M/s Karvy Stock Broking Limited, Hyderabad V. ITO,Ward 14(3), Hyderabad

ITA 1266/HYD/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 6508 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 11 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 17-05-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 30-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B KURMI NAIDU

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SMT. P.MADHAVI DEVI, JUDICIAL MEMBER A ND SHRI S.RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO.1266/HYD/2014 : ASSESSMENT YEARS 2011- 12 M/S. KARVY STOCK BROKING LTD., HYDERABAD (PAN - AABCK 5190 K ) V/S INCOME TAX OFFICER WARD 14(3), HYDERABAD (APPELLANT) (RESPONDENT) APPELLANT BY : NONE RESPONDENT BY : SHRI B.KURMI NAIDU DR DATE OF HEARING 17 . 5 .201 6 DATE OF PRONOUNCEMENT 31 .5.2016 O R D E R PER SMT. P.MADHAVI DEVI, JUDICIAL MEMBER : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGA INST THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS) VI JAYAWADA (CAMP HYDERABAD) DATED 19.3.2014, CONFIRMING THE ORDER PA SSED BY THE ASSESSING OFFICER UNDER S.201(1) & S.201(1A) OF THE INCOME TAX ACT,1961, RAISING A DEMAND OF RS.10,68,189 FROM THE ASSESSEE UNDER S.201(1A) OF THE ACT, FOR THE ASSESSMENT YEAR 2011- 12. 2. BRIEFLY STATED, FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF STOCK AND SHARE BROKING AND DISTRIBUTION OF FINANCIAL PRODUCTS AND ALSO A DEPOSITORY PARTICIPAN T. A SURVEY UNDER S.133A WAS CONDUCTED ON THE PREMISES OF THE ASSESSE E AND SUBSEQUENT THERETO, THE ASSESSING OFFICER ISSUED A SHOW CAUSE NOTICE TO THE ASSESSEE REQUIRING IT TO EXPLAIN WHETHER TDS WAS DEDUCTED OR NOT ON THE AMOUNT OF TRANSACTION CHARGES PAID BY TH E ASSESSEE TO THE STOCK EXCHANGES, AS THE SAME WAS IN THE NATURE OF T ECHNICAL SERVICES, WHICH ATTRACT THE PROVISIONS OF S.194J OF THE ACT. IN RESPONSE, ASSESSEE CONTENDED THAT THE SERVICES RENDERED BY I T ARE NOT IN THE ITA NO1266/HYD/2014 M/S. KARVY STOCK BROKING LTD., HYDERABAD 2 NATURE OF TECHNICAL SERVICES, SINCE TRANSACTION CH ARGES ARE LEVIED BY RESPECTIVE STOCK EXCHANGES ON THE TURNOVER OF THE P URCHASE AND SALE OF SECURITIES THROUGH ON LINE SYSTEM. IT WAS ALSO CON TENDED THAT THE TURNOVER REPRESENTS THE SALE AND PURCHASE OF SECURI TIES BY VARIOUS CLIENTS OF THE COMPANY, AND INSTEAD OF VARIOUS CUST OMERS PAYING THE SAID CHARGES DIRECTLY TO THE STOCK EXCHANGES, THE A SSESSEE PAYS THE TRANSACTIONS CHARGES TO THE STOCK EXCHANGES AND THE REAFTER COLLECTED THE SAME FROM THE CUSTOMERS, THEREBY ACTING ONLY AS A MEDIATOR BETWEEN THE STOCK EXCHANGES AND THE CUSTOMERS. THE ASSESSING OFFICER, RELYING ON THE DECISION OF THE BOMBAY HIGH COURT IN THE CASE OF KOTAK SECURITIES LTD. (340 ITR 333) REJECTING THE E XPLANATION OF THE ASSESSEE, HELD THAT THE TDS PROVISIONS ARE APPLICAB LE TO THE TRANSACTION CHARGES LEVIED BY THE ASSESSEE AND ACCO RDINGLY PASSED THE IMPUGNED ORDER UNDER S.201/201(1A) DATED 30.3.2012, TREATING THE ASSESSEE AS AN ASSESSEE IN DEFAULT. HOWEVER, CONSI DERING THE FACT THAT THE ASSESSEE HAS FURNISHED LETTER FROM BSE AND NSE, STATING THAT THEY HAVE OFFERED THE TRANSACTION CHARGES AS THEIR INCOM E, HE RAISED THE DEMAND OF ONLY RS.10,68,189 TOWARDS INTEREST UNDER S.201(1A) OF THE ACT. 3. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE THE LEARNED CIT(A), REITERATING ITS CONTENTION THAT THE TDS PROVISIONS ARE NOT APPLICABLE TO THE TRANSACTION CHARGES LEVIED BY THE ASSESSEE. HOWEVER, THE CIT(A), BY THE IMPUGNED ORDER, CONFIR MED THE VIEW TAKEN BY THE ASSESSING OFFICER AND DISMISSED THE AP PEAL OF THE ASSESSEE. 4. DESPITE NOTICE NONE APPEARED ON BEHALF OF THE A PPELLANT- ASSESSEE. THE MAIN ISSUE INVOLVED IN THE PRESENT APPEAL, RELATING TO THE NATURE OF THE TRANSACTION CHARGES LEVIED BY THE ASSESSEE AND ITA NO1266/HYD/2014 M/S. KARVY STOCK BROKING LTD., HYDERABAD 3 CONSEQUENTLY APPLICABILITY OF THE TDS PROVISIONS OF S.194J TO SUCH CHARGES COLLECTED BY THE ASSESSEE, IS COVERED IN FA VOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY THE DECISION OF THE APEX COURT IN THE CASE OF CIT V/S. KOTAK SECURITIES LTD. (2016 TAX PUB (DT )1609 (SC). THE APEX COURT, SETTING ASIDE THE DECISION OF THE HON'B LE BOMBAY HIGH COURT REPORTED AT 340 ITR 333, HELD THAT UNDER THE PURVIEW OF FEES FOR TECHNICAL SERVICES, PAYMENTS FOR SERVICES WHIC H ARE SPECIALISED, EXCLUSIVE AND CUSTOMIZED TO USER/CONSUMER ARE COVER ED. THE HON'BLE APEX COURT OBSERVED THAT THE SERVICES MADE AVAILABL E BY THE BOMBAY STOCK EXCHANGE (BSE ONLINE TRADING(BOLT) SYSTEM) FO R WHICH THE CHARGES WERE PAID BY MEMBERS ARE AVAILABLE TO ALL M EMBERS OF THE STOCK EXCHANGE IN RESPECT OF EVERY TRANSACTION THAT IS ENTERED INTO AND SINCE THERE IS NOTHING SPECIAL, EXCLUSIVE OR CUSTOM ISED SERVICE AND SINCE EACH AND EVERY MEMBER HAS TO NECESSARILY AVAI L OF SUCH SERVICES IN THE NORMAL COURSE OF TRADING IN SECURITIES. THUS , THE APEX COURT HELD THAT SUCH SERVICES DO NOT COME UNDER THE PURVIEW O F TECHNICAL SERVICES AND ACCORDINGLY NOT LIABLE TO TDS. IN TH IS VIEW OF THE MATTER, RESPECTFULLY FOLLOWING THE DECISION OF THE APEX COU RT DISCUSSED ABOVE, WE DELETE THE DEMAND RAISED BY THE ASSESSING OFFICE R EVEN IN TERMS OF S.201(1A), ALLOWING THE APPEAL OF THE ASSESSEE. 5. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 31.05.2016 SD/- SD/- (S.RIFAUR RAHMAN) (P.MADHAVI DEVI) ACCOUNTANT MEMBER. JUDICIAL MEMBER DT/- 31 ST MAY, 2016 ITA NO1266/HYD/2014 M/S. KARVY STOCK BROKING LTD., HYDERABAD 4 COPY FORWARDED TO: 1. M/S. KARVY STOCK BROKING LTD., C/O. M/S.P.MURALI KRISHNA, ADVOCATE 5-9-22/1, ADARSHNAGAR, HYDERABAD. 2. INCOME TAX OFFICER WARD 14(3), HYDERABAD 3. 4. COMMISSIONER OF INCOME-TAX(APPEALS) VIJAYAWADA, COMMISSIONER OF INCOME-TAX VIJAYAWADA 5 . DEPARTMENTAL REPRESENTATIVE ITAT, HYDERABAD B.V.S.