ITO 4(2)(1), MUMBAI V. PARAG PARIKH FINANCIAL ADVISORY SERVICES LTD, MUMBAI

ITA 2388/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 7664 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-02-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2005-2006
• Appeal Filed On: 15-04-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIRENDRA OJHA
• Assessee Lawyers: C N VAZE
• Keywords: TDS
• Section: 73

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'C' BENCH, MUMBAI BEFORE SHRI R.K. GUPTA, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO. 2388/MUM/2009 (ASSESSMENT YEAR: 2005-06) INCOME TAX OFFICER 4(2)(1) M/S. PARAG PARIKH FINANC IAL ROOM NO. 644, 6TH FLOOR ADVISORY SERVICES LTD. AAYAKAR BHAVAN, M.K. ROAD VS. GREAT WESTERN BLDG., 130/132 MUMBAI 400020 SHAHID BHAGAT SINGH ROAD, FORT PAN - AABCP 9117 F APPELLANT RESPONDENT APPELLANT BY: SHRI VIRENDRA OJHA RESPONDENT BY: SHRI C.N. VAZE O R D E R PER B. RAMAKOTAIAH, A.M. THIS APPEAL BY THE REVENUE IS AGAINST THE ORDER OF THE CIT(A) IV, MUMBAI DATED 27.01.2009. 2. GROUND NOS. 1 TO 6 OF THIS APPEAL PERTAIN TO DISALL OWANCE OF RS.1,08,833/- OF V-SAT CHARGES AND RS.5,13,287/- OF TRANSACTION CHARGES UNDER SECTION 40(A)(IA). THE A.O. HAS DISCUSSED THI S ISSUE VIDE PARA 3.1 TO 3.9 AND HELD THAT V-SAT AND TRANSACTION CHARGES PAI D TO STOCK EXCHANGE ARE FOR TECHNICAL SERVICES AND THEREFORE TDS WAS DE DUCTIBLE UNDER SECTION 194J. SINCE THE TDS WAS NOT MADE, THE A.O. DISALLOW ED THE AMOUNT UNDER SECTION 40(A)(IA). THE CIT(A) CONSIDERED THE V-SAT CHARGES ARE REIMBURSEMENT CHARGES PAID BY THE MEMBERS OF THE ST OCK EXCHANGE IN LIEU OF INFRASTRUCTURE AND TRADE FACILITIES PROVIDED BY THE STOCK EXCHANGE AND V- SAT CHARGES ARE NOT PAYMENTS WHICH CAN COME WITHIN THE PAYMENT OF FEES FOR TECHNICAL SERVICES AND ALSO NOT FOR ANY WORK DO NE BY THE NSC FOR THE MEMBER BROKERS. THE TDS IS THEREFORE NOT DEDUCTIBLE ON THE SAME. SO FAR AS DEDUCTIBILITY OF TDS ON TRANSACTION CHARGES ARE CON CERNED THE CIT(A) RELIED ON THE DECISION OF THE ITAT MUMBAI IN KOTAK SECURIT IES VS. ACIT NOW REPORTED AS 025 SOT 440 (MUM) WHEREIN IT WAS HELD T HAT THE STOCK ITA NO. 2388/MUM/2009 M/S. PARAG PARIKH FINANCIAL ADVISORY SERVICES LTD. 2 EXCHANGE DOES NOT PROVIDE MANAGERIAL SERVICES AND T HE FEES PAID BY THE MEMBERS TO THE STOCK EXCHANGE IS NOT FOR ANY TECHNI CAL SERVICES RENDERED, SO THE TDS IS NOT DEDUCTIBLE ON THE SAME. ACCORDING LY HE DIRECTED THE A.O. TO ALLOW THE ABOVE AMOUNTS. 3. THE LEARNED D.R. RELIED ON THE ORDER OF THE A.O. WH EREAS THE LEARNED COUNSEL ON THE CIT(A)S ORDER. FURTHER IT WAS SUBMI TTED THAT WITH REFERENCE TO THE PAYMENT MADE BY THE MEMBERS TO ITS STOCK EXC HANGE FOR V-SAT/ LEASE LINE/BOLT/DEMAT CHARGES IT WAS HELD BY THE IT AT MUMBAI BENCH IN DCIT VS. ANGEL BROKING LTD. IN ITA NO. 7031/MUM/200 8 THAT THE PAYMENT IS NOT FOR TECHNICAL SERVICES RENDERED. 4. CONSIDERING THE ARGUMENTS OF BOTH THE COUNSELS AND THE CASE LAW RELIED UPON IN THIS REGARD WE ARE OF THE OPINION TH AT THERE IS NO NEED TO INTERFERE WITH THE ORDER OF THE CIT(A) IN THIS REGA RD. IT IS TO BE HELD THAT THE PAYMENTS ARE MADE BY ASSESSEE TO STOCK EXCHANGE AS A MEASURE OF PROVIDING OF INFRASTRUCTURE TO THE MEMBERS AND THE FEE PAID IN THIS REGARD IS NOTHING BUT FEE PAID FOR USE OF FACILITIES PROVIDED BY THE STOCK EXCHANGE. STOCK EXCHANGES ARE NOT THE OWNERS OF THIS TECHNOLO GY TO PROVIDE THEM FOR A FEE AND THE MEMBERS OF THE STOCK EXCHANGE AND THE P UBLIC AT LARGE ARE BENEFICIARIES OF THE INFRASTRUCTURE PROVIDED BY THE STOCK EXCHANGE. THE CIT(A) HAS CORRECTLY CAME TO THE CONCLUSION THAT TH ESE CHARGES ARE NOT FEES FOR TECHNICAL SERVICES. ACCORDINGLY, RESPECTFULLY F OLLOWING THE COORDINATE BENCH DECISIONS RELIED UPON (SUPRA) THE ORDER OF TH E CIT(A) IS CONFIRMED AND THE GROUNDS ARE REJECTED. 5. GROUND NO. 7 PERTAINS TO THE ISSUE OF SET OFF OF BR OUGHT FORWARDS LOSS AGAINST THE BROKERAGE INCOME STATING THAT EXPLANATI ON TO SECTION 73 IS NOT APPLICABLE. THE GROUND IS AS UNDER: - 7. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN DIRECTING TO SET OFF THE BROUGH T FORWARD LOSS AGAINST THE BROKERAGE INCOME STATING THAT THE EXPLA NATION TO SECTION 73 IS NOT APPLICABLE 6. IT WAS SUBMITTED THAT THE ASSESSEE HAD TO UNDERTAKE SOME TRADING IN THE NATURE OF HEDGING TO PROTECT ITSELF FROM UNDUE RISK TAKEN BY IT AND THE ITA NO. 2388/MUM/2009 M/S. PARAG PARIKH FINANCIAL ADVISORY SERVICES LTD. 3 LOSSES SO CLAIMED WERE NOT ALLOWED TO BE SET OFF ST ATING THAT EXPLANATION TO SECTION 73 IS APPLICABLE. IT WAS SUBMITTED THAT THE ISSUE IN ASSESSMENT YEAR 2003-04 IN ITA NO. 3873/MUM/2007 ABOUT QUANTIFICATI ON OF LOSS UNDER CONSIDERATION WAS RESTORED BACK TO THE FILE OF THE A.O. VIDE ORDER DATED 3 RD APRIL 2009 AND IT WAS SUBMITTED THAT THE A.O. ALLOW ED THE NECESSARY RELIEF IN THE CONSEQUENTIAL ORDER. SINCE THE ISSUE IS ONE OF SET OFF OF BROUGHT FORWARD LOSSES, THE A.O. IS DIRECTED TO ALLOW THE SET OFF, IF THE EARLIER YEARS LOSS IS QUANTIFIED AS A BUSINESS LOSS ACCORDING TO THE PROV ISIONS OF LAW. THE GROUND IS INFACT INFRUCTUOUS AND ACCORDINGLY REJECTED. 7. GROUND NOS. 8 & 9 ARE GENERAL IN NATURE WHICH REQUI RE NO ADJUDICATION. 8. IN THE RESULT, APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH FEBRUARY 2010. SD/- SD/- (R.K. GUPTA) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 12 TH FEBRUARY 2010 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) IV, MUMBAI 4. THE CIT IV, MUMBAI CITY 5. THE DR, C BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.