ACIT 4(3), MUMBAI V. MEHTA FINSTOCK P. LTD, MUMBAI

ITA 3116/MUM/2011

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2919 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 5 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2015
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 16-04-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 20-04-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MAURYA PRATAPDR

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI B BENCH , ,, , !'# , ,, , $ BEFORE S/SH. RAJENDRA,ACCOUNTANT MEMBER & SAKTIJIT DEY,JUDICIAL MEMBER /.ITA NO.3116/MUM/2011, % & /ASSESSMENT YEAR-2007-08 ACIT-4(3) ROOM NO.649, 6 TH FLOOR AAYAKAR BHAVAN, M.K. ROAD MUMBAI-400 020. VS M/S. MEHTA FINSTOCK PVT. LTD. 612, ARUM CHAMBERS, TARDEO MUMBAI-400 034. PAN: AAACK 2231 L ( / APPELLANT) ( / RESPONDENT) %'# /ASSESSEE BY : SHRI NEELKANTH KHANDELWAL / REVENUE BY : SHRI MAURYA PRATAPDR / DATE OF HEARING : 06-10- 2015 / DATE OF PRONOUNCEMENT : 14 -10-2015 , 1961 1961 1961 1961 254 254 254 254( (( (1 11 1) )) ) )* ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER DT.18.02.2011 OF CIT(A)-8,MUM BAI THE ASSESSING OFFICER(AO),HAS RAISED VARIOUS GROUNDS,BUT PRIMARILY THEY DEAL WITH DISALLOWANCE MADE IN RESPECT OF VSAT, TRANSACTION CHARGES AND LEASELINE CHARGES,AMOUNTING TO RS.12.35 LAKHS. 2. ASSESSEE-COMPANY,ENGAGED IN STOCK BROKING,FILED ITS RETURN OF INCOME ON 30.10.2007, DECLARING INCOME OF RS.30.22 LACS.THE AO COMPLETED THE ASSESSMENT ON 22.12.2009,U/S.143 (3)OF THE ACT,DETERMINING THE INCOME OF THE ASSESSE AT RS.1.14CRORES. 3. DURING THE ASSESSMENT PROCEEDINGS,THE AO FOUND THAT THE ASSESSEE HAD NOT DEDUCTED TAX AT SOURCE FOR THE PAYMENTS MADE UNDER THE HEADS VSAT, TRANSACTION CHARGES AND LEASELINE CHARGES. HE HELD THAT CHARGES WERE FOR TECHNICAL SE RVICES,THAT SAME FELL WITHIN THE PURVIEW OF SECTION 194J OF THE ACT,THAT THE ASSESSEE HAD TO DE DUCT TAX U/S.40(A)(IA)OF THE ACT,THAT IT HAD FAILED TO DO SO. HE MADE A DISALLOWANCE OF RS.12,35 ,895/-. 4. AGGRIEVED BY THE ORDER OF THE AO THE ASSESSEE PREFE RRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA) .BEFORE HIM , THE ASSESSEE SUBMITTED THAT ISSUE WAS DECIDED IN IT S FAVOUR BY THE ORDER OF THE TRIBUNAL DELIVERED IN TH E CASE OF KOTAK SECURITIES LTD.REFERRING TO THE DECISIONS OF ANGEL BROKING LTD.(35 SOT 457)AND KOTAK SECURITIES LTD. (124 TTJ 241),HE DELETED THE ADDITION OF RS.12.35 LACS MADE BY THE A O. 5. DURING THE COURSE OF HEARING BEFORE US,THE DEPARTME NTAL REPRESENTATIVE(DR) LEFT THE ISSUE TO THE DISCRETION OF THE BENCH. THE AUTHORISED REPR ESENTATIVE (AR) RELIED UPON THE CASES OF (INCOME TAX APPEAL (L) NO.475 OF 2011 DATED 28.07.2 011), KOTAK SECURITIES LTD. INCOME TAX APPEAL (LOD) NO.2910 OF 2009 DT.21.10.2011, ANSAL L ANDMARK TOWNSHIP (P.)LTD.(ITA 160 OF 2015 DT.26.8.2015),PERFECT CIRCLE INDIA LTD. (IT A/7241/M/2012 AY 09-10 DT.27.3. 2015).WITH REGARD TO THE TRANSACTION CHARGES,HE STA TED THAT THE TAX WAS PAID FOR THE AMOUNT IN QUESTION BY THE RECIPIENT AND THAT FOR VERIFICATIO N PURPOSES THE MATTER COULD BE SENT BACK TO THE FILE OF THE AO, IN LIGHT OF THE AMENDMENT TO TH E PROVISIO TO SECTION 40(A)(IA)OF THE ACT. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT THE ISSUE OF VSAT AND LEASE LINE CHARGES PAID TO STOCK EXCHANGE HAS BEEN DELIBERATED UPON AND 3116/11MEHTAFINSTOCK-A.Y.07-08 2 DECIDED BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF ANGEL CAPITAL & DEBIT MARKET(SUPRA)IN FOLLOWING MANNER: THREE QUESTIONS OF LAW RAISED BY THE REVENUE IN TH IS APPEAL WHICH READ THUS: A)WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE HONBLE TRIBUNAL WAS JUSTIFIED IN HOLDING THAT VSAT AND LEASE LINE CHARG ES PAID TO THE STOCK EXCHANGE BY THE ASSESSEE COMPANY. WERE ALLOWABLE AS A DEDUCTION FR OM TAXABLE INCOME EVENTHOUGH THE ASSESSEE COMPANY HAD FAILED TO DEDUCT TDS THEREON. B) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE HONBLE TRIBUNAL WAS JUSTIFIED IN HOLDING THAT VSAT AND LEASE LINE CHARG ES PAID TO THE STOCK EXCHANGE BY THE ASSESSEE COMPANY WERE NOT PAID IN CONSIDERATION OF TECHNICAL SERVICES RENDERED BY THE STOCK EXCHANGE WITHIN THE MEANING OF SECTION 194J R.W. EX PLANATION 2 SECTION 9 (1)(VII) OF THE INCOME TAX ACT? XXXX 2.AS REGARDS FIRST TWO QUESTIONS ARE CONCERNED THE FINDING OF FACT RECORDED BY THE ITAT IS THAT VSAT AND LEASE LINE CHARGES PAID BY THE ASSESSEE TO STOCK EXCHANGE WERE MERELY REIMBURSEMENT OF THE CHARGES PAID/PAYABLE BY THE ST OCK EXCHANGE TO THE DEPARTMENT OF TELECOMMUNICATION.SINCE THE VSAT AND LEASE LINE CHA RGES PAID BY THE ASSESSEE DONOT HAVE ANY ELEMENT OF INCOME, DEDUCTING TAX WHILE MAKING SUCH PAYMENTS DO NOT ARISE.HENCE, QUESTION NOS.(A) AND (B) CANNOT BE ENTERTAINED. RESPECTFULLY FOLLOWING THE ABOVE,THE ISSUE OF VSAT AND LEASE LINE CHARGES PAID TO STOCK EXCHANGE IS DECIDED AGAINST THE AO. 5.1 AS FAR AS THE TRANSACTION CHARGES ARE CONCERNED WE ARE OF THE OPINION THAT MATTER NEEDS FURTHER VERIFICATION AS THE ASSESSEE HAS CLAIMED TH AT THE RECIPIENT OF THE MONEY HAD PAID TAXES.WE FIND THAT THOUGH THE PROVISO TO SECTION 40 (A)(IA) WAS NOT INTRODUCED FROM THE YEAR UNDER CONSIDERATION, YET THE HONBLE DELHI HIGH COU RT IN THE CASE OF ANSAL LANDMARK TOWNSHIP(P) LTD. (SUPRA), HAS HELD, THAT AMENDMENT IS RETROSPECTIVE IN NATURE.IN THE MATTER OF PERFECT CIRCLE INDIA LTD. (SUPRA), SAME PRINCIPLE H AS BEEN FOLLOWED. 5.2 FOLLOWING THE ABOVE DECISIONS,WE ARE OF THE OPINION ,THAT IN THE INTEREST OF JUSTICE,THE MATTER SHOULD BE RESTORED BACK TO THE FILE OF THE A O FOR VERIFICATION PURPOSES.IF IT IS FOUND THAT THE RECIPIENT HAD PAID THE TAXES FOR THE AMOUN T IN QUESTION ADDITION MADE SHOULD BE DELETED.IN CASE IT IS FOUND THAT NO TAX WAS PAID TH E ADDITION CONFIRMED BY THE FAA WOULD STAY.EFFECTIVE GROUND OF APPEAL IS DECIDED IN FAVOU R OF THE AO,IN PART. AS A RESULT,APPEAL FILED BY THE AO STANDS PARTLY A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH OCTOBER,2015. 14 '# ,2015 SD/- SD/- ( !'# / SAKTIJIT DEY) ( ( / RAJENDRA) ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER /MUMBAI, /DATE: 14. 1 0. 2015 . . . .. . JV.SR.PS. +# ,&# / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3116/11MEHTAFINSTOCK-A.Y.07-08 3 3. THE CONCERNED CIT(A)/ !$, - , 4. THE CONCERNED CIT / !$, - 5. DR A BENCH, ITAT, MUMBAI / / , , . . . 6. GUARD FILE/ %2 //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.