DCIT CIR 4(2), MUMBAI V. TRIVENI MANAGEMENT CONSULTANCY SERVICES LTD, MUMBAI

ITA 2025/MUM/2010

• Counselvise Citation: 202519914 RSA 2010
• Duration Of Justice: 1 year(s) 3 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2006-2007
• Appeal Filed On: 12-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUBHASH SHETTY
• Assessee Lawyers: C G K NAIR
• Keywords: Procedural lapse
• Section: 40(a)(ia); 205; 201

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH: MUMBAI BEFORE SHRI R.S. PADVEKAR, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NOS.2024 AND 2025/MUM /2010 (ASSESSMENT YEARS: 2005-06 AND 2006-07) ACIT 4(2), R. NO.642, 6TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400 020 ....... APPELLANT VS M/S. TRIVENI MANAGEMENT CONSULTANCY SERVICES LTD., A-2, BANDRA LIBERTY CHS 98/B, HILL ROAD, BANDRA (WEST), MUMBAI -400 050 ..... RESPONDENT PAN: AABCT 4249 C APPELLANT BY: SHRI SUBHASH SHETTY RESPONDENT BY: SHRI C.G.K. NAIR O R D E R PER R.S. PADVEKAR, JM THESE TWO CROSS APPEALS FILED BY THE REVENUE AGAINS T THE ORDERS OF THE LD. CIT (A)-8 MUMBAI FOR THE A.YS. 2005-06 A ND 2006-07 CHALLENGING THE RESPECTIVE IMPUGNED ORDERS OF THE L D. CIT (A). THE FIRST ISSUE, WHICH IS COMMON IN BOTH THE APPEALS IS IN RESPECT OF THE DISALLOWANCE OF ` 10,40,589/- FOR THE A.Y. 2005-06 AND ` 6,99,410/- FOR THE A.Y. 2006-07 MADE BY THE A.O. BY APPLYING S ECTION 40(A)(IA) IN RESPECT OF VSAT AND LEASELINE CHARGES PAID BY THE A SSESSEE TO THE STOCK EXCHANGE TREATING THE SAME TOWARDS THE RENDER ING THE TECHNICAL SERVICES WHICH WERE DELETED BY THE LD. CIT (A). 2. WE HAVE HEARD THE PARTIES. BRIEFLY STATED, THE FACTS WHICH REVEALED FROM THE RECORDS ARE AS UNDER. THE ASSESS EE-COMPANY IS A SHARE-BROKER. THE ASSESSEE HAS CLAIMED THE EXPENDI TURE IN THE A.Y. 2005-06 TOWARDS TRANSACTION CHARGES OF ` 8,48,589/- AND VSAT ITAS 2024 AND 2025/MUM/2010 M/S. TRIVENI MANAGEMENT CONSULTANCY SERVICES LTD. 2 CHARGES OF ` 1,92,000/-. SAME WAY, IN THE A.Y. 2006-07 THE ASS ESSEE HAD CLAIMED THE TRANSACTION CHARGES OF ` 2,27,295/- AND LEASE LINE CHARGES OF ` 4,72,115/-. THE A.O. HAS NOTED THAT THE ASSESSEE IS REQUIRED TO MAKE THE PAYMENT OF THE SAID AMOUNT CHA RGES AND LEASE LINE OPERATOR ON ACCOUNT OF SERVICES PROVIDED BY IT WITH REGARD TO THE TRANSACTIONS IN SECURITIES THROUGH STOCK EXCHANGE A ND LEASELINE OPERATOR ON ACCOUNT OF SERVICES PROVIDED BY IT WITH REGARD TO THE TRANSACTIONS IN SECURITIES THROUGH STOCK EXCHANGE. THE A.O. WAS OF THE OPINION THAT THE PAYMENT MADE BY THE ASSESSEE T O THE STOCK EXCHANGE FOR LEASELINE, VSAT AND TRANSACTION CHARGE S ARE IN THE NATURE OF FEES FOR TECHNICAL SERVICES AND THE ASSES SEE WAS REQUIRED TO DEDUCT THE TAX AT SOURCE AND AS THE ASSESSEE HAS NO T DEDUCTED THE TAX AT SOURCE IN VIEW OF THE PROVISIONS OF SECTION 40(A )(IA) THE SAID EXPENDITURE WAS NOT ALLOWABLE IN THE A.Y. 2005-06 A ND 2006-07. THE A.O., THEREFORE, MADE THE DISALLOWANCE AND MADE ADD ITION IN THE INCOME OF THE ASSESSEE. THE LD. CIT (A) DELETED TH E ADDITION IN BOTH THE YEARS BY FOLLOWING THE DECISION OF THE ITAT MUM BAI IN THE CASE OF KOTAK SECURITIES LTD. VS. ADDL. CIT 124 TTJ (MUM) 2 14 / 24 DTR 214. NOW, THE REVENUE IS IN APPEAL BEFORE US. 3. IN THE CASE OF KOTAK SECURITIES LTD. (SUPRA) THE TRIBUNAL HAS EXAMINED THE NATURE OF THE VASAT, LEASELINE AND TRA NSACTION CHARGES AND HAS HELD THAT THE SAME CANNOT BE TREATED AS A P AYMENT / FEES FOR TECHNICAL SERVICES. WE, THEREFORE, FOLLOWING THE O RDER OF THE TRIBUNAL IN THE CASE KOTAK SERVICES LTD. (SUPRA) CONFIRMED T HE ORDER OF THE LD. CIT (A) AND NO OTHER DECISION OF THE HIGH FORUM HAS BROUGHT TO OUR NOTICE. ACCORDINGLY, GROUND NO.1 IN BOTH THE APPEA LS IS DISMISSED. 4. THE NEXT ISSUE IS WHETHER THE LD. CIT (A) IS JUS TIFIED IN DELETING THE ADDITION MADE BY THE A.O. ON ACCOUNT OF PENALTY OF ` 20,000/- LEVIED ON THE VIOLATION OF THE BYE LAWS OF THE STOC K-EXCHANGE AND THIS ISSUE IS ARISING IN THE A.Y. 2005-06. ITAS 2024 AND 2025/MUM/2010 M/S. TRIVENI MANAGEMENT CONSULTANCY SERVICES LTD. 3 5. WE HAVE HEARD THE PARTIES. THE LD. COUNSEL SUBM ITS THAT THE PENALTY IS LEVIED BY THE STOCK-EXCHANGE FOR CERTAIN DELAYS AND TECHNICAL NON-COMPLIANCES AND HENCE, IT CANNOT BE T REATED AS PENALTY LEVIED FOR SERIOUS INFRACTION OF LAW. THE LD. COUN SEL ARGUED THAT THIS ISSUE IS ALSO COVERED IN FAVOUR OF THE ASSESSEE BY THE FOLLOWING DECISIONS:- (I) KAIRA CAN CO. LTD. VS. DCIT -2 ITR (TRIB) 2 0 (MUM) (II) ITO VS. VRM SHARE BROKING (P.) LTD. -27 SOT 469 (MUM) 6. WE HAVE ALSO HEARD THE LD. D.R. IN THE CASE OF KAIRA CAN CO. LTD. (SUPRA) THE ASSESSEE WAS LEVIED THE PENALTY OF ` 1,40,000/-, WHICH WAS DISALLOWED BY THE A.O. TREATING THE SAME FOR TH E INFRINGEMENT OF LAW. THE SAID PENALTY WAS LEVIED AND THE ASSESSEE FAILED TO MAKE THE DISCLOSURE OF DETAILS AS REQUIRED IN THE DISCLOSURE NORMS OF REGULATIONS 6 AND 8 UNDER THE SECURITIES AND EXCHAN GE BOARD OF INDIA (SEBI) REGULATIONS SCHEME, 2002. THE TRIBUNA L BY APPLYING TEST LAID DOWN IN THE CASE OF PRAKASH COTTON MILLS P. LT D. 201 ITR 684 (SC) AS WELL AS IN THE CASE OF CIT VS. AHMEDABAD COTTON MANUFACTURING CO. LTD. 205 ITR 163 (SC) IT IS HELD THAT EACH AND EVER Y PAYMENT CANNOT BE TREATED AS A PENALTY AS THE SAME IS LEVIED FOR R EGULARIZATION OF CERTAIN LAPSES. IN THE PRESENT CASE, THE ASSESSEE HAS TO PAY THE PENALTY FOR MINOR PROCEDURAL LAPSES. THE IDENTICAL VIEW HAS BEEN TAKEN BY THE TRIBUNAL IN THE CASE OF VRM SHARE BROK ING (P.) LTD. (SUPRA). IN OUR OPINION, THE SAID LD. CIT (A) HAS RIGHTLY DELETED THE ADDITION. NO INTERFERENCE IS CALLED FOR. IN THE R ESULT GROUND NO.2 FOR THE A.Y. 2005-06 IS DISMISSED. 7. IN THE RESULT, BOTH THE APPEALS OF REVENUE ARE D ISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS D AY OF 29TH JUNE 2011. SD/- SD/- ( B. RAMAKOTAIAH ) ACCOUNTANT MEMBER ( R.S. PADVEKAR ) JUDICIAL MEMBER MUMBAI, DATE : 29TH JUNE 2011 ITAS 2024 AND 2025/MUM/2010 M/S. TRIVENI MANAGEMENT CONSULTANCY SERVICES LTD. 4 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A)8, MUMBAI. 4) THE CIT-4, MUMBAI. 5) THE D.R. D BENCH, MUMBAI. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR I.T.A.T., MUMBAI *CHAVAN ITAS 2024 AND 2025/MUM/2010 M/S. TRIVENI MANAGEMENT CONSULTANCY SERVICES LTD. 5 SR.N. EPISODE OF AN ORDER DATE INITIALS CONCERNED 1 DRAFT DICTATED ON 29.06.2011 SR.PS 2 DRAFT PLACED BEFORE AUTHOR 29.06.2011 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/PS SR.PS/PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7 FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER