ITO 4(2)(1), MUMBAI V. PASHUPATI CAPITAL SERVICES P. LTD, MUMBAI

ITA 2713/MUM/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 8064 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 08-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P SHARMA
• Keywords: Non-deduction of tax

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH C, MUMBAI BEFORE SHRI N.V.VASUDEVAN(J.M) & SHRI RAJENDRA SIN GH (A.M) ITA NO.2713/MUM/2010(A.Y. 2006-07) THE ITO 4(2)(1), ROOM NO.644, 6 TH FLOOR, AAYKAR BHAVAN, MK ROAD, MUMBAI 20. (APPELLANT) VS. M/S.PASHUPATI CAPITAL SERVICES P. LTD., GALA NO.122, NEW SONAL INDUSTRIAL ESTATE, BLDG.NO.2, MARVE LINK ROAD, MALAD (W), MUMBAI 64 PAN:AACCP0795J APPELLANT BY : SHRI O.P.SHARMA RESPONDENT BY : SHRI S.L.JAIN ORDER PER N.V.VASUDEVAN, J.M, THIS IS AN APPEAL FILED BY THE REVENUE AGAINST TH E ORDER DATED 20/1/2010 OF CIT(A)-8, MUMBAI RELATING TO ASSESSMEN T YEAR 2006-07. GROUNDS OF APPEAL RAISED BY THE REVENUE READ AS FO LLOWS: 1. (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE O F RS.15,96,873/- MADE U/S. 40(A)(IA) IN RESPECT OF VSAT, LEASELINE C HARGES AND TRANSACTION CHARGES PAID TO STOCK EXCHANGE, WITHOUT APPRECIATING THE FACTS THAT THESE WERE COMPOSITE CHARGES FOR PROFESS IONAL AND TECHNICAL SERVICES RENDERED BY THE STOCK EXCHANGE TO ITS MEMB ERS AND THE ASSESSEE HAS FAILED TO DEDUCT TDS THEREON. II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW THE LD. CIT(A) ERRED IN IGNORING THE FACT THAT THESE SERVI CES ARE ESSENTIAL IN NATURE AS THEY CAN ONLY BE AVAILED BY MEMBERS OF ST OCK EXCHANGE. III) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN IGNORING THE FACTS THAT USE OF TECHNOLOGY AND ALGORITHMIC BASED PROGRAMS HAVE CONVERTED AN ERSTWH ILE PHYSICAL MARKET INTO A DIGITALLY OPERATED MARKET. ITA NO.2713/MUM/2010(A.Y. 2006-07) 2 IV) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) ERRED IN IGNORING THE FACT THAT THE SERV ICES RENDERED BY THE BROKERS ARE NOT STANDARD SERVICES BUT SERVICES THAT HAS BEEN DEVELOPED TO CATER TO THE NEEDS OF THE BROKER COMMUNITY TO FA CILITATE TRADING. V) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW THE LD. CIT(A) HAS OVERLOOKED THE FACT THAT THE BROKERS HAVE IN SUBSEQUENT YEARS THEMSELVES STARTED DEDUCTING THE TDS ON SUCH PAYMENTS AND THAT THERE IS NO REASON TO GIVE A DIFFERENT TREATME NT IN THIS YEAR 2. THE ASSESSEE IS A COMPANY. IT IS ENGAGED IN TH E BUSINESS OF STOCK BROKING AND SHARE TRADING. THE GROUND RAISED BY THE REVENUE IS WITH REGARD TO NON-DEDUCTION OF TAX AT SOURCE IN RESPECT OF PAYMENT OF VSAT AND LEASE LINE CHARGES BY THE ASSESSEE TO THE STOCK EXC HANGE. THE AO ON THE PRESUMPTION THAT THE VSAT AND LEASE LINE CHARGES P AID BY THE ASSESSEE TO THE STOCK EXCHANGE WAS IN THE NATURE OF A FEES FOR PROFESSIONAL AND TECHNICAL SERVICES RENDERED WAS OF THE VIEW THAT THE ASSESSE E OUGHT TO HAVE DEDUCTED TAX AT SOURCE WHILE MAKING PAYMENT TO THE STOCK EXC HANGE. SINCE THE ASSESSEE DID NOT DEDUCT TAX AT SOURCE THE EXPENDITU RE ON ACCOUNT OF LEASE LINE CHARGES DEBITED BY THE ASSESSEE IN THE P&L ACC OUNT WAS HELD TO BE NOT DEDUCTIBLE IN COMPUTING THE TOTAL INCOME BY VIRTUE OF THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. ON APPEAL BY THE ASS ESSEE THE CIT(A) HELD THAT VSAT AND LEASE LINE CHARGES ARE NOT IN THE NATURE O F FEES FOR TECHNICAL SERVICES AND DELETED THE ADDITION MADE BY THE AO. 3. AGGRIEVED BY THE ORDER OF THE CIT(A) THE REVENUE HAS PREFERRED GROUND NO.2 BEFORE THE TRIBUNAL. 4.. AT THE TIME OF HEARING IT WAS AGREED BY BOTH TH E PARTIES THAT THE ISSUE AS TO WHETHER VSAT AND LEASE LINE CHARGES IS IN TH E NATURE OF FEES FOR PROFESSIONAL AND TECHNICAL SERVICES RENDERED AND A S TO WHETHER PROVISIONS OF SECTION 194J OF THE ACT WOULD APPLY AND CONSEQUENTL Y DISALLOWANCE COULD BE ITA NO.2713/MUM/2010(A.Y. 2006-07) 3 MADE FOR NON DEDUCTION OF TAX AT SOURCE UNDER SECTI ON 40(A)(IA) OF THE ACT COULD BE MADE HAS ALREADY BEEN DECIDED BY THIS TRIB UNAL IN THE CASE OF DCIT VS. ANGEL BROKING LTD. (2010) 35 SOT 457 (MUM) AND ASSESSEES OWN CASE ON IDENTICAL ISSUE FOR ASSESSMENT YEAR 2005-06 VIDE IT A NO.3854/M/09 ORDER DATED 15/7/2010. THE TRIBUNAL IN THE AFORESAID DE CISIONS HAS HELD THAT VSAT AND LEASE LINE CHARGES ARE NOT IN THE NATURE OF FEES FOR TECHNICAL SERVICES RENDERED SO AS TO ATTRACT THE PROVISIONS O F SECTION 194J OF THE ACT. IN VIEW OF THE ABOVE WE DO NOT FIND ANY INFIRMITY I N THE ORDER OF THE CIT(A) DELETING THE ADDITION MADE BY THE AO. CONSEQUENTLY THE GROUND RAISED BY THE REVENUE IS DISMISSED. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 16 TH DAY OF MARCH, 2011. SD/- SD/- (RAJENDRA SINGH) (N.V.VASUDEVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED. 16 TH MARCH.2011 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3 . THE CIT CITY CONCERNED 4. THE CIT(A)- CONCERNED 5. THE D.RC BENCH. (TRUE COPY) BY ORDER ASST. REGISTRAR, I TAT, MUMBAI BENCHES MUMBAI. VM. ITA NO.2713/MUM/2010(A.Y. 2006-07) 4 DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 10/3/2011 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 11/3/2011 SR.PS/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 THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER