ACIT CIR 4(3), MUMBAI V. JHPS SECURITIES P. LTD, MUMBAI

ITA 274/MUM/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3460 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-06-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 29-05-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 11-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: V G GINDE
• Keywords: Business income; Non-deduction of tax; Bad and doubtful debts

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUM BAI .. , !,#$ # % BEFORE SHRI B. R. MITTAL, JM AND SHRI SANJAY ARORA , AM ./ I.T.A. NO. 274/MUM/2011 ( ' ( )( ' ( )( ' ( )( ' ( )( / / / / ASSESSMENT YEAR: 2006-07) DY. CIT 4(3), 6 TH FLOOR, ROOM NO.649, AAYAKAR BHAVAN, MUMBAI-400 020 ' ' ' ' / VS. JHP SECURITIES PVT. LTD. A-21-28, GOKUL ARCADE, VILE PARLE (E), MUMBAI-400 057 * #$ . / + ./ PAN/GIR NO. AAACJ 2847 H ( *, / APPELLANT ) : ( -.*, / RESPONDENT ) *, / # / APPELLANT BY : SHRI MANOJ KUMAR -.*, 0 / # / RESPONDENT BY : SHRI V. G. GINDE ' 0 12$ / // / DATE OF HEARING : 29.05.2013 3 ) 0 12$ / DATE OF PRONOUNCEMENT : 19.06.2013 #4 / O R D E R PER SANJAY ARORA, A. M.: THIS IS AN APPEAL BY THE REVENUE DIRECTED AGAINST T HE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-10, MUMBAI (CIT(A) FOR SH ORT) DATED 25.10.2010, ALLOWING THE ASSESSEES APPEAL CONTESTING ITS ASSESSMENT U/S .143(3) OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) FOR THE ASSESSMENT YEAR (A. Y.) 2006-07. 2. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. 2 ITA NO. 274/MUM/2011 (A.Y. 2006-07) DY. CIT VS. J H P SECURITIES PVT. LTD. 2.1 THE REVENUES APPEAL RAISES TWO ISSUES PER ITS GROUNDS, BOTH OF WHICH WE SHALL TAKE UP IN SERIATIM. THE FIRST IS IN RESPECT OF DIS ALLOWANCE ON ACCOUNT OF BAD DEBTS WRITTEN OFF IN THE SUM OF RS.4,81,391/-, CLAIMED U/S.36(1)( VII) OF THE ACT. DEDUCTION IN ITS RESPECT STANDS DENIED TO THE ASSESSEE-COMPANY, A MEMBER OF THE STOCK EXCHANGE AND WORKING AS A SHARE BROKER, AS IT IS ONLY THE BROKERAGE COMPONE NT OF THE DEBT RAISED, OR THE AMOUNT BILLED TO ITS CLIENTS, WHICH COULD BE SAID TO HAVE BEEN TAKEN INTO ACCOUNT IN COMPUTING ITS BUSINESS INCOME, SO AS TO MEET THE CONDITION OF SEC TION 36(2)(I) OF THE ACT, TO WHICH THE CLAIM U/S.36(1)(VII) IS SUBJECT. THE MATTER STANDS SINCE RESOLVED BY THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. SHREYAS S. MORAKHIA [2012] 342 ITR 285 (BOM.), CLARIFYING THAT BOTH THE COMPONENTS, I.E., THE VALUE OF THE SHARES TRANSACTED AS WELL AS THE BROKERAGE THEREON, ARISE FROM THE VERY SAME TRANSACTION AND, THUS, CONSTITUTE A PART OF THE DEBT ARISING THEREFROM. THE REQUIREMENT OF SECTION 36(2)(I), THE NON- COMPLIANCE OF WHICH FORMS THE BASIS OF THE REVENUE S CASE, HAS BEEN CLARIFIED AS BEING FULFILLED. IN VIEW THEREOF, THE REVENUES GROUND DE SERVES TO BE DISMISSED. WE DECIDE ACCORDINGLY. 2.2 THE SECOND AND THE ONLY OTHER ISSUE BEING AGITA TED BY THE REVENUE IS IN RESPECT OF DISALLOWANCE QUA VSAT CHARGES (RS.1,10,000/-) AND LEASE LINE CHARGE S (RS.25,300/-) PAID BY THE ASSESSEE TO THE STOCK EXCHANGE, EFFECTE D U/S.40(A)(IA) IN VIEW OF THE NON DEDUCTION OF TAX AT SOURCE THEREON. THIS MATTER HAS AGAIN REACHED FINALITY, AT LEAST AS FAR AS THE PROVINCE OF MAHARASHTRA IS CONCERNED, WITH THE HONBLE JURISDICTIONAL HIGH COURT CLARIFYING PER ITS DECISION IN THE CASE OF CIT V. KOTAK SECURITIES LTD. [2012] 340 ITR 333 (BOM), THAT ONLY THE TRANSACTION CHARGES QUAL IFY AS FEES FOR TECHNICAL SERVICES, IN TERMS OF EXPLANATION 2 TO SECTION 9(VII), EXIGIBLE TO DEDUCTION OF TAX AT SOURCE U/S. 194J, SO THAT IN THE EVENT OF NON-DEDUCTION OF TAX AT SOU RCE, AS IN THE INSTANT CASE, THE PROVISION OF SEC. 40(A)(IA) WOULD STAND ATTRACTED. THE HON'BLE COURT HAS PER ITS SAID DECISION EXAMINED THE SERVICES UNDER REFERENCE, TAKING, FOR THE SAKE OF CONVENIENCE, THE BSE ONLINE TRADING (BOLT) SYSTEM DEVISED BY THE BSE FOR FACILITATING TRADING IN SECURITIES BY ITS MEMBERS. THE RANGE AND SCOPE OF THE SERVICES WAS EXAMINED BY IT, AND FOR WHICH 3 ITA NO. 274/MUM/2011 (A.Y. 2006-07) DY. CIT VS. J H P SECURITIES PVT. LTD. REFERENCE BE MADE TO PARAS 23 TO 28 OF ITS DECISION , ALSO MEETING THE SEVERAL ARGUMENTS/OBJECTIONS RAISED BY THE ASSESSEE-RESPOND ENT. THE SAME, WHICH HAVE IN EFFECT CONVERTED AN ERSTWHILE PHYSICAL MARKET INTO A DIGIT ALLY OPERATED ONE, WERE HELD TO BE TECHNICAL SERVICES, WHICH INCLUDES MANAGERIAL SERVI CES AS WELL (REFER EXPLANATION 2 TO SECTION 9(1)(VII) OF THE ACT). ACCORDINGLY, THE SAI D CHARGES RAISED BY THE STOCK EXCHANGE ON ITS CONSTITUENT MEMBERS WOULD CONSTITUTE FEES F OR TECHNICAL SERVICES WITHIN THE MEANING OF THE SAID TERM U/S. 194J OF THE ACT. THE VSAT AND LEASE LINE CHARGES, ON THE OTHER HAND, ARE PAID BY THE STOCK EXCHANGE TO THE CORRESPONDING SERVICES PROVIDERS, A ND STANDS REIMBURSED IN ITS RESPECT BY ITS MEMBERS, AS IT IS ONLY FOR THEIR ULTIMATE BENEF IT THAT THE SAID SERVICES STAND AVAILED OF OR SECURED BY IT. THE TAX AT SOURCE, IF AT ALL, WOU LD THEREFORE NEED TO BE DEDUCTED BY THE STOCK EXCHANGE UPON PAYMENT TO THE SAID SERVICE PRO VIDERS, AND NOT ON BEING REIMBURSED BY ITS MEMBERS. THE REVENUES SECOND GROUND, WHICH IS ONLY IN RESPECT OF THESE PAYMENTS, WOULD, THEREFORE, ALSO WARRANT BEING DISM ISSED. 3. IN VIEW OF THE FOREGOING, THE REVENUES APPEAL W OULD STAND TO BE DISALLOWED ON BOTH THE ISSUES RAISED BY IT. THE ASSESSEE BEFORE U S RELIED UPON BY THE DECISION IN THE CASE OF CO-ORDINATE BENCH OF THE TRIBUNAL FOR AN EARLIER YEAR, I.E., A.Y. 2005-06 (IN ITA NO.1368/MUM/2009 DATED 09.09.2010), PLACING A COPY OF THE SAME ON RECORD. THE SAME ONLY CONFIRMS THAT THE VIEW EXPRESSED BY THE TRIBUN AL PER ITS DECISIONS HAS SINCE BEEN CONFIRMED BY THE HON'BLE JURISDICTIONAL HIGH COURT, WITH REFERENCE TO THE BINDING DECISIONS BY WHICH WE HAVE DECIDED THE INSTANT APPEAL. 4. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED . 5 16 0 $5 0 1 78 ORDER PRONOUNCED IN THE OPEN COURT ON JUNE 19 , 201 3 #4 0 3 ) $# 9'6:' 19, 2013 0 ? SD/- SD/- (B. R. MITTAL) (SANJAY ARORA) / JUDICIAL MEMBER #$ / ACCOUNTANT MEMBER MUMBAI; 9' DATED : 19.06.2013 4 ITA NO. 274/MUM/2011 (A.Y. 2006-07) DY. CIT VS. J H P SECURITIES PVT. LTD. .'../ ROSHANI , SR. PS #4 0 -1@ A#@)1 #4 0 -1@ A#@)1 #4 0 -1@ A#@)1 #4 0 -1@ A#@)1/ COPY OF THE ORDER FORWARDED TO : 1. *, / THE APPELLANT 2. -.*, / THE RESPONDENT 3. B ( ) / THE CIT(A) 4. B / CIT CONCERNED 5. @E? -1' , , / DR, ITAT, MUMBAI 6. ?F( G / GUARD FILE #4' #4' #4' #4' / BY ORDER, H HH H/ // /7 7 7 7 (DY./ASSTT. REGISTRAR) , , , , / ITAT, MUMBAI