DCIT CIR 4(2), MUMBAI V. TIRUPATI EQUITIES LTD, MUMBAI

ITA 2748/MUM/2010

• Counselvise Citation: 274819914 RSA 2010
• Duration Of Justice: 1 year(s) 4 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-08-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Next Hearing Date: 26-07-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 08-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D SU NDER SINGH
• Section: 40(a)(ia); 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH: MUMBAI BEFORE SHRI R.S. PADVEKAR, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO.2748/MUM/2010 (ASSESSMENT YEAR: 2006-07) ACIT, CIR-4(2), AAYAKAR BHAVAN, M.K. ROAD, MUMBAI -400 020 ....... APPELLANT VS TRIPUATI EQUITIES LTD., KRISHNAM HOUSE, PLOT NO.103, SECTOR-3, CHARKOP, KANDIVALI (W), MUMBAI -400 067 ..... RESPONDENT PAN: AABCT 2958 E APPELLANT BY: MR. D. SU NDER SINGH RESPONDENT BY: MR. VIMAL PUNMIYA DATE OF HEARING: 26.07.2011 DATE OF PRONOUNCEMENT: 19.08.2011 O R D E R PER R.S. PADVEKAR, JM IN THIS APPEAL, THE REVENUE HAS CHALLENGED THE IMPU GNED ORDER OF THE LD. CIT (A)-8, MUMBAI DATED 25.1.2010 FOR TH E A.Y. 2006-07. THE REVENUE HAS TAKEN THE FOLLOWING EFFECTIVE GROUN DS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT (A) ERRED IN DELETING THE ADDITION OF ` 14,10,957/- MADE ON ACCOUNT OF JOBBERS COMMISSION PAID. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT (A) ERRED IN HOLDING THE RELATIONS HIP BETWEEN MEMBER BROKER AND JOBBER AS A PRINCIPAL TO ITA 2748/MUM/2010 TRIPUATI EQUITIES LTD. 2 PRINCIPAL RELATIONSHIP AND THEREFORE, NOT ELIGIBLE FOR TAX DEDUCTION U/S.194C OF THE I.T. ACT. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT (A) OUGHT TO HAVE CONSIDERED THAT SHARING OF PROFITS IS NOT AN LEGAL ARRANGEMENT AND THE ENTI RE EXERCISE WAS WITH A VIEW TO AVOID LEGITIMATE TAXES. 2. WE HAVE HEARD THE PARTIES. THE LD. COUNSEL SUBM ITS THAT THE ORDER OF THE LD. CIT (A) HAS TO BE UPHELD AS THE IS SUE HAS BEEN COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE CO -ORDINATE BENCH IN THE CASE OF DY. CIT 4(1) MUMBAI VS. CHIMANLAL MANE KLAL SECURITIES PVT. LTD. 3. THE FACTS PERTAINING TO THE SHORT CONTROVERSY AR E AS UNDER. THE ASSESSEE-COMPANY IS A MEMBER OF NATIONAL STOCK EXCH ANGE OF INDIA (NSEI) AND IS IN SHARE TRADING AND STOCK BROKER. I T WAS FOUND BY THE A.O. THAT THE ASSESSEE HAS DEBITED ` 14,10,957/- ON ACCOUNT OF PAYMENT MADE TO JOBBERS/ARBITRAGERS. THE A.O. HAS NOTED THAT THE PAYMENTS WERE BOOKED IN THE BOOKS OF ACCOUNT AS COM MISSION PAYMENT OR SHARING OF PROFITS. THE A.O. WAS OF THE OPINION THAT THE ASSESSEE WAS REQUIRED TO DEDUCTED TAX U/S.194C ON T HE PAYMENT MADE TO THE JOBBERS / ARBITRAGERS. IN VIEW OF THE A.O., THE ASSESSEE HAS UTILISED THE SERVICES OF THE JOBBERS FOR CARRYI NG OUT THE WORK WHICH PRIMARILY BELONGS TO THE COMPANY AND THE PAYMENTS A RE MADE IN LIEU OF THE SERVICES RENDERED FOR CARRYING OUT CERTAIN W ORK AND PAYMENTS MADE THEREON FALL WITHIN THE PURVIEW OF SEC. 194C O F THE I.T. ACT, 1961. AS THE ASSESSEE COMPANY HAS NOT DEDUCTED THE TAX-AT-SOURCE ON THE SAID AMOUNT, THE SAME IS LIABLE TO BE DISALL OWED U/S.40(IA) OF THE ACT. THE ASSESSEE CARRIED THE ISSUE BEFORE THE LD. CIT (A) AND THE LD. CIT (A) DELETED THE ADDITION. ITA 2748/MUM/2010 TRIPUATI EQUITIES LTD. 3 4. WE FIND THAT NOW THE ISSUE STANDS COVERED IN FAV OUR OF THE ASSESSEE BY THE DECISION OF THE CO-ORDINATE BENCH I N THE CASE OF CHIMANLAL MANEKLAL SECURITIES PVT. LTD. (SUPRA). I N THE SAID CASE, WHILE DISMISSING THE APPEAL OF THE REVENUE ON THE I DENTICAL ISSUE IT IS HELD AS UNDER:- 6. ON THE OTHER HAND THE LD. COUNSEL FOR THE ASSES SEE, AT THE OUTSET, SUBMITS THAT THIS ISSUE IS COVERED IN FAVOU R OF THE ASSESSEE BY THE ORDER OF THE TRIBUNAL IN DCIT VS. A SSET ALLIANCE SECURITIES PVT. LTD. IN ITA NO.1488/MUM/2009 FOR AS SESSMENT YEAR 2006-07 DATED 16.7.2010 WHICH HAS ALSO BEEN FO LLOWED IN DCIT VS. PRAKASH K. SHAH SHARES & SECURITIES P. LTD . IN ITA NO.214 AND 5528/MUM/2009 FOR A.Y. 2005-06 AND 2006 -07 DATED 30.11.2010. HE ALSO PLACED ON RECORD THE COPY OF THE SAID ORDERS OF THE TRIBUNAL. 7. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECOR D. WE FIND THAT THE FACTS ARE NOT IN DISPUTE. WE FURTHER FIND THAT THE ISSUE IS SQUARELY COVERED AGAINST THE REVENUE AND IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE TRIBUNAL IN ASSET ALLI ANCE SECURITIES PVT. LTD. SUPRA, WHEREIN THE TRIBUNAL ON THE SIMILA R FACTS AND CIRCUMSTANCES OF THE CASE HAS HELD VIDE PARA-9 OF I TS ORDER AS UNDER :- 9. .....THE FACTS SHOW THAT THERE WERE SEPARATE JOINT VENTURES ENTERED INTO BY THE ASSESSEE WITH SEVERAL JOBBERS/ARBITRAGERS AND PAYMENTS HAVE BEEN MADE TO THEM UNDER SUCH AGREEMENTS AND THE ASSESSEE'S SHARE IN THE PROFITS HAS BEEN TAKEN TO T HE PROFIT AND LOSS ACCOUNT. IN THESE CIRCUMSTANCES TH E PROVISIONS OF SEC.194C ARE NOT ATTRACTED BECAUSE IN ESSENCE AND SUBSTANCE THE AMOUNTS PAID TO THE JOBBERS OR ARBITRAGERS DID NOT IN REALITY REPRESENT THE EXPENSE OF THE ASSESSEE COMPANY BUT REPRESENTED PAYMENT OF THE SHARE OF THE JOBBERS/ARBITRAGERS UNDER THE AGREEMENT ENTERED INTO WITH THEM. IN SUC H A CASE THE ASSESSEE IS RIGHT IN SAYING THAT THERE W AS NO QUESTION OF DEDUCTING ANY TAX AT SOURCE. THE ITA 2748/MUM/2010 TRIPUATI EQUITIES LTD. 4 ABOVE FACTS ALSO ESTABLISH THAT THE RELATIONSHIP BETWEEN THE ASSESSEE AND THE JOBBERS/ARBITRAGERS WAS NOT OF PRINCIPAL AND AGENT BUT WAS THAT OF PRINCIPAL TO PRINCIPAL. BOTH HAD AGREED TO EMBARK UPON A JOINT VENTURE TO TRADE IN SHARES AND SECURIT IES IN THE STOCK EXCHANGE AND TO SHARE THE PROFIT/LOSS EQUALLY. WE DO NOT SEE HOW SUCH PAYMENTS CAN BE TERMED AS PAYMENTS TO CONTRACTORS FOR ANY WORK TO BE CARRIED OUT BY THEM. WE THEREFORE UPHOLD THE FINDING OF THE CIT(A) THAT THESE PAYMENTS DO NOT ATTRACT SECTION 194C AND THE ASSESSEE WAS NOT LIABL E TO DEDUCT TAX THEREFROM. ACCORDINGLY SECTION 40(A) (IA) IS ALSO NOT APPLICABLE. THE PAYMENTS, IN OUR VIEW , WERE RIGHTLY ALLOWED AS DEDUCTION BY THE CIT(A).... .... THE ABOVE ORDER HAS ALSO BEEN FOLLOWED IN THE CASE OF DCIT VS. GANDHI SECURITIES & INVESTMENT PVT. LTD. IN ITA NO.734/MUM/2009 FOR ASSESSMENT YEAR 2006-07 DATED 22.9.2010 IN WHICH ONE OF US (JM) WAS PARTY WHEREIN IT HAS BEEN HELD THAT THESE PAYMENTS ARE PRINCIPAL TO PRINCIPAL WHICH DO NOT ATTRACT SECTION 194C, HENCE, THE ASSESSEE WAS NOT L IABLE TO DEDUCT TAX THEREFROM AND HENCE, THE PROVISION OF S ECTION 40(A)(IA) IS NOT APPLICABLE. IN THE ABSENCE OF ANY DISTINGUIS HING FEATURE BROUGHT ON RECORD BY THE LD. DR WE RESPECTFULLY FOL LOWING THE CONSISTENT VIEW OF THE TRIBUNAL HOLD THAT THESE PAY MENTS ARE PRINCIPLE TO PRINCIPLE WHICH DO NOT ATTRACT THE APP LICABILITY OF SECTION 194C AND, HENCE, THE PROVISIONS OF SECTION 40(A)(IA) ARE NOT APPLICABLE AND ACCORDINGLY WE ARE INCLINED TO UPHOLD THE FINDING OF THE LD. CIT(A) IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER. THE GROUNDS TAKEN BY THE REVENU E ARE, THEREFORE, REJECTED. 5. THE FACTS ARE IDENTICAL IN THE PRESENT CASE. WE , THEREFORE, FOLLOWING THE DECISION IN THE CASE OF CHIMANLAL MAN EKLAL SECURITIES PVT. LTD. (SUPRA) CONFIRMED THE ORDER OF THE LD. CI T (A) AND DISMISS THE APPEAL FILED BY THE REVENUE. 6. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ITA 2748/MUM/2010 TRIPUATI EQUITIES LTD. 5 ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 1 9TH AUGUST 2011. SD/- SD/- ( B. RAMAKOTAIAH ) ACCOUNTANT MEMBER ( R.S. PADVEKAR ) JUDICIAL MEMBER MUMBAI, DATE: 19TH AUGUST 2011 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A)8, MUMBAI. 4) THE CIT-4, MUMBAI. 5) THE D.R. J BENCH, MUMBAI. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR I.T.A.T., MUMBAI *CHAVAN ITA 2748/MUM/2010 TRIPUATI EQUITIES LTD. 6 SR.N. EPISODE OF AN ORDER DATE INITIALS CONCERNED 1 DRAFT DICTATED ON 08.06.2011 SR.PS 2 DRAFT PLACED BEFORE AUTHOR 10.06.2011 SR.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 FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER