DCIT CIR 4(2), MUMBAI V. SSJ HOLDING P. LTD, MUMBAI

ITA 2751/MUM/2010

• Counselvise Citation: 275119914 RSA 2010
• Duration Of Justice: 1 year(s) 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-07-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Next Hearing Date: 19-07-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 08-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K SINGH
• Keywords: Non-deduction of tax

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. 2751/MUM/2010 (ASSESSMENT YEAR: 2006-07) ACIT, CIRCLE 4(2) M/S. SSJ HOLDING PVT. LTD. ROOM NO. 642, 6TH FLOOR SURYA MAHAL, 1ST FLOOR AAYAKAR BHAVAN, M.K. ROAD VS. BURJORJI BHARUCHA MARG, FORT MUMBAI 400020 MUMBAI 400001 PAN - AAECS 6349 F APPELLANT RESPONDENT APPELLANT BY: SHRI S.K. SINGH RESPONDENT BY: MS VINITA SHAH O R D E R PER B. RAMAKOTAIAH, A.M. THIS APPEAL BY THE REVENUE IS AGAINST THE ORDER OF THE CIT(A) VII, MUMBAI DATED 18.01.2010. 2. THE REVENUE HAS RAISED A SOLITARY GROUND REGARDING DELETION OF DISALLOWANCE OF VSAT /LEASELINE CHARGES & TRANSACTI ON CHARGES DISALLOWED BY THE A.O. INVOKING PROVISIONS OF SECTION 40A(A)(I A). 3. WE HAVE HEARD THE LEARNED COUNSEL AND THE LEARNED D .R. 4. AS FAR AS THE ISSUE OF ALLOWANCE OF VSAT & TRANSACT ION CHARGES ARE CONCERNED THESE EXPENDITURES ARE ALLOWABLE EXPENDIT URES FOLLOWING THE ORDER OF THE ITAT IN THE CASE OF KOTAK SECURITIES VS. ADD L. CIT IN ITA NO. 1995/MUM/2008 WHICH IN TURN WAS FOLLOWED BY DCIT VS . ANGEL BROKING LTD. 35 SOT 457 (MUM). THE CIT(A) FOLLOWED THE ORDER OF THE ITAT MUMBAI BENCH IN KOTAK SECURITIES VS. ADDL. CIT IN ITA NO. 1995/M UM/2008 DATED 28.08.2008. IT WAS HELD IN THAT CASE THAT THE STOCK EXCHANGES DO NOT PROVIDE ANY MANAGERIAL SERVICES AND THE FEES PAID B Y THE MEMBER TO THE STOCK EXCHANGE CAN NOT HELD TO BE FOR TECHNICAL SER VICES RENDERED, NO TDS WAS DEDUCTIBLE ON THE SAME. THEREFORE, PROVISIONS O F SECTION 40A(A)(IA) DOES ITA NO. 2751/MUM/2010 2 NOT APPLY. THE ITAT MUMBAI BENCH IN THE CASE OF DCI T VS. ANGEL BROKING LTD. 35 SOT 547 HELD AS UNDER: - STOCK EXCHANGES AS MEASURE OF PROVIDING INFRASTRUC TURE TO THEIR MEMBERS INSTALL VSAT AND LEASED LINE SYSTEM. FEE CO LLECTED IN THAT REGARD IS NOTHING BUT FEE PAID FOR USE OF FACILITIE S PROVIDED BY THE STOCK EXCHANGE. SUCH FACILITIES ARE AVAILABLE FOR U SE BY ANY MEMBER. SATELLITE BASED TRADING ENABLES TRADING MEMBERS TO TRADE ON EXCHANGE FROM THEIR PLACE OF WORK ACROSS THE COUNTR Y. STOCK EXCHANGE HAS TO GET PERMISSION FROM THE DEPARTMENT OF TELECO MMUNICATION FOR INSTALLING AND SETTING UP VSAT OR LEASED LINE SYSTE M. CHARGES LEVIED BY THE STOCK EXCHANGE ON ITS MEMBERS ARE FOR THE PU RPOSE OF RECOVERY OF ITS COST IN PROVIDING THESE FACILITIES TO THE ME MBERS. STOCK EXCHANGES DO NOT PROVIDE ANY TECHNICAL SERVICES BY INSTALLING VSAT NETWORK. THEY MERELY PROVIDE FACILITIES FOR MEMBERS TO PURCHASE AND SELL SHARES WITHIN FRAME WORK OF ITS BY-LAWS. THEY ALSO PROVIDE FOR A MECHANISM FOR SETTLEMENT OF DISPUTE BETWEEN THE BRO KERS AND CUSTOMERS. STOCK EXCHANGES DO NOT INVOLVE THEM IN P ROVIDING ANY TECHNICAL SERVICES TO ANY OF ITS MEMBERS. THE ASSESSING OFFICER IN COMING TO THE CONCLUSION T HAT THE PAYMENT WAS FOR FEE FOR TECHNICAL SERVICES HAD RELIED UPON THE FACT THAT THE SCREEN BASED TRADING WAS SOPHISTICATED METHOD OF TR ADING. THAT BY ITSELF WOULD NOT BE SUFFICIENT TO HOLD TECHNICAL SE RVICES BEING RENDERED. THE ASSESSING OFFICER HAD ALSO HELD THAT SERVICES W ERE NOT AVAILABLE TO THE PUBLIC AT LARGE BUT ONLY TO REGISTERED MEMBERS, AGAIN THAT BY ITSELF WOULD NOT MAKE THE SERVICES IN QUESTION AS TECHNICA L SERVICES. ANOTHER REASON GIVEN BY THE ASSESSING OFFICER WAS THAT SPEE D AT WHICH TRANSACTIONS WERE COMPLETED AND THE EASE WITH WHICH TRANSACTIONS WERE DONE IN SCREEN BASED TRADING, WHICH AGAIN WAS NOT RELEVANT CRITERIA FOR HOLDING THE SERVICES RENDERED AS TECHN ICAL SERVICES. FACT THAT THE DATA PROVIDED ON SCREEN WOULD PROVIDE BETT ER DATA FOR CARRYING OUT TRANSACTION WOULD NOT AGAIN BE SUFFICI ENT TO HOLD THAT TECHNICAL SERVICES WERE BEING RENDERED. ALL THE ABO VE FEATURES PRESENT IN SCREEN BASED TRADING SAVE TIME. THIS IS THE RESU LT OF IMPROVED TECHNOLOGY. THAT DOES NOT MEAN THAT STOCK EXCHANGE IS PROVIDING TECHNICAL SERVICES. MEMBERS OF THE STOCK EXCHANGE A ND THE PUBLIC AT LARGE ARE BENEFICIARIES OF THESE TECHNICAL IMPROVEM ENTS. STOCK EXCHANGES ARE NOT THE OWNER OF THIS TECHNOLOGY TO P ROVIDE IT FOR A FEE FOR PROSPECTIVE USE. THEY ARE THEMSELVES CONSUMERS OF THE TECHNOLOGY. THEREFORE, THE PAYMENT IN QUESTION COULD NOT BE CON SIDERED AS FEE FOR TECHNICAL SERVICES RENDERED. THE ORDER OF THE COMMI SSIONER (APPEALS) WAS TO BE CONFIRMED. 5. IN THE CASE OF KOTAK SECURITIES LTD (SUPRA), RELIED ON BY THE CIT(A) THE ISSUE WITH REFERENCE TO TDS PROVISIONS WAS ALSO CON SIDERED AND HELD AS UNDER; ITA NO. 2751/MUM/2010 3 TO CALL A PAYMENT AS FEES FOR TECHNICAL SERVICES IT SHOULD HAVE BEEN PAID IN CONSIDERATION OF RENDERING BY THE RECI PIENT OF PAYMENT OF ANY (A) MANAGERIAL SERVICE, (B) TECHNICAL OR CON SULTANCY SERVICES. THE STOCK EXCHANGES MERELY PROVIDE FACILITY TO ITS MEMBERS TO PURCHASE AND SELL SHARES, SECURITIES, ETC., WITHIN THE FRAMEWORK OF ITS BYE LAWS. IN THE EVENT OF DISPUTE IT PROVIDES F OR MECHANISM FOR SETTLEMENT OF DISPUTE. IT REGULATES CONDITIONS SUBJ ECT TO WHICH A PERSON CAN BE A MEMBER AND AS TO WHEN AND IN WHAT C IRCUMSTANCES MEMBERSHIP CAN BE TRANSFERRED, CANCELLED, SUSPENDED , ETC. THE EXCHANGE PROVIDES FOR A PLACE WHERE THE MEMBERS FAN MEET AND TRANSACT BUSINESS. THE TRANSACTION FEE PAID IS ON T HE BASIS OF VOLUME OF TRANSACTIONS EFFECTED BY A MEMBER. THE STOCK EXC HANGE DOES NOT RENDER ANY MANAGERIAL SERVICE NOR DO THEY RENDER AN Y TECHNICAL CONSULTANCY SERVICE. THE TRANSACTION FEE IS NOT PAI D IN CONSIDERATION OF ANY SERVICE PROVIDED BY THE STOCK EXCHANGE. IT I S A PAYMENT FOR USE OF FACILITIES PROVIDED BY THE STOCK EXCHANGE AN D SUCH FACILITIES ARE AVAILABLE FOR USE BY ANY MEMBER. THE PROVISIONS OF SECTION 194J WHICH CASE A BURDEN ON A PERSON TO DEDUCT TAX AT SO URCE AND TREAT HIM AS A DEFAULTER ON HIS FAILURE TO DEDUCT TAX AT SOURCE, NEED BE INTERPRETED STRICTLY AND IN THE ABSENCE OF A CLEAR OBLIGATION ON THE PART OF A PERSON, SPELT OUT IN UNAMBIGUOUS TERMS BY THE PROVISIONS OF SECTION 194J, READ WITH EXPLANATION 2 TO SECTION 9(1)(VII), SUCH OBLIGATION CANNOT BE IMPLIED OR LEFT TO THE IPSI DI XIT OF THE REVENUE AUTHORITIES. THEREFORE, TRANSACTION FEE PAID COULD NOT BE SAID TO BE A FEE PAID IN CONSIDERATION OF THE STOCK EXCHANGE REN DERING ANY TECHNICAL SERVICE TO THE ASSESSEE. THE PROVISIONS O F SECTION 194J WERE, THUS, NOT ATTRACTED. THEREFORE, THERE WAS NO OBLIGATION ON THE PART OF THE ASSESSEE TO DEDUCT TAX AT SOURCE. CONSE QUENTLY, THE PROVISIONS OF SECTION 40(A)(IA) WERE ALSO NO ATTRAC TED AND, THEREFORE, THE DISALLOWANCE MADE WAS TO BE DELETED. RESPECTFULLY FOLLOWING THE ABOVE COORDINATE BENCH D ECISION WE ARE OF THE OPINION THAT THERE IS NO NEED TO DEVIATE FROM THE O RDER OF THE CIT(A). ACCORDINGLY, THE GROUND IS DISMISSED. 6. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH JULY 2011. SD/- SD/- (R.S. PADVEKAR) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 27 TH JULY 2011 ITA NO. 2751/MUM/2010 4 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) VIII, MUMBAI 4. THE CIT IV, MUMBAI CITY 5. THE DR, J BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.