TANNA AGRO IMPEX P.LTD, MUMBAI V. ADDL CIT RG 2(3), MUMBAI

ITA 3224/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 49624 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Next Hearing Date: 30-06-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 23-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S L SINGH
• Keywords: Transactions in derivatives
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, J BENCH, MUMBAI. BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER AND SHRI V. DURGA RAO, JUDICIAL MEMBER I.T.A NO.3224/ MUM/2010 ASSESSMENT YEAR: 2007-08 M/S. TANNA AGRO IMPEX P. LTD., .. APPELLANT TANNA HOUSE, 2 ND FLOOR, 11/A, NATHALAL D.PAREKSH MARG, MUMBAI-039 PA NO.AABCT 0245 J VS ADDL.COMMISISONER OF INCOME TAX, RANGE 2(3), ,. RESPONDEN T AAYAKAR BHAVAN, M.K. ROAD, MUMBAI. APPEARANCES: MAYUR MAKADIA, FOR THE APPELLANT S.L. SINGH, FOR THE RESPONDENT DATE OF HEARING : 30.6.2011 DATE OF PRONOUNCEMENT : 29-07-2011 O R D E R PER PRAMOD KUMAR: 1. BY WAY OF THIS APPEAL, THE ASSESSEE APPELLANT HA S CHALLENGED CORRECTNESS OF CIT(A)S ORDER DATED 11 TH MARCH, 2010, IN THE MATTER OF ASSESSMENT UNDER SEC TION 143(3) OF THE INCOME TAX ACT, 1961, FOR THE ASSESS MENT YEAR 2007-08 ON THE FOLLOWING GROUNDS: I.T.A NO.3224/ MUM/2010 ASSESSMENT YEAR: 2007-08 2 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF ` .4,61,769 BEING AN AMOUNT OF BROKERAGE PAID TO THE BROKER FOR THE TRANSACTION OF SALE AND PURCHASE OF COMMODITIES THROUGH COMMODITY EXCHANGE APPLYING THE PROVISIONS OF SECTION 40(A)(IA) FOR NON DEDUCTION OF TAX AT SO URCE ON THE BROKERAGE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD CIT(A) FAILED TO APPRECIATE THE FACT THAT THE BROKERAGE HA S NOT BEEN PAID BY THE APPELLANT BUT THE BROKER HAS RECOVERED THE AMOU NT AS TRANSACTION CHARGES IN THE BILL RAISED FOR SALE OR PURCHASE OF THE COMMODITY EXCHANGE. 2. THESE GROUNDS OF APPEAL, BEING INTERCONNECTED, W ILL BE TAKEN UP TOGETHER. BRIEFLY STATED, THE RELEVANT MATERIAL FACTS ARE LIK E THIS. THE ASSESSEE IS ENGAGED IN EXPORT, IMPORT AND WHOLESALE TRADE FOR AGRO PRODUCT S. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTIC ED THAT THE ASSESSEE HAD PAID AN AMOUNT OF ` .4,61,769 TOWARDS BROKERAGE ON COMMODITIES HEDGING TRANSACTIONS, BUT DID NOT DEDUCT THE TAX AT SOURCE FROM SUCH BROKERAG E PAYMENTS. THE ASSESSING OFFICER, ACCORDINGLY, DISALLOWED ` .4,61,769 U/S.40(A)(IA) OF THE INCOME TAX ACT. AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BE FORE THE CIT(A), BUT WITHOUT ANY SUCCESS. THE ASSESSEE IS NOT SATISFIED AND IS IN F URTHER APPEAL BEFORE US. 3. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTUAL MATRIX OF THE CASE AS ALSO THE A PPLICABLE LEGAL POSITION. 4. WE FIND THAT IN TERMS OF THE PROVISIONS OF SECTI ON 40(A)(IA) ANY AMOUNT PAID, INTER ALIA, FOR COMMISSION OR BROKERAGE, ON WHICH TAX IS DED UCTIBLE AT SOURCE AND SUCH TAX HAS NOT BEEN DEDUCTED AT SOURCE, IS NOT DE DUCTIBLE IN COMPUTING INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUS INESS OR PROFESSION. SECTION 194H, ON THE OTHER HAND, SETS OUT TAX DEDUCTION AT SOURCE REQUIREMENTS WITH RESPECT TO COMMISSION OR BROKERAGE. SECTION 194H, IN TUR N, DEFINES COMMISSION AND BROKERAGE AS FOLLOWS: (I) COMMISSION OR BROKERAGE INCLUDES ANY PAYMENT RECEIVED OR RECEIVABLE, DIRECTLY OR INDIRECTLY, BY A PERSON ACT ING ON BEHALF OF I.T.A NO.3224/ MUM/2010 ASSESSMENT YEAR: 2007-08 3 ANOTHER PERSON FOR SERVICES RENDERED (NOT BEING PRO FESSIONAL SERVICES) OR FOR ANY SERVICES IN THE COURSE OF BUYING OR SELL ING OF GOODS OR IN RELATION TO ANY TRANSACTION RELATING TO ANY ASSET, VALUABLE ARTICLE OR THING, NOT BEING SECURITIES. 5. A PLAIN READING OF THE ABOVE PROVISION MAKES IT CLEAR THAT COMMISSION OR BROKERAGE IN RESPECT OF TRANSACTIONS IN SECURITIES ARE NOT COVERED BY THE SCOPE OF TAX DEDUCTION AT SOURCE REQUIREMENTS. THE MEANING ASSI GNED TO THE EXPRESSION SECURITIES IS, AS STATED IN EXPLANATION (III) TO SECTION 194H, IS THE SAME AS ASSIGNED TO IT IN CLAUSE (H) OF SECTION 2 OF THE SECURITIES CON TRACTS (REGULATIONS) ACT, 1956. THIS DEFINITION OF SECURITIES IS AS FOLLOWS: SECURITIES INCLUDE ( I ) SHARES, SCRIPS, STOCKS, BONDS, DEBENTURES, DEBENT URE STOCK OR OTHER MARKETABLE SECURITIES OF A LIKE NATURE IN OR OF ANY INCORPORAT ED COMPANY OR OTHER BODY CORPORATE; [( IA ) DERIVATIVE; ( IB ) UNITS OR ANY OTHER INSTRUMENT ISSUED BY ANY COLLE CTIVE INVESTMENT SCHEME TO THE INVESTORS IN SUCH SCHEMES;] [( IC ) SECURITY RECEIPT AS DEFINED IN CLAUSE (E G ) OF SECTION 2 OF THE SECURITISATION AND RECONSTRUCTION OF FINANCIAL ASSETS AND ENFORCEMENT OF SECURITY INTEREST ,2002;] [ ( ID ) UNITS OR ANY OTHER SUCH INSTRUMENT ISSUED TO THE INVESTORS UNDER ANY MUTUAL FUND SCHEME; ] ( II ) GOVERNMENT SECURITIES; ( IIA ) SUCH OTHER INSTRUMENTS AS MAY BE DECLARED BY THE CENTRAL GOVERNMENT TO BE SECURITIES; AND ( III ) RIGHTS OR INTEREST IN SECURITIES ; 6. IT IS THUS CLEAR THAT TRANSACTIONS OF DERIVATES ARE ALSO COVERED BY THE SCOPE OF EXPRESSION SECURITIES FOR THE PURPOSE OF TAX DEDU CTION REQUIREMENTS U/S.194H OF THE ACT. THE HEDGING TRANSACTIONS OF COMMODITIES, IF I N THE NATURE OF DERIVATIVES TRANSACTIONS, WILL, THEREFORE, BE OUTSIDE THE AMBIT OF TRANSACTIONS ON WHICH TDS REQUIREMENTS COME INTO PLAY. AS THIS ASPECT OF THE MATTER IS NOT CLEAR FROM THE MATERIAL ON RECORD, WE DEEM IT FIT AND PROPER TO RE MIT THE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION IN THE LIG HT OF OUR OBSERVATIONS ABOVE. WE ALSO MAKE IT CLEAR THAT EXCEPT IN THE SITUATION ABO VE, COMMISSION PAID ON TRANSACTIONS I.T.A NO.3224/ MUM/2010 ASSESSMENT YEAR: 2007-08 4 OF SALES AND PURCHASE OF COMMODITIES THROUGH COMMOD ITIES EXCHANGE ARE CLEARLY COVERED BY THE SCOPE OF SECTION 194H AND THE MATTER DOES NOT CALL FOR ANY INTERFERENCE IN SUCH A SITUATION. 7. IN THE RESULT, APPEAL IS ALLOWED FOR STATISTICAL PURPOSES IN THE TERMS INDICATED ABOVE. PRONOUNCED IN THE OPEN COURT ON 29 TH JULY, 2011 SD/- (V. DURGA RAO) JUDICIAL MEMBER SD/- (PRAMOD KUMAR) ACCOUNTANT MEMBER MUMBAI, DATED 29 TH JULY, 2011 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS),6, MUMBAI 4. COMMISSIONER OF INCOME TAX, 2 , MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH J, MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI