JM FINANCIAL SERVICES LTD, MUMBAI V. CIT (TDS) 1, MUMBAI

ITA 2421/MUM/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3274 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-09-2016
• Appeal Filed By: Assessee
• Bench Allotted: J
• Next Hearing Date: 04-07-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 28-04-2015
• Court: TRIBUNAL
• Department Lawyers: ALOK JOHARI
• Assessee Lawyers: DR K SHIVRAM
• Keywords: Revision of order; Opportunity of being heard; Principle of natural justice; Additional evidence
• Section: 201(1); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH, MUMBAI BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER I.T.A. NO.2421/M/2015 (ASSESSMENT YEAR: 2011 - 2012 ) JM FINANCIAL SERVICES LIMITED, 1 ST FLOOR, B WING, SUASHISH IT PARK, PLOT NO.68E, OFF. DATTAPADA ROAD, OPP. TATA STEEL, BORIVALI (E), MUMBAI - 066. / VS. CIT (TDS) - 1, MUMBAI. ./ PAN : AAACJ1597A ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : DR. K. SHIVRAM / RESPONDENT BY : SHRI ALOK JOHARI, CIT - DR / DATE OF HEARING : 02.09.2016 / DATE OF PRONOUNCEMENT : 09 .09.2016 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE ASSESSEE ON 8.4.2015 IS AGAINST THE ORDER OF THE CIT (TDS) - 1, MUMBAI DATED 18.3.2015 U/S 263 OF THE ACT FOR THE ASSESSMENT YEAR 2011 - 2012. IN THIS APPEAL, ASSESSEE RAISED THE FOLLOWING REVISED GROUNDS WHICH REA D AS UNDER: - 1. THE LD CIT FAILED TO APPRECIATE THAT THE ORDER DATED 25.3.2015 U/S 201(1) / 201(1A) IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE REVENUE, AND HENCE, ERRED IN PASSING THE ORDER DATED 18.3.2015 U/S 263 HOLDING THAT THE APPELLANT WAS LIABLE TO DEDUCT TAX AT SO URCE U/S 194A AND THEREBY MADE A DEFAULT U/S 201(1) / 201(1A) OF THE ACT. 2. THE LD CIT FAILED TO APPRECIATE THAT THE PAYMENTS MADE TO NATIONAL SECURITIES CLEARING CORPORATION LIMITED (NSCCL) ARE TOWARDS FEES FOR BORROWING OF SECURITIES UNDER THE SECURITI ES LENDING SCHEME, 1997 AND NOT TOWARDS INTEREST ON MONEYS BORROWED OR DEBT INCURRED. THEREFORE, THE PROVISIONS OF SECTION 194A DO NOT APPLY. THEREFORE, REVISION OF ORDER PASSED BY THE AO U/S 201(1) / 201(1A) IS BAD IN LAW. 3. WITHOUT PREJUDICE TO THE AB OVE, THE LD CIT FAILED TO APPRECIATE THAT NSCCL IS ONLY AN INTERMEDIARY ENTITLED TO RECEIVE THE PAYMENT FROM THE APPELLANT AND PASS ON THE SAME TO THE LENDER OF SECURITIES WHOSE IDENTITY IS NOT KNOWN TO THE APPELLANT WITHOUT WHICH TAX CANNOT BE DEDUCTED. THEREFORE, REVISION OF ORDER PASSED BY THE AO U/S 201(1) / 201(1A) IS BAD IN LAW. 4. WITHOUT PREJUDICE TO THE ABOVE, THE IMPUGNED PAYMENT IS NOT IN THE NATURE OF INCOME IN THE HANDS OF THE INTERMEDIARY, NSCCL AND HENCE, THE APPELLANT WAS NOT REQUIRED TO DE DUCT AT SOURCE. THEREFORE, THE PROVISIONS OF SECTION 194A DO NOT APPLY. 5. WITHOUT PREJUDICE TO THE ABOVE, THE LD CIT ERRED IN PASSING THE ORDER DATED 18.3.2015 U/S 263 WITHOUT PROVIDING SUFFICIENT OPPORTUNITY TO THE APPELLANT OF BEING HEARD AND FILING EX PLANATIONS AND DOCUMENTS. HENCE, THE ORDER U/S 263 IS BAD IN LAW. 2 2. AT THE OUTSET, LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE GROUNDS AND MENTIONED THAT THE ORDER OF THE CIT WAS PASSED WITHOUT GRANTING A REASONABLE OPPORTUNITY OF BEING H EARD TO THE ASSESSEE AND THE SAME CONSTITUTES VIOLATION TO THE PRINCIPLES OF NATURAL JUSTICE. FURTHER, BRINGING OUR ATTENTION TO THE PAPER BOOK FILED BEFORE THE TRIBUNAL, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE FILED AN ADDITIONAL EVIDENCE VIDE LETTER DATED 23.6.2015 AND REQUESTED FOR ADMITTING THE SAME UNDER RULE 29 OF THE IT RULES. THE SAID ADDITIONAL EVIDENCE CONSTITUTES AN AGREEMENT BETWEEN THE ASSESSEE AND THE NATIONAL SECURITIES CLEARING CORPORATION LIMITED (NSCCL) FOR BORROWING SECU RITIES. LD COUNSEL FOR THE ASSESSEE PRAYED FOR ADMITTING THE SAID ADDITIONAL EVIDENCE AND REMANDING THE MATTER TO THE FILE OF THE CIT FOR FRESH ADJUDICATION KEEPING ALL THE ISSUES OPEN. 3. AFTER HEARING BOTH THE PARTIES, WE ARE OF THE OPINION THAT THE ISSUE IN QUESTION RELATES TO THE REQUIREMENT OF MAKING TDS IN RESPECT OF THE FEES PAID BY THE ASSESSEE. ON PERUSAL OF THE RECORD, W E FIND, THERE IS NO CLARITY ON THE RECIPIENT OF THE FEES, WHI CH IS THE SUBJECT MATTER OF TDS. IT IS THE OPINION OF THE CIT THAT THE NSCCL RECEIVED THE FEES, WHEREAS THE COMMISSIONER HEARD THE CASE ON THE PRESUMPTION THAT THE NSCCL IS NOT THE RECIPIENT OF THE MONEY. ON CONSIDERING THESE VARIATIONS, WE FIND, THERE I S A NEED FOR FINDING OF THE FACT AT THE CIT LEVEL. IT IS NOT UNDERSTOOD AS TO HOW THE FEES IN QUESTION CONSTITUTES INTEREST WITHIN THE MEANING OF SECTION 2(28) OF THE ACT. CIT IS DIRECTED TO PASS A SPEAKING ORDER CONSIDERING THE ABOVE ISSUES AND ALSO APPLYING THE CORRECT PROVISIONS WHILE DECIDING THE ISSUE AFRESH. CIT WILL CONSIDER THE AGREEMENT BETWEEN THE ASSESSEE AND THE NSCCL DURING THE REMANDING PROCEEDINGS. CIT IS ALSO DIRECTED TO GRANT AN ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AS PER THE SET PRINCIPLES OF NATURAL JUSTICE. WITH THESE DIRECTIONS, WE SET ASIDE THE REVISION ORDER OF THE CIT AND REMAND THE ISSUE TO THE FILE OF THE CIT . CIT IS DIRECTED TO CLARIFY THE FACTS AND PASS A SPEAKING ORDER AFTER HEARING THE ASSESSEE. ACCORDI NGLY, GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 4. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 0 9 T H SEPTEMBER, 2016. S D / - S D / - ( MAHAVIR SINGH ) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 0 9 .09.2016 3 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI