIS BASIS ADOPTED BY LEARNED CIT (A) WHILE GIVING RELIE F TO THE ASSESSEE ON THIS ISSUE AND THIS BEING SO AND FOR THE REASONS GIVEN BY THE LEAR NED CIT (A) IN HIS IMPUGNED ORDER, WE UPHOLD THE ORDER OF LEARNED CIT (A) ON THIS ISSU E AND DISMISS GROUND NO.8 OF THE REVENUES APPEAL. 6. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. PRONOUNCED IN THE OPEN COURT TODAY ON THE 22ND DAY OF DECEMBER 2009. SD/- (R S PADVEKAR) JUDICIAL MEMBER SD/- (P M JAGTAP) ACCOUNTANT MEMBER MUMBAI, DATE: 22ND DECEMBER 2009 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) -IV, MUMBAI. 4) THE CIT-4, MUMBAI. 5) THE D.R. C BENCH, ITAT, MUMBAI. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR CHAVAN* I.T.A.T., MUMBAI ITA 1223/M/2009 M/S PELF INVESTMENT PVT LTD 4 SR.N. EPISODE OF AN ORDER DATE INITIALS CONCERNED 1 DRAFT DICTATED ON 17.12.09 SR.PS 2 DRAFT PLACED BEFORE AUTHOR 17.12.09 SR.PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.PS SR.PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS 7 FILE SENT TO THE BENCH CLERK SR.PS 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER