The ITO, TDS-3, Ahmedabad V. Shah Investor's Home Ltd., Ahmedabad

ITA 1768/AHD/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 5976 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 7 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-02-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 01-07-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: H V GANDHI
• Keywords: Non-deduction of tax; TDS
• Section: 40(a)(ia); 201(1); 194J

Judgement Text

, ,LK ,LK,LK ,LK- -- -,E ,E,E ,E- -- -LH LHLH LH IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD LOZJH IZNHI DQEKJ DSFM;K] YS[KK LNL; ,OA EGKOHN LOZJH IZNHI DQEKJ DSFM;K] YS[KK LNL; ,OA EGKOHN LOZJH IZNHI DQEKJ DSFM;K] YS[KK LNL; ,OA EGKOHN LOZJH IZNHI DQEKJ DSFM;K] YS[KK LNL; ,OA EGKOHN IZL KN] U;KF;D LNL; DS LE{KA IZLKN] U;KF;D LNL; DS LE{KA IZLKN] U;KF;D LNL; DS LE{KA IZLKN] U;KF;D LNL; DS LE{KA BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER AND SHRI MAHAVIR PRASAD, JUDICIAL MEMBER ./ I.T.A. NO. 1768/AHD/2016 ( / ASSESSMENT YEAR : 2011-12) THE ITO, TDS - 3, ROOM NO.4, 2 ND FLOOR, AMRUT JYANT BHAVAN, NAVJIVAN BUILDING, B/H. GUJARAT VIDDHYAPITH, OFF. ASHRAM ROAD, AHMEDABAD 380 014 / VS. SHAH INVESTORS HOME LTD. SIHL HOUSE, OPP. AMBAWADI JAIN TEMPLE, NEHRUNAGAR CROSS ROAD, AHMEDABAD 380 015 ./ ./ PAN/GIR NO. : AAFCS 4436 C ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI UMA SHANKAR PRASAD, SR. D.R. / RESPONDENT BY : SHRI H. V. GANDHI, A.R. / DATE OF HEARING 05/02/2018 !'# / DATE OF PRONOUNCEMENT 22/02/2018 $% / O R D E R PER MAHAVIR PRASAD, JUDICIAL MEMBER : THIS IS AN APPEAL BY THE DEPARTMENT AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-10, AHMEDABAD, VIDE APPEAL NO.CIT(A)-10/ITO.TDS-3/95/15-16 DATED 29/04/2016 FO R THE ASSESSMENT YEAR (AY) 2011-12. ITA NO. 1768/AH D/2016 ITO VS. SHAH INVESTORS HOME LTD. ASST.YEAR 2011-12 - 2 - 2. DEPARTMENT HAS TAKEN FOLLOWING GROUNDS OF APPEAL S: 1. THAT THE LD.CIT HAS ERRED IN LAW AND ON FACTS B Y MAKING DISALLOWANCE OF RS.1,08,74,884/- REGARDING THE PAYM ENT OF TRANSACTION CHARGES AND OTHER CHARGES PAID TO NSE A ND BSE, ON THE ALLEGED GROUND THAT TDS IS DEDUCTED U/S.194C IN STEAD OF U/S.194J OF THE I.T. ACT, 1961 AND DISALLOWED THE E NTIRE EXPENDITURE / PAYMENT U/S. 40(A)(IA) OFTHEI.T.ACT,1 961. 2. THAT THE LD CIT HAS ERRED IN LAW AND ON FACTS B Y MAKING DISALLOWANCE OF RS.32,76,404/- REGARDING THE PAYMEN T OF NSDL CHARGES AND CDSL CHARGES, ON THE ALLEGED GROUND THA T TDS IS DEDUCTED U/S.194C INSTEAD OF 194J OF THE I.T. ACT, 1961 AND DISALLOWED THE ENTIRE EXPENDITURE / PAYMENT U/S. 40 (A)(IA) OF THE I.T. ACT, 1961. 3. WITHOUT APPRECIATING THE FACT THAT THE ASSESS EE HAS DEDUCTED AND DEPOSITED TDS TO THE TAX U/S.194C OF THE I.T. ACT A O HAS IMPOSED CONSEQUENCES OF FAILURE TO DEDUCT TAX U/S. 201(1) AND RAISED DEMAND OF RS.20,94,390/- ALONG WITH INTEREST U/S. 201(1A) OF THE I.T. ACT, 1961. 3. BRIEFLY STATED FACTS AS CULLED OUT FROM THE RECO RDS ARE THAT ORDER U/S. 201(1) & 201(1A) OF THE ACT WAS PASSED BY THE ITO(TDS)-3, AHMEDABAD. IN THE SAID ORDER, IT HAS BEEN CONTENDED BY THE ITO THAT THE ASSESSEE HAS FAILED TO DEDUCT TDS ON VARIOUS PAYMEN TS SUCH AS COMMISSION, RENT, CONTRACT CHARGES AND PROFESSIONAL CHARGES, WHICH HAS BEEN DISALLOWED BY THE AO U/S.40(A)(IA) OF THE ACT WHILE PASSING ORDER U/S.143(3) OF THE I.T. ACT. THE APPELLANT SUBMITTED BEFORE THE ITO(TDS) THAT IT HAS DEDUCTED THE TAX U/S.194C AS CONTRACTO R PAYMENT AND PAID SUCH TAX TO THE GOVERNMENT WITHIN THE TIME. THERE FORE, THE PROCEEDINGS U/S.201(1) AND 201(1A) ARE NOT WARRANTED. IT WAS HE LD BY THE ITO(TDS) THAT THE ASSESSEE SHOULD HAVE DEDUCTED TAX U/S.194J OF THE I.T. ACT AND ITA NO. 1768/AH D/2016 ITO VS. SHAH INVESTORS HOME LTD. ASST.YEAR 2011-12 - 3 - ACCORDINGLY DEMAND A DEMAND OF RS.14,15,130/- U/S.2 01(1) AND RS.6,79,260/- U/S. 201(1A) OF THE ACT WAS RAISED AG AINST THE ASSESSEE. 4. AGAINST THE SAID ORDER ASSESSEE PREFERRED APPEAL BEFORE THE LD.CIT(A) WHO ALLOWED THE APPEAL OF THE ASSESSEE. 5. NOW DEPARTMENTS APPEAL IS BEFORE US. 6. WE HAVE GONE THROUGH THE RELEVANT RECORD AND IMP UGNED ORDER. GROUND NO.1 AND 2 ARE INTERCONNECTED AND GROUND NO. 3 IS CONSEQUENTIAL. LD. AR CITED AN ORDER OF GUJARAT HIGH COURT IN ASSE SSEES OWN CASE IN TAX APPEAL NO.658 OF 2017. IN THIS ORDER SUPREME CO URT HAS HELD THAT THE BROKERS MAKE PAYMENT TO THE STOCK EXCHANGE FOR THE FACILITIES OF FACELESS SCREEN BASED TRANSACTIONS MADE AVAILABLE A T THE STOCK EXCHANGE WHICH WAS COMPULSORY FOR THE BROKERS TO USE. IN THE OPINION OF THE SUPREME COURT, THIS WAS NOT A PAYMENT OF FEE FOR TE CHNICAL SERVICE RENDERED BY THE STOCK EXCHANGE INVITING DEDUCTION A T SOURCE UNDER SECTION 194J OF THE ACT. THIS BEING THE POSITION, S ECOND QUESTION IS NOT ADMITTED. 7. IN THE ABOVE SAID MATTER ASSESSEE GOT RELIEF FRO M THE JURISDICTIONAL HIGH COURT AND HONBLE HIGH COURT HAS HELD THAT WHA TEVER PAYMENT HAS BEEN MADE TO THE STOCK EXCHANGE IS NOT A FEE FOR TE CHNICAL SERVICES. 8. LD. AR ALSO CITED A JUDGMENT OF HONBLE SUPREME COURT IN THE MATTER OF CIT-4, MUMBAI VS. M/S. KOTAK SECURITIES L TD. IN CIVIL APPEAL ITA NO. 1768/AH D/2016 ITO VS. SHAH INVESTORS HOME LTD. ASST.YEAR 2011-12 - 4 - NO.3141 OF 2016. HONBLE SUPREME COURT DECIDED THAT THE TRANSACTION CHARGES PAID TO THE CONCERNED STOCK EXCHANGE ARE NO T TO BE CONSIDERED AS FEES FOR TECHNICAL SERVICES AND HENCE THE SAME ARE NOT COVERED UNDER THE PROVISIONS OF SECTION 194J OF THE I.T. ACT. THE REL EVANT FINDING OF THE HONBLE SUPREME COURT ORDER IS REPRODUCED HERE AS U NDER: 9. THERE IS YET ANOTHER ASPECT OF THE MATTER WHICH , IN OUR CONSIDERED VIEW, WOULD REQUIRE A SPECIFIC NOTICE. THE SERVICE MADE AVAILABLE BY THE BOMBAY STOCK EXCHANGE [BSE ONLINE TRADING (BOLT ) SYSTEM] FOR WHICH THE CHARGES IN QUESTION HAD BEEN PAID B Y THE APPELLANT - ASSESSEE ARE COMMON SERVICES THAT EVERY MEMBER OF T HE STOCK EXCHANGE IS NECESSARILY REQUIRED TO AVAIL OF TO CARRY OUT TR ADING IN SECURITIES IN THE STOCK EXCHANGE. THE VIEW TAKEN BY THE HIGH COUR T THAT A MEMBER OF THE STOCK EXCHANGE HAS AN OPTION OF TRADING THROUGH AN ALTERNATIVE MODE IS NOT CORRECT. A MEMBER WHO WANTS TO CONDUCT HIS DAILY BUSINESS IN THE STOCK EXCHANGE HAS OPTION BUT TO AVAIL OF SU CH SERVICES. EACH AND EVERY TRANSACTION BY A MEMBER INVOLVES THE US E OF THE SERVICES PROVIDED BY THE STOCK EXCHANGE FOR WHICH A MEMBER IS COMPULSORILY REQUIRED TO PAY AN ADDITIONAL CHARGE ( BASED ON THE TRANSACTION VALUE) OVER AND ABOVE THE CHARGES FOR T HE MEMBERSHIP IN THE STOCK EXCHANGE. THE ABOVE FEATURES OF THE SERVI CES PROVIDED BY THE STOCK EXCHANGE WOULD MAKE THE SAME A KIND OF A FACI LITY PROVIDED BY THE STOCK EXCHANGE FOR TRANSACTING BUSINESS RATHER THAN A TECHNICAL SERVICE PROVIDED TO ONE OR A SECTION OF THE MEMBERS OF THE STOCK EXCHANGE TO DEAL WITH SPECIAL SITUATIONS FACED BY S UCH A MEMBER(S) OR THE SPECIAL NEEDS OF SUCH MEMBER(S) IN THE CONDUCT OF BUSINESS IN THE STOCK EXCHANGE. IN OTHER WORDS, THERE IS NO EXCLUSI VITY TO THE SERVICES RENDERED BY THE STOCK EXCHANGE AND EACH AND EVERY M EMBER HAS TO NECESSARILY AVAIL OF SUCH SERVICES IN THE NORMAL CO URSE OF TRADING IN SECURITIES IN THE STOCK EXCHANGE. SUCH SERVICES, TH EREFORE, WOULD UNDOUBTEDLY BE APPROPRIATE TO BE TERMED AS FACILITI ES PROVIDED BY THE STOCK EXCHANGE ON PAYMENT AND DOES NOT AMOUNT TO 'T ECHNICAL SERVICES' PROVIDED BY THE STOCK EXCHANGE, NOT BEING SERVICES SPECIFICALLY SOUGHT FOR BY THE USER OR THE CONSUMER . IT IS THE AFORESAID LATTER FEATURE OF A SERVICE RENDERED WHICH IS THE E SSENTIAL HALLMARK OF THE EXPRESSION 'TECHNICAL SERVICES' AS APPEARING IN EXPLANATION 2 TO SECTION 9(1)(VII) OF THE ACT. ITA NO. 1768/AH D/2016 ITO VS. SHAH INVESTORS HOME LTD. ASST.YEAR 2011-12 - 5 - 10. FOR THE AFORESAID REASONS, WE HOLD THAT THE VIE W TAKEN BY THE BOMBAY HIGH COURT THAT THE TRANSACTION CHARGES PAID TO THE BOMBAY STOCK EXCHANGE BY ITS MEMBERS ARE FOR 'TECHNICAL SE RVICES RENDERED IS NOT AN APPROPRIATE VIEW. SUCH CHARGES, REALLY, ARE NATURE OF PAYMENTS MADE FOR FACILITIES PROVIDED BY THE STOCK EXCHANGE . NO TDS ON SUCH PAYMENTS WOULD, THEREFORE, BE DEDUCTIBLE UNDER SECT ION 194J OF THE ACT. 9. IN THE ABOVE SAID MATTER HONBLE SUPREME COURT H AS HELD THAT NATURE OF SUCH SERVICES BEING PROVIDED BY THE STOCK EXCHANGE WOULD UNDOUBTEDLY BE APPROPRIATE TO BE TERMED AS FACILITI ES PROVIDED BY THE STOCK EXCHANGE ON PAYMENT AND DOES NOT AMOUNT TO 'T ECHNICAL SERVICES' PROVIDED BY THE STOCK EXCHANGE, NOT BEING SERVICES SPECIFICALLY SOUGHT FOR BY THE USER OR THE CONSUMER. THEREFORE, THE SAM E CANNOT BE HELD TO BE TECHNICAL SERVICES. 10. IN OUR CONSIDERED OPINION, LD. CIT(A) HAS PASSE D DETAILED AND REASONED ORDER AND RESPECTFULLY FOLLOWING THE CIT-4 , MUMBAI VS. M/S. KOTAK SECURITIES LTD (SUPRA), WE DISMISS APPEAL OF THE DEPARTMENT. 11. IN THE RESULT, APPEAL FILED BY THE DEPARTMENT I S DISMISSED. THIS ORDER PRONOUNCED IN OPEN COURT ON 22/02/2018 SD/- SD/- IZNHI DQEKJ DSFM;K IZNHI DQEKJ DSFM;K IZNHI DQEKJ DSFM;K IZNHI DQEKJ DSFM;K EGKOHJ IZLKN EGKOHJ IZLKN EGKOHJ IZLKN EGKOHJ IZLKN YKS[KK LN YKS[KK LN YKS[KK LN YKS[KK LNL; L; L; L; U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; (PRADIP KUMAR KEDIA) (MAHAVIR PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 22/02/2018 PRITI YADAV, SR.PS ITA NO. 1768/AH D/2016 ITO VS. SHAH INVESTORS HOME LTD. ASST.YEAR 2011-12 - 6 - !'# $#! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. & '( ) / CONCERNED CIT 4. ) () / THE CIT(A)-10, AHMEDABAD. 5. ,-. //'( , '(# , 12$&$ / DR, ITAT, AHMEDABAD 6. .34 5 / GUARD FILE. % & / BY ORDER, , / //TRUE COPY// '/& () ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION 05/02/2018 (DICTATION-PAD 2 PAGE S ATTACHED AT THE END OF THIS APPEAL-FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 06/02/2018 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S 19/02/2018 6. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 19/02/2018 7. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S. 8. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 9. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 10. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER