J M FIANANCIAL SECURITIES LTD, MUMBAI V. ASST CIT 4(3), MUMBAI

ITA 2457/MUM/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3300 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-07-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: J
• Next Hearing Date: 19-06-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 12-04-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: DR K SHIVARAM MR SANJAY PARIKH
• Keywords: Depreciation; Reasonable cause
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH, M UMBAI !' !' !' !' #$ #$ #$ #$ %&' %&' %&' %&' !' !' !' !' ( BEFORE SHRI B. RAMAKOTAIAH, AM, AND SHRI AMIT SHUKL A, JM /. I.T.A. NO.2457/MUM/2012 ( ) * ) * ) * ) * $+* $+* $+* $+* / ASSESSMENT YEAR: 2006-07) M/S. J.M. FINANCIAL SECURITIES PVT. LTD. 141, MAKERS CHAMBERS III, NARIMAN POINT, MUMBAI- 400021 ) ) ) ) / VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE- 4(3), AAYAKAR BHAWAN, MUMBAI:- 400 020 ', /. - /. PAN/GIR NO. : AAACJ5976B ( ,. / APPELLANT ) : ( /0,. / RESPONDENT ) ,. 1 / APPELLANT BY : MR. DR. K. SHIVARAM MR. SANJAY PARIKH /0,. 1 / RESPONDENT BY : MR. MOHIT JAIN )$ % / DATE OF HEARING : 19.06. 2013 4+ % /DATE OF PRONOUNCEMENT : 03 .07.2013 !& / O R D E R PER :AMIT SHUKLA , JM THIS APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGAI NST THE IMPUGNED ORDER DATED 24.01.2012 PASSED BY CIT(APPEALS)-8, MUMBAI FOR QUA NTUM OF ASSESSMENT PASSED U/S 143(3) FOR THE ASSESSMENT YEAR- 2006-07. 2. IN GROUND NO.1 AND 2, THE ASSESSEE HAS CHALLENGE D THE DISALLOWANCE OF DEPRECIATION ON NSE MEMBERSHIP CARD OF RS. 6,67,419/-. THE ASSES SEE HAS ACQUIRED NSE MEMBERSHIP CARD NAMELY FROM J.M MORGAN STANLEY FIXED INCOME SE CURITIES PVT. LTD WHICH IS PRESENTLY KNOWN AS MS. J.M FINANCIAL SECURITIES LTD. THE ASSE SSEE HAD STAYED CLAIMING DEPRECIATION 2 ITA NO. 2457 /MUM/2012 (A.Y. 2006-07) M/S. J.M. FINANCIAL SECURITIES LTD. VS . ACIT ON THE SAID CARD FROM ASSESSMENT YEAR 2001-02 AND O NWARDS. IN THIS YEAR THE ASSESSING OFFICER HAS DISALLOWED THE DEPRECIATION AFTER DETAI L REASONING AS GIVEN IN PARA-2 TO 12 OF THE ASSESSMENT ORDER. 3. BEFORE THE CIT(APPEALS), IT WAS CONTENDED THAT HONBLE SUPREME COURT IN THE CASE OF TECHNO SHARE & STOCKS LTD. VS. CIT(APPEALS) REPO RTED IN (2010), 327 ITR 323 HAS HELD THAT THE DEPRECIATION WAS ALLOWABLE ON THE BSE MEMB ERSHIP CARD. THE LD. CIT(APPEALS) HOWEVER HELD THAT THE SAID JUDGMENT IS APPLICABLE ONLY TO MEMBERSHIP OF BSE CARD ONLY AND THE SAME IS NOT APPLICABLE FOR MEMBERS OF NSE. HE TRIED TO MAKE DISTINCTION BETWEEN THE MEMBERSHIP OF NSE AND BSE AND HELD THAT THE SAI D JUDGMENT CANNOT BE APPLIED IN THE PRESENT CASE. 4. BEFORE US, LEARNED COUNSEL SUBMITTED THAT THE TR IBUNAL, IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2001-02 AND 2002-03 HAS ALLOWED THE ASSESSEE CLAIM. THEREAFTER, IN SUBSEQUENT ASSESSMENT YEARS VIZ., 2004-05 AND 2005- 2006, THE CIT (APPEALS) HAS ALLOWED THE ASSESSEE CLAIM, FOLLOWING THE ORDER OF THE SUPR EME COURT AND THE TRIBUNAL ORDER IN ASSESSEES OWN CASE. AGAINST THE SAID ORDER CIT(A PPEALS) THE DEPARTMENT HAS NOT PREFERRED ANY APPEAL. THE DECISION OF THE TRIBUNAL FOR THE A SSESSMENT YEAR 2004-05 AND 2007-08 WAS ALSO FILED BEFORE US. 5. ON THE OTHER HAND, LD. DR RELIED HEAVILY UPON T HE FINDINGS OF THE CIT(APPEALS). 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT FINDINGS OF THE AO AS WELL AS CIT(APPEALS). THIS ISSUE HAS ALREADY COME U P FOR CONSIDERATION BEFORE US WHICH WE HAVE DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE I N THE ASSESSMENT YEAR 2007-08, WHEREIN THE DEPARTMENTAL APPEAL BEFORE THE TRIBUNAL BRING I TA NO. 3112/MUM/2011 WAS DISMISSED ON THE SOME GROUND FOLLOWING OF THE SUPREME COURT I N THE CASE OF TECHNO SHARES & STOCKS LTD., WHEREIN ONE OF THE PARTY BEFORE THE SUPREME C OURT WAS ASSESEE ALSO. FURTHER, IN OUR OPINION, THE DISTINCTION MADE BY THE CIT(APPEALS) I N RESPECT OF BSE CARD AND NSE CARD IS NOT CORRECT AND THE REASONING GIVEN BY HIM CANNOT B E SUSTAINED. RESPECTIVELY FOLLOWING THE 3 ITA NO. 2457 /MUM/2012 (A.Y. 2006-07) M/S. J.M. FINANCIAL SECURITIES LTD. VS . ACIT PRECEDENCE OF THE TRIBUNAL ORDER AND ALSO DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF TECHNO SAHRES & STOCKS LTD (SUPRA), WE ALLO W THE ASSESSEES CLAIM OF DEPRECIATION ON NSE MEMBERSHIP CARD. THUS, GROUND NO. 1 AND 2 RA ISED BY THE ASSESSEE IS ALLOWED. 7. IN GROUND NO. 3 AND 4, THE ASSESSEE HAS CHALLEN GED THE DISALLOWANCE OF DEPRECIATION ON INTANGIBLE ASSESTS OF RS. 17,79,785/-. AT THE OUT SET, LEARNED COUNSEL SUBMITTED THAT THIS ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2004-05, IN ITA NO. 4289/MUM/ 2 011. 8. THE ASSESSING OFFICER HAS DISALLOWED THE CLAIM OF DEPRECIATION ON INTANGIBLE ASSETS OF RS. 17,79,785/- ON THE GROUND THAT IT IS GOODW ILL AND SAME CANNOT BE TREATED AS INTANGIBLE ASSET. DETAIL DISCUSSION HAS BEEN MADE BY THE ASSESSING OFFICER AT PAGES 2 TO 12 OF THE ASSESSMENT ORDER FOR DISALLOWANCE THE SAME. THE LD. CIT(APPEALS) TOO CONFIRM THE DISALLOWANCE FOLLOWING THE CIT(A) ORDER FOR THE ASS ESSMENT YEAR 2004-05. 9. AFTER CONSIDERING THE RELEVANT FINDINGS OF THE A O, CIT(APPEALS) AND ALSO TRIBUNAL ORDER AS REFERRED TO LEARNED COUNSEL, WE FIND THAT SIMILAR ISSUE HAD COME UP FOR CONSIDERATION BEFORE THE TRIBUNAL IN THE ASSESSMENT YEAR 2004-05 WHEREIN THE TRIBUNAL FOLLOWING THE SUPREME COURT DECISION IN THE CASE OF J.M. FINANCIAL SECURITIES LTD., REPORTED IN 348 ITR 302, HAS DIRECTED THE AO TO ALLOW THE DE PRECIATION ON GOODWILL HENCE, THE FACTS BEING SIMILAR, THEREFORE, RESPECTIVELY FOLLOWING T HE EARLIER YEARS PRECEDENCE, WE DIRECT THE ASSESSING OFFICER TO ALLOW DEPRECIATION ON INTANGIB LE ASSESTS. ACCORDINGLY, GROUND NO. 3 AND 4 TREATED AS ALLOWED. 10. IN GROUND NO. 5 AND 6, THE ASSESSEE HAS CHALLE NGED THE DISALLOWANCE OF EXPENSES U/S 40 (A)(IA) ON ACCOUNT OF TRANSACTION CHARGES PAID T O NSE OF RS. 1,23 293/-. THE ASSESSING OFFICER NOTED THAT ASSESSEE HAS PAID SUM OF RS. 1,2 3,293/- TOWARDS TRANSACTION CHARGES AND 1,10,000 FOR VSAT CHARGES. THE AO TREATED THESE EXP ENSES IN THE NATURE OF TECHNICAL SERVICES AND HELD THAT ASSESSEE FAILED TO DEDUCT TD S ON SUCH PAYMENT U/S 194J. ACCORDINGLY, HE DISALLOWED THE SAID PAYMENT U/S 40( A)(IA). SO FAR AS THE VSAT CHARGES OF 4 ITA NO. 2457 /MUM/2012 (A.Y. 2006-07) M/S. J.M. FINANCIAL SECURITIES LTD. VS . ACIT RS. 1,10,000/-, IS CONCERNED THE LD. CIT(APPEALS) H AS DELETED THE SAID ADDITION ON THE GROUND THAT SAME IS COVERED BY THE DECISION OF HON BLE BOMBAY HIGH COURT DECISION IN THE CASE OF M/S. ANGEL BROKING LTD. HOWEVER, WITH REGAR D TO TRANSACTION CHARGES HE CONFIRMED THE DISALLOWANCES. 11. BEFORE US, LEARNED COUNSEL SUBMITTED THAT IN TH E EARLIER YEARS NO SUCH DISALLOWANCE WAS MADE ON THE TRANSACTIONS CHARGES, THEREFORE, SA ME CANNOT BE DISALLOWED IN THIS YEAR, THEREFORE, FOLLOWING THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. KOTAK SECURITES LTD. (2012), 340 ITR 333(BOM) DISAL LOWANCE SHOULD NOT BE MADE AS THE ASSESSEE HAS REASONABLE CAUSE FOR NON DEDUCTING THE TDS ON THE PAYMENT OF TRANSACTION CHARGES DURING UNDER THE CONSIDERATION. 12. ON THE OTHER HAND, THE LEARNED DR SUBMITTED TH AT THE HONBLE HIGH COURT IN THE CASE OF KOTAK SECURITIES LTD. HAS CATEGORICALLY HELD THA T TRANSACTION CHARGES FALLS WITHIN THE AMBIT OF SECTION 194J, AS IT IS KIND OF RENDERING O F MANAGERIAL SERVICES WHICH CONSTITUTE FEES FOR TECHNICAL SERVICES WITHIN THE SECTION 194J, HEN CE DISALLOWANCE U/S 40(A)(IA) IS JUSTIFIED. 13. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND AL SO THE DECISION OF THE HONBLE HIGH COURT, WE FIND THAT THE ISSUE OF PAYMENT OF TRANSAC TION CHARGES CLEARLY FALLS WITHIN THE AMBIT OF SECTION 194J WHICH HAS BEEN DECIDED AGAINST THE ASSESSEE BY THE HONBLE HIGH COURT IN THE CASE OF CIT VS. KOTAK SECURITIES LTD.(SUPRA). HOWEVER, IN THAT CASE, THE HONBLE HIGH COURT FOUND THAT THERE WAS A REASONABLE CAUSE ON AC COUNT OF THE FACT THAT ASSESSEE HAS NOT BEEN DEDUCTING TDS ON THE TRANSACTION CHARGES FROM LAST SEVERAL YEARS AND THE DEPARTMENT HAS ALLOWED SUCH PAYMENT. THUS, THERE WAS A REASON ABLE CAUSE FOR NOT DEDUCTING THE TDS IN THIS YEAR. 14. HOWEVER, IN THIS CASE NO SUCH REASONABLE CAUSE HAS BEEN ESTABLISHED THAT IN THE EARLIER YEARS THE DEPARTMENT HAS ALLOWED THE ASSESS EES CLAIM IF IN ONE YEAR THE ASSESSEES CLAIM HAS BEEN WRONGLY ALLOWED, THIS CANNOT ACT AS A RESJUDICATA. THE ASSESSEE ADMITTEDLY HAS NOT DEDUCTED TDS, HENCE, THE LAW AS SETTLED BY THE HONBLE HIGH COURT THAT THE 5 ITA NO. 2457 /MUM/2012 (A.Y. 2006-07) M/S. J.M. FINANCIAL SECURITIES LTD. VS . ACIT TRANSACTIONS CHARGES ARE LIABLE FOR DEDUCTION OF TD S U/S 194J, WE HOLD THAT THE ASSESSEE WAS LIABLE TO DEDUCT TDS IN RESPECT OF TRANSACTIONS CHA RGES AND ACCORDINGLY THE DISALLOWANCES MADE BY THE AO AND CONFIRMED BY THE CIT(APPEALS) U/ S 40(A) (IA) IS CONFIRMED. IN THE RESULT GROUND NO. 5 AND 6 IS TREATED AS DISMISSED. 15. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. %6 ) *% & '$7% % 89 ORDER PRONOUNCED ON 3 RD DAY JULY, 2013 . !&4+ !)6 03.07.2013 ; SD/- SD/- ( B. RAMAKOTAIAH ) ( AMIT SHUKLA ) !' / ACCOUNTANT MEMBER !' !' !' !' /JUDICIAL MEMBER MUMBAI: !) DATED : 03.07.2013 ) . /. PRAMOD KUMAR, PS !& !& !& !& /% /% /% /% =+% =+% =+% =+% / COPY OF THE ORDER FORWARDED TO : 1. ,. / THE APPELLANT 2. /0,. / THE RESPONDENT 3. > ) ( / THE CIT(A) 4. > / CIT - CONCERNED 5. $?; /%) , , / DR, ITAT, MUMBAI 6. ;@* A / GUARD FILE !&) !&) !&) !&) / BY ORDER, B BB B / 8 8 8 8 (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI.