IDBI CAPITAL MARKET SERVICES LTD, MUMBAI V. DCIT RG 4(1), MUMBAI

ITA 1404/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 92501 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-05-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 30-04-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 19-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PREMANAND J
• Assessee Lawyers: N C JAIN
• Keywords: Reasonable cause
• Section: 115JB

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI - I BENCH . . , , BEFORE S/SH. I.P. BANSAL, JUDICIAL MEMBER & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO. 1404 /MUM/20 13 , / ASSESSMENT YEAR - 20 09 - 10 IDBI CAPITAL MARKET SERVICES LTD. 3 RD FLOOR, MAFATLAL CENTER NARIMAN POINT , MUMBAI - 400 0 21 . PAN: AAACI 1268 F VS DY. CIT RANGE - 4(1) AAYAKAR BHAVAN, M.K. MARG MUMBAI - 400 020. ( / APPELLANT ) ( / RESPONDENT ) /ASSESSEE BY : SHRI N.C. JAIN / REVENUE BY : SHRI P R EMANAND J. (DR) / DATE OF HEARING : 30 - 0 4 - 2015 / DATE OF PRONOUNCEMENT : 08 - 0 5 - 2015 , 1961 254 ( 1 ) ORDER U/S.254(1)OF THE INCOME - TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER DT.7/12/2012 OF THE CIT(A) - 8,MUMBAI, THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: A)THE L EARNED CIT (A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 94,01,055 MADE UNDER SECTION 40(A)(1A) OF THE ACT BASING HIS DECISION ON THE PRONOUNCEMENT IN CIT VS KOTAK SECURITIES LTD (IT A NO. 3111 OF 2009) B) THE LEARNED CIT (A) WHILE REL Y ING ON THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF KOTAK SECURITIES WHICH HELD SUCH PAYMENTS AS 'FEES FOR TECHNICAL SERVICES' FAILED TO TAKE NOTE OF THE FACT THAT EVEN THOUGH SUCH PAYMENTS ARE HELD TO BE SUBJECTED TO TDS, THE 1 - LONHIE HIGH COURT DID NOT APPR OVE DISALLOWANCE U/S 40(1) (IA) ON THE GROUND OF THE DISPUTED NATURE OF THE ISSUE. C) THE LEARNED CIT (A) FAILED TO TAKE NOTE OF THE FACT THAT THE PROVISIONS OF SECTION 194J AND 40(I)(1A) ARE TWO DISTINCT AND INDEPENDENT PROVISIONS AND APPLICATION OF THE P ROVISION DOES NOT NECESSARY INVOLVE APPLICATION OF DISALLOWANCE PROVISION U/S 40(I)(IA). BY HOLDING THE PROVISIONS OF SECTION 40(I)(1A) NOT APPLICABLE TO THE ASSESSMENT YEAR 2005 - 06 WHICH WAS THE YEAR BEFORE THEM, THE 1 - LONBIC COURT GAVE LEGAL COGNIZANCE A ND RELEVANCE TO THE EXISTENCE OF REASONABLE CAUSE IN MAKING DISALLOWANCE UNDER THE SECTION. D) THE LEARNED CIT (A) FAILED TO TAKE NOTE OF THE FACT THAT THE REASONS WHICH PROMPTED THE COURT TO HOLD THE PROVISION INAPPLICABLE TO A.Y. 2005 - 06 APPLY WITH EQUAL FORCE TO THE YEAR UNDER APPEAL. SUCH PAYMENTS WERE ALSO TREATED AS NOT OF THE NATURE OF 'FEES OF TECHNICAL SERVICES' AND NOT OBJECTED TO BY THE DEPARTMENT FOR SEVERAL Y EARS. WHEN THE ISSUE AROSE, THE I - ION' BLE ITAT MUMBAI HELD IT AS NOT THE FECS FOR TECH NICAL SERVICES'. IT IS FOR THE FIRST TIME IN 2011 THAT THE ISSUE WAS DECIDED DIFFERENTLY BY THE BOMBAY HIGH COURT. E) THE LEARNED CIT (A) FAILED TO APPRECIATE THAT THE ISSUE WAS HIGHLY CONTENTIOUS AND WAS DECIDED BY THE 1TAT IN ASSESSCE'S FAVOUR WHICH CONS TITUTED A REASONABE CAUSE FBR NOT DEDUCTING TAX AT SOURCE. EXISTENCE OF SUCH DISPUTE HAS BEEN ACCEPTED BY I - ION'HLC BOMBAY HIGH COURT AS REASONABLE CAUSE JUSTIFYING NON - DEDUCTION OF TAX AND CONSEQUENT NON - APPLICATION OF SECTION 40(1)(IA). GROUND NO. 2 THE APPELLANT CRAVES LEAVE TO ADD TO, MODIFY OR SUBSTITUTE ANY GROUND OF APPEAL BEFORE OR DURING THE HEARING OF THE APPEAL IF THE CIRCUMSTANCES SO REQUIRE. ASSESSEE - COMPANY,ENGAGED IN THE BUSINESS OF, INVESTMENT, BROKING AND SECURITIES, FILED ITS RETURN OF IN COME ON 23/9/2009,DECLARING NET LOSS OF RS. 22.52 CRORES UNDER NORMAL PROVISIONS AND BOOK PROFIT OF RS.11.46 CRORES U/S. 115JB OF THE ACT. ASSESSING OFFICER (AO) COMPLETED THE ASSESSMENT U/S.143(3) OF THE ACT ON ,DETERMINING THE INCOME OF THE ASSESSEE AT ( - ) RS.15.89 CRORES. 1404/M/13(09 - 10) IDBI 2 2 .E FFECTIVE GROUND OF APPEAL IS ABOUT DISALLOWANCE MADE U/S. 40(A)(IA) OF THE ACT. DURING THE ASSESSMENT PROCEEDINGS, THE AO FOUND THAT THE ASSESSEE HAD CLAIMED BSE CHARGES, NSE CHARGES AND TRANSACTION CHARGES AS PER THE DETAIL GIVEN BELO W: - (I) BSE CHARGES RS.3,90,508/ - (II) NSE CHARGES RS.6,69,874/ - (III) TRANSACTION CHARGES RS.33,29,423/ - TOTAL RS.43,89,805/ - HE FOUND THAT THE ASSESSEE HAS NOT DEDUCTED TAX AT SOURCE FO R THE ABOVE MENTIONED CHARGES. THE ASSESSEE, IN THIS REGARD, SUBM ITTED THAT THE ABOVE CHARGES WERE NOT FEES FOR TECHNICAL SERVICES ,THAT IT WAS NOT UNDER OBLIGATION TO DEDUCT TAX U/S.194J OF THE ACT, THAT THE ISSUE WAS CONSIDERED BY THE TRIBUNAL IN THE CASE OF KOTAK SECURITIES WHEREIN IT WAS HELD THAT SUCH SERVICES WERE NOT IN TH E NATURE OF TECHNICAL SERVICES. THE AO DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE BECAUSE THE H ONBLE B OMBAY H IGH C OURT HAD REVERSE D THE DECISION OF THE TRIBUNAL.THEREFORE, THE DISPUTED AMOUNT WAS ADDED TO THE INCOME OF THE ASSESSEE UNDER THE PRO VISIONS OF SECTION 40(A)(IA) OF THE ACT FOR NOT DEDUCTING TAX AT SOURCE U/S. 194J OF THE ACT. 3. AGGRIEVED BY THE ORDER OF THE AO,THE ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPEL LATE AUTHORITY (FAA).BEFORE HIM, IT WAS ARGUED THAT THE HONBLE HIGH COUR T ,IN THE CASE OF KOTAK SECURITIES, HAD HELD THAT REASONABLE CAUSE WAS A DECISIVE FACTOR IN MAKING DISALLOWANCE. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE, THE FAA DISMISSED THE APPEAL RELYING ON THE ORDER OF KOTAK SECURITIES LTD.(ITA NO.3111/09). HE H ELD THAT THE TRANSACTION CHARGES PAID BY THE ASSESSEE TO THE STOCK EXCHANGE CONSTITUTED FEE FOR TECHNICAL SERVICES, THAT THE ASSESSEE WAS LIABLE TO DEDUCT TAX AT SOURCE WHILE CREDITING THE TRANSACTION CHARGES TO THE ACCOUNT OF STOCK EXCHANGE THAT THE AO HA D RIGHTLY DISALLOWED THE AMOUNTS IN QUESTION U/S. 40(A)(IA) OF THE ACT. 4. DURING THE COURSE OF HEARING B EFORE US,AUTHORISED REPRESENTATIVE (AR) STATED THAT THE TRIBUNAL HAD WHI LE DECIDING APPEAL FOR AY 08 - 09, HELD THAT PROVISIONS OF SEC.194J WERE NOT ATTRAC TED, THA T THE RETURN OF INCOME WAS FILED BY THE ASSESSEE LONG BEFORE THE DECISION OF THE H ONBLE HIGH C OURT WAS PRONOUNCED. DEPARTMENTAL REPRESENTATIVE (DR) LEFT THE ISSUE TO THE DISCRETION OF THE BENCH. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. WE FIND THAT WHILE ADJUDICATING THE APPEAL FOR AY 2008 - 09 IN ASSESSEES OWN CASE IN (ITA NO.618/MUM2012) DT. 18/2/2015), THE TRIBUNAL HAS HELD AS UNDER : - 7. GROUND NO.2 IS IN RELATION TO THE DISALLOWANCE MADE UNDER SECTION 40(A)(IA) O F THE ACT IN RESPECT OF PAYMENTS MADE TO BOMBAY STOCK EXCHANGE. WE FIND THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE EXCEPT THAT THE TRANSACTION CHARGES HAVE BEEN CONSIDERED TO BE SUBJECT TO TDS BY THE DECISION O F HON'BLE BOMBAY HIGH COURT IN THE CASE OF KOTAK SECURITIES LTD. IN INCOME TAX APPEAL NO.3111 OF 2009. HOWEVER, WE FIND THAT THE HON'BLE HIGH COURT HAS OBSERVED THAT SECTION 194J WAS INSERTED W.E.F. 1/7/1995 AND TILL ASSESSMENT YEAR 2005 - 06 BOTH THE REV ENUE AND THE ASSESSEE PROCEEDED ON THE FOOTING THAT SECTION 194J WAS NOT APPLICABLE TO THE PAYMENT OF TRANSACTION CHARGES AND ACCORDINGLY DURING THE PERIOD FROM 1995 TO 2005 NEITHER THE ASSESSEE HAS DEDUCTED TAX AT SOURCE NOR THE REVENUE HAS RAISED ANY OBJECTION. THE HON'BLE HIGH COURT FURTHER OBSERVED THAT IN THESE CIRCUMSTANCES IF BOTH THE PARTIES FOR NEARLY A DECADE PROCEEDED ON THE FOOTING THAT SECTION 194J IS NOT ATTRACTED, THEN IN THE ASSESSMENT YEAR IN QUESTION, NO FAULT CAN BE FOUND WITH THE ASSESSEE IN NOT DEDUCTING TAX AT SOURCE UNDER SECTION 194J OF THE ACT AND CONSEQUENTLY, NO ACTION COULD BE TAKEN UNDER SECTION 40(A)(IA) OF THE ACT. 7.1 RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED ON 14/08/2009 AND THIS DECISION OF THE HON'BLE COURT WAS PRONOUNCED ON 21/10/2011. THUS, THE ASSESSEE HAD ALREADY FILED THE RETURN OF INCOME AND THE TIME PERIOD FOR DEDUCTING TAX AT SOURCE WAS ALSO LAPSED. CONSIDERING 1404/M/13(09 - 10) IDBI 3 THESE PECULIAR FACTS. IN OUR CONSIDERED OPINION NO DISALLOWANCE ON THIS A CCOUNT SHOULD BE MADE FOR THE YEAR UNDER CONSIDERATION. GROUND NO.2 IS ACCORDINGLY ALLOWED. WE FIND THAT RETURN FOR THE YEAR UNDER APPEAL WAS FILED O N 23/9/2009,AS STATED EARLIER. RESPECTFULLY, FOLLOWING THE ORDER OF THE TRIBUNAL, FOR THE EARLIER YEAR WE D ECIDE THE EFFECTIVE GROUND OF A PPEAL IN FAVOUR OF THE ASSESSEE AS THE FACTS AND CIRCUMSTANCES OF BOTH THE YEARS ARE SIMILAR. AS A RESULT, APPEAL FILED BY T HE ASSESSEE STANDS ALLOWED . . ORDER PRO NOUNCED I N THE OPEN COURT ON 8 TH , MAY , 2015. 8 TH , 2015 SD/ - SD/ - ( . . /I.P. BANSAL) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / MUMBAI, /DATE: 08 .05 .2015 J V . SR.PS / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR A BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , / ITAT, MUMBAI.