ITO, New Delhi V. M/s. SPEL Securities Ltd., New Delhi

ITA 3277/DEL/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2840 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-06-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 17-05-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 23-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Earning of tax free income; Non-deduction of tax
• Section: 14A; 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, DELHI BEFORE SHRI R. K. PANDA, ACCOUNTANT MEMBER AND MS. SUCHITRA KAMBLE, JUDICIAL MEMBER I.T.A. NO. 3206/DEL/2013 ASSESSMENT YEAR: 2009-10 SPFL SECURITIES LTD. 3/4267, ANSARI ROAD DARYAGANJ NEW DELHI PAN-AABCS2452C VS. ITO WARD-9(2) NEW DELHI [APPELLANT] [RESPONDENT] I.T.A. NO. 3277/DEL/2013 ASSESSMENT YEAR: 2009-10 ITO WARD-9(2) NEW DELHI VS. SPFL SECURITIES LTD. 3/4267, ANSARI ROAD DARYAGANJ NEW DELHI PAN-AABCS2452C [APPELLANT] [RESPONDENT] APPELLANT BY: SH. K. SAMPATH, ADV RESPONDENT BY: SH. V. RAJ A K UMAR, SR. D.R. DATE OF HEARING: 1 7 0 5 2017 DATE OF PRONOUNCEMENT: 15 0 6 2017 O R D E R PER R.K. PANDA, A.M: THESE ARE CROSS APPEALS. THE FIRST ONE IS FILED BY THE ASSESSEE AND THE SECOND ONE FILED BY THE REVENUE AND ARE DIRECTED AG AINST THE ORDER DATED 28 TH FEBRUARY, 2013 OF THE CIT(A)-XII NEW DELHI REL ATING TO ASSESSMENT YEAR ITA NO. 3206/DEL/2013 AY 2009-10 2 2009-10. FOR THE SAKE OF CONVENIENCE BOTH THE APPEA LS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER. ITA NO. 3206/DEL/2013 (ASSESSEE) 2. ALTHOUGH A NUMBER OF GROUNDS HAVE BEEN RAISED BY THE ASSESSEE THEY ALL RELATE TO THE ORDER OF LD. CIT(A) IN CONFI RMING THE ADDITION OF RS. 81,53,443/- AND RS. 59,27,785/- MADE BY THE AO UNDE R SECTION 40(A)(IA) ON ACCOUNT OF NON DEDUCTION OF TDS. 3. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE IS A COMPANY AND IS A MEMBER OF NATIONAL STOCK EXCHANGE, BOMBAY STOCK AND MCX-SX. IT IS ALSO EARNING BROKERAGE INCOME FROM PROVIDING PLATFORM OF TRADING IN SHARES ETC AND ALSO ENGAGED IN ITS OWN TRADING OF SHARES. IT FILED ITS RETURN OF INCOME ON 29 TH SEPTEMBER, 2009 DECLARING AN INCOME OF RS. 3,48,590 /- DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO OBSERVED THAT ASSESS EE HAS DEBITED AN AMOUNT OF RS. 1,24,58,945/- AS BROKERAGE. FROM THE VARIOUS DETAILS FILED BY THE ASSESSEE, HE OBSERVED THAT ASSESSEE HAS PAID BROKER AGE OF RS. 2,39,64,252/- AND EARNED BROKERAGE OF RS. 1,40,16,546/-. HE, THER EFORE, ASKED THE ASSESSEE TO FILE THE DETAILS OF TDS DEDUCTED ON SUCH PAYMENT UNDER THE PROVISIONS OF SECTION 194H OF THE INCOME TAX ACT. IT WAS REPLIED BY THE ASSESSEE THAT IT HAS NOT DEDUCTED ANY TDS FROM THE BROKERAGE PAYMENT AS PER THE PROVISIONS OF EXPLANATION (I) TO SECTION 194H OF THE INCOME TAX A CT. IT WAS ARGUED THAT IN CASE OF AUTHORIZED SUB BROKER, NO TDS PROVISION IS APPLICABLE AS THEY WERE DEALING IN SECURITIES. HOWEVER, TDS WAS DEDUCTED ON PAYMENT OF BROKERAGE TO AUTHORISED PERSONS PERTAINING TO F AND O SEGMENT. 4. HOWEVER, THE AO WAS NOT SATISFIED WITH THE EXPLA NATION GIVEN BY THE ASSESSEE. HE OBSERVED THAT IN A PARTICULAR CASE OF CLIENT M/S J.V. STOCK BROKING ITA NO. 3206/DEL/2013 AY 2009-10 3 PRIVATE LIMITED, THE ASSESSEE HAS PAID AN AMOUNT OF RS. 81,52,443/- ON ACCOUNT OF BROKERAGE. NO TDS WAS DEDUCTED FROM THIS PAYMENT . FROM THE COPY OF THE AGREEMENT FILED, THE AO NOTED FROM CLAUSE 7 OF THE AGREEMENT WITH THE SAID COMPANY THAT M/S J.V. STOCK BROKING PRIVATE LIMITED WAS TO BE PAID BRANCH RUNNING EXPENSES AS CONSIDERATION FOR MANAGING WHOL E OF THE AFFAIRS OF THE BRANCH. FROM THE DETAILS FILED FOR BRANCH RUNNING E XPENSES, HE OBSERVED THAT NO AMOUNT IS BEING SHOWN FOR THIS SUB BROKER AS BEI NG PAID. THEREFORE, THIS AMOUNT WHICH ACTUALLY PERTAINS TO BRANCH RUNNING EX PENSES HAS BEEN SHOWN UNDER COMMISSION AND BROKERAGE PAID AND LATER JUSTI FIED THAT TDS WAS NOT TO BE DEDUCTED ON THIS AMOUNT. SINCE ACCORDING TO THE AO, TDS WAS DEDUCTIBLE ON AMOUNTS PAID FOR BRANCH RUNNING EXPENSES UNDER SECT ION 194C OF THE ACT AND THE ASSESSEE HAS NOT DEDUCTED TDS AS PER THE PROVIS IONS OF SECTION 40(IA) OF THE ACT, THE AO MADE ADDITION OF RS. 81,52,443/- TO THE TOTAL INCOME OF THE ASSESSEE. 5. THE AO FURTHER NOTED THAT THE EXPLANATION OF THE ASSESSEE THAT CERTAIN PERSONS WERE EXEMPTED FROM THE DEDUCTION OF TDS FROM THE BROKERAGE AS PER THE PROVISIONS OF SECTION 194H IS NOT ACCEPT ABLE. HE OBSERVED THAT BROKERAGE PAID IS NOT FOR BUYING OR SELLING SECURIT Y BUT FOR INTRODUCING CLIENTS AND THEREFORE THE TDS PROVISIONS ARE APPLICABLE TO THE ASSESSEE. SINCE THE ASSESSEE HAS NOT DEDUCTED TDS FROM SUCH PAYMENT THE AO DISALLOWED AN AMOUNT OF RS. 59,27,785/- UNDER SECTION 40(IA) OF T HE INCOME TAX ACT. 6. IN APPEAL, THE LEARNED CIT(A) UPHELD BOTH THE AD DITIONS MADE BY THE AO UNDER SECTION 40(IA) BY OBSERVING AS UNDER: I HAVE PERUSED THE FACTS STATED IN ASSESSMENT ORDER AS WELL FACTS STATED BY THE ASSESSEE IN HIS SUBMISSION AND THE COMMENTS OF THE ASSESSING OFFICER DT. 31.12.12 & 26.2.13 RESPECTIVELY. CLAUSE 7 OF THE AGREEMENT WITH J.V. STOCK BROKING P VT. LTD IS IMPORTANT WHICH STATES THAT: ITA NO. 3206/DEL/2013 AY 2009-10 4 THAT OUT OF TOTAL BROKERAGE EARNED AN AMOUNT*EQUIVA LENT TO 0.05% ON THE JOBBING TURNOVER VALUE AND A CHARGE OF 0.05% ON THE DELIVER Y TURNOVER VALUE SHALL BE RETAINED BY THE FIRST PARTY AND THE BALANCE AMOUNT OF BROKERAGE EARNED SHALL BE PAID BY THE FIRST PARTY TO THE SECOND PARTY FOR MANAGING WHOLE OF THE AFFAIRS OF THE BRANCH AS BRANCH RUNNING EXPENSES. THIS ARRANGEMENT MAY BE REVIEWED WITH MUTUAL CONSENT OF BOTH THE PARTIES FROM TIME TO TIME. FROM THE ABOVE, IT IS CLEAR THAT THIS AGREEMENT IS CONTRARY TO ASSESSEE'S SUBMISSION STATED SUPRA. HENCE THE NATURE OF TRANSACTION IS OF A WORK CONTRACT COVERED U/S 194C AND TDS IS APPLICABLE. FURTHER, IN RESPECT OF THE ADDITION OF RS. 59,27,78 5/- THE ASSESSING OFFICER HAS STATED THAT: VIDE ITS SUBMISSION DATED 14.12.11 THE ASSESSEE HAS STA TED THAT THE NATURE OF BROKERAGE PAID TO SUB-BROKER/AUTHORIZED PERSONS. IT WAS PAID TO MOBILIZE BUSINESS FOR THE COMPANY AND INTRODUCE CLIENTS TO THE COMPANY. T HE BROKERAGE PAID IS NOT FOR BUYING OR SELLING OF SECURITIES. BUT IT IS FOR INTR ODUCING CLIENTS AND GETTING BUSINESS FOR THE ASSESSEE. HENCE IN THIS CASES WHERE TDS HAS NOT BEEN DEDUCTED ON ACCOUNT OF PAYMENT FOR BROKERAGE DONE IS BEING ADDED BACK TO T HE INCOME OF THE ASSESSEE AS PER PROVISIONS OF SECTION 40 (IA) OF THE ACT. KEEPING IN VIEW OF THE ABOVE STATED FACT, I UPHOLD BOTH THE ADDITIONS MADE BY THE ASSESSING OFFICER OF RS. 81,53,443/- & 59,27,785 ON ACCOUNT ON NON DEDUCTION OF TDS. 7. AGGRIEVED WITH SUCH ORDER OF THE CIT(A), THE ASS ESSEE IS IN APPEAL BEFORE THE TRIBUNAL CHALLENGING THE ADDITION OF RS. 81,51,443/- AND RS. 59,27,785/- UNDER SECTION 40(IA) OF THE INCOME TAX ACT. 8. THE LEARNED COUNSEL FOR THE ASSESSEE VEHEMENTLY CHALLENGED THE ORDER OF THE CIT(A) IN UPHOLDING THE ADDITION MADE BY THE AO UNDER SECTION 40(IA) OF THE ACT OF BOTH THE AMOUNTS FOR NON DEDUC TION OF TAX. HE SUBMITTED THAT THE COMPANY IS AN AUTHORISED STOCK BROKER AND MEMBER OF NATIONAL STOCK EXCHANGE OF INDIA LIMITED AND BOMBAY STOCK EXCHANGE LIMITED. THAT BEING THE AUTHORISED STOCK BROKER, THE COMPANY IS DEALING IN PURCHASE AND SALE OF SHARES AND DERIVATIVES ON BEHALF OF THE CLIENTS ON BROKERA GE BASIS. THE COMPANY GETS CLIENTS THROUGH OWN EFFORTS AND ALSO TAKES SERVICES OF AUTHORIZED SUB BROKERS / PERSONS FOR CASH SEGMENT AND FOR F & O SEGMENT. THE BROKERS / AUTHORIZED PERSONS ARE APPOINTED BY THE TRADING MEMBERS OF THE STOCK EXCHANGE TO ACT AS ITA NO. 3206/DEL/2013 AY 2009-10 5 AGENTS OF THE CONCERNED TRADING MEMBER FOR ASSISTIN G THE INVESTORS IN BUYING, SELLING OR DEALING IN SECURITIES OF CAPITAL MARKET SEGMENTS AS WELL AS IN FUTURE F & O SEGMENT. REFERRING TO THE PROVISIONS OF SECTION 194H, HE SUBMITTED THAT THE COMMISSION OR BROKERAGE DOES NOT INCLUDE PAYMEN T FOR SERVICES IN RELATION TO SECURITIES. REFERRING TO THE DECISION OF MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. M/S S.J. INVESTMENT AGENCIES P. LTD. 107, VIDE ITA NO. 3820/MUM/2009 WITH CO NO. 01/MUM/2010 ORDER DATED 2 3 RD FEBRUARY, 2011 FOR AY 2006-07 HE SUBMITTED THAT THE TRIBUNAL IN TH E SAID DECISION HAS UPHELD THE ORDER OF THE CIT(A) IN DELETING THE DISALLOWANC E OF SUB BROKERAGE MADE BY THE AO UNDER SECTION 40(IA) OF THE INCOME TAX ACT. REFERRING TO THE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF PRAYAS SECURITIES PVT. LTD., MUMBAI VS. ASSISTANT COMMISSIONER OF INCOME TAX VIDE ITA NO. 4731/MUM/2010 ORDER DATED 10 TH AUGUST, 2011 FOR ASSESSMENT YEAR 2006-07 HE SUBMITTED THAT SIMILAR VIEW HAS BEEN TAKEN AND I T HAS BEEN HELD THAT ANY PAYMENT OF COMMISSION OR BROKERAGE MADE IN RESPECT OF A TRANSACTION IN SECURITIES IS NOT COVERED BY THE REQUIREMENT OF TAX DEDUCTION UNDER SECTION 194H OF THE I.T. ACT. IT HAS BEEN HELD THAT THE ASS ESSEE, WHICH HAS PAID COMMISSION OR BROKERAGE TO THE SUB BROKERS FOR MOBI LIZING BUSINESS AND SECURITIES WAS NOT REQUIRED TO DEDUCT THE TAX. HE S UBMITTED THAT SIMILAR VIEW HAS BEEN TAKEN BY THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF JAIN INVESTMENT VS. ITO IN ITA NO. 3663 / MUM / 2010 ORDER DATED 24 TH FEBRUARY, 2011 FOR ASSESSMENT YEAR 2006-07 AND IN THE CASE OF M/S TANNA AGRO IMPEX P. LTD., VS. ADDL. COMMISSIONER OF INCOME TAX, RANGE 2 (3) VIDE ITA NO. 3224/MUM/2010 ORDER DATED 29 TH JULY, 2011 FOR ASSESSMENT YEAR 2007-08. HE ACCORDINGLY SUBMITTED THAT THIS BEING A COVERED MAT TER IN FAVOUR OF THE ASSESSEE, THEREFORE THE GROUNDS RAISED BY THE ASSES SEE SHOULD BE ALLOWED. IN HIS ALTERNATE CONTENTION, THE LEARNED COUNSEL FOR T HE ASSESSEE SUBMITTED THAT ITA NO. 3206/DEL/2013 AY 2009-10 6 SINCE THE PAYEE HAS ALREADY OFFERED THE COMMISSION INCOME TO TAX, THEREFORE, IN VIEW OF THE DECISION OF THE HONBLE SUPREME COUR T IN THE CASE OF HINDUSTAN COCA COLA BEVERAGES PRIVATE LTD VS. CIT REPORTED IN 293 ITR 226 NO DISALLOWANCE CAN BE MADE UNDER SECTION 40(A)(IA) OF THE INCOME TAX ACT. 9. THE LEARNED DR ON THE OTHER HAND HEAVILY RELIED ON THE ORDER OF THE AO AND THE CIT(A). 9.1. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE AO AS WELL AS CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. WE FIND THE ASSESSEE IN THE INSTANT CASE IS A MEMBER OF NATIONAL STOCK EXCHANGE, BOMBAY STOCK EXCHANGE AND MCX STOCK EXCHANGE. IT HAS PAID CERTAIN AMOUNT TO DIFFERENT BROKERS AND SUB BROKERS ON WHICH NO TAX HAS BEEN DEDUCTED FOR WHICH THE AO MADE DISALLOWANCE UNDER S ECTION 40(IA) OF THE INCOME TAX ACT FOR VIOLATION OF THE PROVISIONS OF S ECTION 194H / 194C AND MADE ADDITION OF RS. 81,52,443/- AND RS. 59,27,785/- RES PECTIVELY. WE FIND IN APPEAL THE LEARNED CIT(A) UPHELD THE ACTION OF THE AO AND SUCH REASONING OF THE CIT(A) HAS ALREADY BEEN REPRODUCED IN THE PRECEDING PARAGRAPHS. 10. IT IS THE SUBMISSION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT PROVISIONS OF SECTION 194H ARE NOT APPLICABLE TO CO MMISSION / BROKERAGE PAID IN RESPECT OF A TRANSACTION IN SECURITIES. WE FIND THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF S.J. INVESTMENT AGENCIES PRIVATE LTD (SUPRA) WHILE DEALING WITH SUCH AN ISSUE HAS DISMISSED THE APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE CIT(A) DELETING THE ADDITI ON MADE. THE RELEVANT OBSERVATION OF THE TRIBUNAL AT PARA 6 OF THE ORDER READS AS UNDER: AFTER CONSIDERING THE ARGUMENTS AND SUBMISSION WE AGREE WITH THE 'FINDINGS OF THE CIT(A). THE PROVISIONS OF SECTION 194H ARE AS UNDER : - 194H. ANY PERSON, NOT BEING AN INDIVIDUAL OR A HIN DU UNDIVIDED FAMILY, WHO IS RESPONSIBLE FOR PAYING, ON OR AFTER THE IST DAY OF JUNE, 2001, TO A RESIDENT, ANY ITA NO. 3206/DEL/2013 AY 2009-10 7 INCOME BY WAY OF COMMISSION (NOT BEING INSURANCE CO MMISSION REFERRED TO IN SECTION 194D) OR BROKERAGE, SHALL, AT THE TIME OF C REDIT OF SUCH INCOME TO THE ACCOUNT OF THE PAYEE OR AT THE TIME OF PAYMENT OF S UCH INCOME IN CASH OR BY THE ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE, WH ICHEVER IS EARLIER, DEDUCT INCOME-TAX THEREON AT THE RATE OF [TEN] PER CENT: PROVIDED ... PROVIDED ... PROVIDED ..... EXPLANATION.FOR THE PURPOSES OF THIS SECTION , (I) COMMISSION OR BROKERAGE INCLUDES ANY PAYMENT RECEIVED OR RECEIVABLE, DIRECTLY OR INDIRECTLY BY A PERSON ACTING ON BEHALF OF ANOTHER PERSON FOR SERVICES RENDERED (NOT BEING PROFESSIONAL SERVICES) OR FOR ANY SERVICES IN THE COURSE OF BUYING OR SELLING OF GOODS OR IN RELATION TO ANY TRANSACTION RELATING TO ANY ASSET, VALUABLE ARTICLE OR THING, NOT BEING SECURITIES; (II) . (III) ..... (IV) ...... AS CAN BE SEEN FROM THE AB OVE PROVISION, THE COMMISSION OR BRO KERAGE DEFINITION DOES N OT INCLUDE TRANSACTIONS IN SECURITIES. THERE IS NO DOUBT THAT MUTUAL FUNDS ARE CATEGORISED AS SECURITIES ON WHICH THERE IS NO. OBJ ECTION FROM THE REVENUE EITHER BEFORE THE A.O. OR BEFORE THE CIT(A). IN FACT THE C IT(A) ALSO GIVES A FINDING THAT THE A.O. HAS NOT DISPUTED THAT UNITS OF MUTUAL FUNDS AR E SECURITIES AS PER SECURITIES CONTRACTS (REGULATION) ACT, 1956. ASSESSEE IS IN TH E BUSINESS OF MUTUAL FUNDS DISTRIBUTION AND INVESTMENT AGENT. FROM THE DETAILS OF BROKERAGE RECEIVED AND SERVICE TAX DEDUCTED THERE FROM IT CAN BE SEEN THAT OUT OF THE BROKERAGE INCOME OF RS. 8,28,56,873/- THE BROKERAGE INCOME OF ?8,27,47,095/ - IS FROM MUTUAL FUNDS. THE BALANCE BROKERAGE OF RS. 1,09,779/- IS TOWARDS BOND S AND FIXED DEPOSITS. THE SUB- BROKERAGE IS PAID IN RELATION TO UNITS OF MUTUAL FU NDS. FROM THE DETAILS PLACED ON RECORD, WE AR E CONVINCED THAT THE SUB-BROKERAGE PA ID IS CONNECTED WITH THE SERVICES RENDERED IN THE COURSE OF BUYING AND SELLING OF UNI TS OF MUTUAL FUNDS OR IN RELATION TO TRANSACTIONS PERTAINING TO MUTUAL FUNDS AND AS PER THE PROVISIONS OF SECTION 194H EXPLANATION (I) THESE ARE NOT COVERED BY THE PROVIS ION FOR DEDUCTION OF TAX AT SOURCE. THERE IS NOTHING ON RECORD, TO INDICATE THAT THE SU B-BROKERAGE IS PAID FOR ANY OTHER SERVICES OTHER THAN RELATING TO SECURITIES. THE A.O . ALSO ACCEPTS THAT THE BROKERAGE RECEIVED BY THE ASSESSEE IS NOT COVERED BY TDS WHER EAS HE WAS OF THE OPINION THAT THE SUB-BROKERAGE PAID IS COVERED BY THE PROVISIONS. WE ARE UNABLE TO UNDERSTAND THIS LOGIC OF THE A.O. FOR THESE REASONS, WE ARE OF THE OPINION THAT THE ORDER OF THE CIT(A) DOES NOT REQUIRE ANY MODIFICATION AND ACCORDINGLY T HE SAME IS CONFIRMED. REVENUES GROUNDS ON THIS ISSUE ARE ACCORDINGLY REJECTED. 11. WE FIND THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF PRAYAS SECURITIES PVT. LTD. (SUPRA) WHILE DEALING WITH AN IDENTICAL ISSUE READS AS UNDER: SO FAR AS THE PAYMENT OF NSE CHARGES IS CONCERNED, IT APPEARS TO US THAT SECTION 194H WHICH IS REFERRED TO IN THE ASSESSEE'S REPLY D ATED 19.11.2008 TO THE ASSESSING OFFICER (REPRODUCED IN PAGE 2 OF THE ASSESSMENT ORD ER) IS NOT APPLICABLE SINCE THEY ARE ONLY PAYMENTS TO THE SUB-BROKERS FOR MOBILIZING BUSINESS FOR THE ASSESSEE, WHO IS ITA NO. 3206/DEL/2013 AY 2009-10 8 ACTUALLY THE BROKER OF NSE. THE PAYMENT IS FOR THE SERVICES OF THE SUB-BROKERS IN RELATION TO THE SECURITIES. EXPLANATION (I) BELOW S ECTION 194H EXCLUDES FROM THE PURVIEW OF 'COMMISSION OR BROKERAGE' ANY PAYMENT MA DE FOR SERVICES RENDERED IN THE COURSE OF BUYING OR SELLING OR IN RELATION TO A NY TRANSACTION RELATING TO SECURITIES AND THE WORD 'SECURITIES' IS DEFINED IN EXPLANATION (III) TO HAVE THE SAME MEANING ASSIGNED TO IT UNDER THE SECURITIES CONTRACTS (REGU LATION) ACT, 1956, WHICH WE HAVE ALREADY REFERRED TO. THE EFFECT OF THESE PROVISIONS IS THAT ANY PAYMENT OF COMMISSION OR BROKERAGE MADE IN RESPECT OF A TRANSACTION IN SE CURITIES IS NOT COVERED BY THE REQUIREMENT OF TAX DEDUCTION UNDER SECTION 194H OF THE ACT. THEREFORE, THE ASSESSEE WHICH HAS PAID COMMISSION OR BROKERAGE TO THE SUB-B ROKERS FOR MOBILIZING BUSINESS IN SECURITIES WAS NOT REQUIRED TO DEDUCT THE TAX. IN T HIS VIEW OF THE MATTER THE DISALLOWANCE MADE UNDER SECTION 40(A)(IA) IN RESPEC T OF NSE CHARGES IS ALSO NOT JUSTIFIED. 12. IN VIEW OF THE ABOVE DECISIONS CITED (SUPRA) WE ARE OF THE CONSIDERED OPINION THAT ASSESSEE HAS NOT VIOLATED THE PROVISIO NS OF SECTION 194H OF THE INCOME TAX ACT SO AS TO ENABLE THE AO TO MAKE ADDIT ION / DISALLOWANCE UNDER SECTION 40(IA) OF THE INCOME TAX ACT ON ACCOUNT OF NON-DEDUCTION OF TAX FROM THE BROKERAGE PAID TO VARIOUS PARTIES. THE LEARNED DR COULD NOT DISTINGUISH THE ABOVE DECISIONS CITED BY LEARNED COUNSEL FOR THE AS SESSEE NOR COULD BRING ANY MATERIAL BEFORE US SO AS TO TAKE A DIFFERENT VIEW T HAN THE VIEWS TAKEN BY THE MUMBAI BENCH OF THE TRIBUNAL. WE, THEREFORE, SET AS IDE THE ORDER OF THE CIT(A) AND DIRECT THE AO TO DELETE THE ADDITION. ITA NO. 3217/DEL/2013 (REVENUE) THE GROUNDS RAISED BY THE REVENUE ARE AS UNDER: I. THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN DIRECTIN G THE AO TO REWORK THE AMOUNT OF DISALLOWANCE U/S 14A UNDER THE RULE 8D OF THE I.T. RULES 1962 IN ACCORDANCE WITH LAW LAID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT IN MAXOOPS CASE AS WELL AS THE SUBMISSION OF THE ASSESSEE. II. THE APPELLANT CRAVES, LEAVE OR RESERVING THE RIGHT TO AMEND MODIFY, ALTER, ADD OR FOREGO ANY GROUND(S) OF APPEAL AT ANY T IME BEFORE OR DURING THE HEARING OF THIS APPEAL. 2. FACTS OF THE CASE IN BRIEF IS THAT THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVED THAT ASSESSEE HAS E ARNED AN AMOUNT OF RS. ITA NO. 3206/DEL/2013 AY 2009-10 9 66,00,000/- AS EXEMPT DIVIDEND INCOME. HOWEVER, THE ASSESSEE HAS NOT DISALLOWED ANY AMOUNT AS PER THE PROVISIONS OF SECT ION 14A. HE, THEREFORE, ASKED THE ASSESSEE TO EXPLAIN AS TO WHY DISALLOWANC E UNDER SECTION 14A SHOULD NOT BE MADE. IT WAS EXPLAINED BY THE ASSESSEE THAT THE DIVIDEND INCOME IS RECEIVED ON SHARES WHICH ARE LYING UNDER THE HEAD I NVESTMENT FOR A LONG TIME. SUCH INVESTMENTS WERE MADE OUT OF OWN FUNDS AND FRE E RESERVES AND NO BORROWED FUND HAS BEEN UTILIZED. IT WAS ACCORDINGLY ARGUED THAT NO DISALLOWANCE IS CALLED FOR. ON BEING ASKED BY THE A O, THE ASSESSEE FILED THE COMPUTATION OF DISALLOWANCE UNDER SECTION 14A ACCOR DING TO WHICH SUCH EXPENDITURE FOR EARNING THE EXEMPT INCOME WAS RS. 1 ,17,317/-. 2.1 HOWEVER, THE AO WAS NOT SATISFIED WITH THE ABOV E CALCULATION. APPLYING THE PROVISIONS OF SECTION 14A READ WITH RU LE 8D HE DETERMINED SUCH DISALLOWANCE AT RS. 28,46,727/-. 3. IN APPEAL, THE LEARNED CIT(A) DIRECTED THE AO TO RECOMPUTE THE DISALLOWANCE IN THE LIGHT OF THE DECISION OF HONBL E DELHI HIGH COURT IN THE CASE OF MAX UP INVESTMENT. THE RELEVANT OBSERVATION OF L D. CIT(A) READS AS UNDER : FINDING GROUND NO.3 (A) & (B): I HAVE PERUSED THE FACTS STATED IN ASSESSMENT ORDER AS WELL FACTS STATED BY THE ASSESSEE IN HIS SUBMISSION. THE ASSESSEE HAS STATED THAT THE DETAILS OF INTEREST EXPENDITURE WERE FILED, DURING THE COURSE OF ASSESSMENT PROCEEDINGS SHOWING INTEREST OF RS. 1,59,67,466/- PAID ON MARGI N MONEY TO HIS CLIENTS WHERE TRADE WAS DONE BY THE CLIENTS AND THIS AMOUNT WAS E XCLUDED FROM THEIR CALCULATION SINCE ON TRADE DONE BY HIS CLIENTS ASSE SSEE EARNS BROKERAGE AND COMMISSION WHICH IS HIS MAIN BUSINESS AND THUS THIS INTEREST IS DIRECTLY ATTRIBUTABLE TO BUSINESS INCOME OF THE ASSESSEE WHI CH IS WITHIN THE MEANING OF ANY PARTICULAR INCOME OR RECEIPT AND IT RELATES T O EARNING OF TAXABLE INCOME BY THE ASSESSEE AND IS ALLOWABLE AS SUCH AGAINST THE S AID INCOME. THIS AMOUNT OF INTEREST THE ITO HAS NOT EXCLUDED IN HIS CALCULATIO N WHICH WAS TO BE ALLOWED. THEREFORE BALANCE AMOUNT OF INTEREST OF RS. 75, 74, 007/- IS ONLY TO BE CONSIDERED FOR PURPOSES OF RULE 8D. THE AVERAGE OF TOTAL CURRE NT ASSETS IS TO BE CONSIDERED FOR THE PURPOSES OF RULE 8D WHERE AS THE ASSESSING OFFICER HAS TAKEN IT AS NET ITA NO. 3206/DEL/2013 AY 2009-10 10 ASSETS I.E. TOTAL ASSETS LESS LIABILITIES AS SHOWN IN THE BALANCE SHEET OF THE ASSESSEE. THE AVERAGE OF TOTAL ASSETS AS PER SUBMIS SION OF THE ASSESSEE IS RS.59,00,06,383/- AND NOT RS.8,16,37,220/.- MOREOVER THE WORD USED IN RULE 8 D IS TOTAL ASSET N OT NET ASSET. RULE 8D SUB RULE (II) PART C STATES:- THE AVERAGE OF TOTAL ASSETS AS APPEARING IN THE BALANCE SHEET OF THE ASSESSEE, ON THE FIRST DAY AND THE LAST DAY OF THE RELEVANT ACCOUNTING YEAR. THE TERM TOTAL ASSETS MEANS TOTAL ASSETS AS APPEARING IN THE BALANCE SHEET EXCLUDING THE INCREASE ON ACCOUNT OF REVALUATION OF ASSETS BUT INCLUDING THE DECREASE ON ACCOUNT OF REVALUATION OF ASSETS. KEEPING IN VIEW OF THE ABOVE FACTS, THE ASSESSING O FFICER IS THEREFORE DIRECTED TO REWORK THE AMOUNT OF DISALLOWANCE U/S 14 A OF THE A CT UNDER THE RULE 8 D OF THE I.TAX I RULES, 1962 IN ACCORDANCE WITH LAW LAID DOW N BY THE HON'BLE JURISDICTIONAL HIGH COURT IN MAXOOP'S CASE AS WELL AS SUBMISSION FILED BY THE ASSESSEE. T HE APPEAL IS ALLOWED FOR' A STATISTICAL PURPOSES. 4. AGGRIEVED WITH SUCH ORDER OF CIT(A) THE RE VENUE IS IN APPEAL BEFORE THE TRIBUNAL . 5. AFTER HEARING BOTH THE SIDES, WE DONT FIND ANY INFIRMITY WITH ORDER OF LD. CIT(A). HE HAS ONLY DIRECTED THE AO TO REWORK THE DISALLOWANCE U/S 14A R.W. RULE 8D IN THE LIGHT OF T HE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF MAXOPP (SUP RA). THE DECISION OF THE JURISDICTIONAL HIGH COURT IS BINDING ON THE REVENUE. THEREFORE, THE REVENUE SHOULD HAVE NO GRIEVANCE. THE GROUND RA ISED BY THE REVENUE IS ACCORDINGLY DISMISSED. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS ALLOWED AND THE APPEAL FILED BY THE REVENUE IS DISMISSED. (ORDER PRONOUNCED IN THE OPEN COURT ON 15/0 6/2017) SD/ - SD/ - [ SUCHITRA KAMBLE ] [R.K. PANDA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 15 .6.2017 SH/ BINITA COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ITA NO. 3206/DEL/2013 AY 2009-10 11 AS SISTANT REGISTRAR ITA NO. 3206/DEL/2013 AY 2009-10 12