M/S. Kalpatatru Multipier Ltd., Bhopal V. THE ACIT-1(2), Bhopal

ITA 328/IND/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 5334 (ITAT-INDORE)
• Duration Of Justice: 7 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-12-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 13-04-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MOHD JAVED
• Keywords: Depreciation; Retrospective amendment
• Section: 143(3); 32

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE .., .., % BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI O.P. MEENA, ACCOUNTANT MEMBER M/S.KALPATARU MULTIPLIER LIMITED, BHOPAL .. ./ PAN: AABCK5385J VS. ACIT, 2(1), BHOPAL / APPELLANT / RESPONDENT / APPELLANT BY SHRI ARUN JAIN, C. A. / RESPONDENT BY SHRI MOHD. JAVED, SR. DR DATE OF HEARING 01.12.2016 DATE OF PRONOUNCEMENT 06.12.2016 / O R D E R PER O.P. MEENA, ACCOUTANT MEMEBR. THESE APPEALS ARE FILED BY THE ASSESSEE AGAINST THE SEPARATE ORDERS OF LD. COMMISSIONER OF INCOME-TAX ( APPEALS)-2, BHOPAL [HEREINAFTER REFERRED TO AS THE CIT(A)] BOTH DATED .. . / I.T.A. NO. 327 & 328/IND/2016 %' ' / ASSESSMENT YEARS: 2010-11 & 2011-12 I.T.A.NOS. 327 & 328/IND/2016 M/S.KALPATARU MULTIPLIER LTD., BHOPAL PAGE 2 OF 12 04.02.2016 AND PERTAINS TO ASSESSMENT YEARS 2010-11 & 2011-12 AS AGAINST APPEALS DECIDED IN ASSESSMENT O RDER PASSED U/S 143(3) OF THE ACT DATED 28.03.2013 AND 18.03.2014 OF ACIT, 2(1), BHOPAL,[HEREINAFTER REFER RED TO AS THE AO]. 2. THE ASSESSEE HAS TAKEN AS MANY AS THREE COMMON GROUNDS OF APPEAL IN BOTH THE APPEALS FOR ASSESSMEN T YEARS 2010-11 AND 2011-12. THE ASSESSEE HAS TAKEN ONE MOR E GROUND AS GROUND NO. 4 IN THE APPEAL FOR ASSESSMENT YEAR 2011-12, WHICH WE SHALL DISPOSE OF IN THE END OF THIS ORDER. 3. GROUND NOS. 1 TO 3 IN BOTH THE APPEALS RELATE TO SO LE ISSUE OF DISALLOWANCE OF RS. 6,46,411/- AND RS. 6,7 6,507/- U/S 40(A)(IA) ON ACCOUNT OF CDSL CHARGES PAID TO ST OCK EXCHANGES FOR ASSESSMENT YEAR 2010-11 AND 2011-12 RESPECTIVELY. EVEN THOUGH IN ASSESSMENT YEAR 2010-1 1, THE PAYMENT OF RS. 5,93,813 WAS PAID DURING THE YEAR AND ONLY AN AMOUNT OF RS. 52,598/- WAS PAYABLE AS ON 31.03.2010 AND IN ASSESSMENT YEAR 2011-12, THE PAYMENT OF RS. 6,28,87 4/-WAS PAID DURING THE YEAR AND ONLY AN AMOUNT OF RS. 47,6 33/- WAS I.T.A.NOS. 327 & 328/IND/2016 M/S.KALPATARU MULTIPLIER LTD., BHOPAL PAGE 3 OF 12 PAYABLE AS ON 31.03.2011. THE AO OBSERVED THAT THE ASSESSEE HAS MADE THE PAYMENT TO CDS LIMITED, A DEPOSITORY CORPORATION WHICH PROVIDES SERVICES OF DEMATERIALIZA TION OF SHARES. ACCORDING TO AO, AS CDSL IS PROVIDING PROFE SSIONAL AND TECHNICAL SERVICE IN THIS REGARD, THE PAYMENT F ELL WITHIN THE AMBIT OF SECTION 194J OF THE ACT. SINCE THE AS SESSEE HAD FAILED TO DEDUCT TDS, THE AO DISALLOWED THE EXPENDI TURE U/S 40(A)(IA) OF THE INCOME-TAX ACT, 1961. 4. BEING NOT SATISFIED WITH THE ORDER OF THE AO, THE ASSESSEE HAS FILED THE APPEALS BEFORE THE CIT(A). 5. IT WAS SUBMITTED THAT OUT OF THE TOTAL EXPENDITURE, ONLY RS. 52,598/- FOR THE ASSESSMENT YEAR 2010-11 AND RS . 47,633/- FOR THE ASSESSMENT YEAR 2011-12 WERE REMAI NING PAYABLE AS ON 31.03.2010. HENCE, IT IS COVERED UNDE R SECOND PROVISO TO SECTION 40(A)(IA) INSERTED BY THE FINANC E ACT, 2012, W.E.F. 01.01.2013. IT WAS FURTHER SUBMITTED THAT THE SAID PROVISION IS DECLARATORY AND CURATIVE AND SHOULD BE GIVEN RETROSPECTIVE EFFECT. HOWEVER, THE LD. CIT(A) WAS OF THE VIEW THAT CDSL IS A LIMITED COMPANY AND IT HAS CHARGED T HE I.T.A.NOS. 327 & 328/IND/2016 M/S.KALPATARU MULTIPLIER LTD., BHOPAL PAGE 4 OF 12 AMOUNTS IN QUESTION FOR SERVICES RENDERED BY IT TOWA RDS DEMATERIALIZATION OF SHARES/SECURITIES ETC., WHICH I S IN THE NATURE OF PROFESSIONAL/TECHNICAL SERVICES TO THE AS SESSEE. HENCE, THE ASSESSEE WAS LIABLE TO DEDUCT TAX AT SOUR CE U/S 194J OF THE ACT. THE LD. CIT(A) ALSO RELIED ON THE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. KO TAK SECURITIES LIMITED, (2012) 340 ITR 333 (BOM) AND AL SO I.T.A.T., INDORE BENCH ORDER FOR ASSESSMENT YEAR 2009-10 IN T HE CASE OF THE ASSESSEE IN I.T.A.NO. 597/IND/2012, WHEREIN T HE SAID DISALLOWANCES WERE CONFIRMED. 6. THE ASSESSEE AGGRIEVED WITH THE ORDER FILED THIS APP EAL BEFORE US. 7. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS MAKING PAYMENT TO CDSL FOR USING THE SY STEM, ITS FACILITIES, SOFTWARE AND OTHER INFORMATION. THEREFOR E, SUCH PAYMENTS ARE FOR THE PURPOSE OF UTILIZING SERVICES, HENCE, NOT IN THE NATURE OF PROFESSIONAL AND TECHNICAL SERVICE S. IT WAS ARGUED THAT THE AFOREMENTIONED ACTIVITIES WAS NEITHE R IN THE NATURE OF CONTRACT NOR PROFESSIONAL/TECHNICAL SERVI CES. I.T.A.NOS. 327 & 328/IND/2016 M/S.KALPATARU MULTIPLIER LTD., BHOPAL PAGE 5 OF 12 THEREFORE, TDS WAS NOT DEDUCTIBLE AND SUBSEQUENTLY, THERE WAS NO APPLICABILITY OF SECTION 40(I)(A) IN THE CASE OF THE ASSESSEE. THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE FURTHER SUBMITTED THAT THE I.T.A.T., INDORE BENCH, INDORE IN THE CASE OF THE ASSESSEE IN I.T.A.NO. 17/IND/2013 F OR THE ASSESSMENT YEAR 2009-10 VIDE ORDER DATED 15.07.2013 , HAS UPHELD THE SAID DISALLOWANCES BY FOLLOWING THE DECIS ION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. KO TAK SECURITIES LIMITED, (2012) 340 ITR 333 (BOM), WHEREI N IT WAS HELD THAT THE TRANSACTION CHARGES PAID BY AN ASSESS EE TO STOCK EXCHANGE CONSTITUTED FEE FOR TECHNICAL SERVICES COV ERED U/S 194J AND, THEREFORE, LIABLE FOR TDS. HOWEVER, THE SAID DECISION OF HON'BLE BOMBAY HIGH COURT HAS BEEN REVE RSED BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. K OTAK SECURITIES LIMITED, (2016) 383 ITR 001 ( S.C.), WHE REIN IT WAS HELD THAT TRANSACTION CHARGES PAID TO BOMBAY STOCK EXCHANGE BY ITS MEMBERS WERE FOR TECHNICAL SERVICES RENDER ED WAS NOT AN APPROPRIATE VIEW. SUCH CHARGES, REALLY WERE IN THE NATURE OF PAYMENTS MADE FOR FACILITIES PROVIDED BY STOCK EXCH ANGE. I.T.A.NOS. 327 & 328/IND/2016 M/S.KALPATARU MULTIPLIER LTD., BHOPAL PAGE 6 OF 12 HENCE, NO TDS ON SUCH PAYMENT WOULD BE DEDUCTIBLE U/ S 194J OF THE ACT. THEREFORE, THE LD. COUNSEL FOR THE ASSESSEE URGED THAT THE PAYMENT TO CDSL ON ACCOUNT OF UTILIZ ATION OF DEMATERIALIZATION OF SHARES/SECURITIES SERVICES WER E NOT IN THE NATURE OF FEE FOR TECHNICAL PURPOSES AND HENCE, THE ASSESSEE WAS NOT LIABLE TO DEDUCT TDS THEREON. ACCORDINGLY, T HE SAME MAY BE DELETED. 8. THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDERS OF THE LOWER AUTHORITIES 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND T HAT THE ASSESSEE HAS AVAILED THE SERVICES OF DEMATERIALIZAT ION OF SHARES AND SECURITIES ON ACCOUNT OF WHICH IT HAS MADE PAYME NTS AS MENTIONED ABOVE. IT IS SEEN THAT THE LD. CIT(A) HAS RELIED ON THE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CA SE OF CIT VS. KOTAK SECURITIES LIMITED, (2012) 340 ITR 333 (B OM) AND THE DECISION OF TRIBUNAL IN THE CASE OF THE ASSESSE E FOR ASSESSMENT YEAR 2009-10 (SUPRA). HOWEVER, THE SAID DECISION HAS BEEN REVERSED BY THE HON'BLE SUPREME COURT IN T HE CASE OF I.T.A.NOS. 327 & 328/IND/2016 M/S.KALPATARU MULTIPLIER LTD., BHOPAL PAGE 7 OF 12 CIT VS. KOTAK SECURITIES LIMITED, (2016) 383 ITR 00 1 ( S.C.), WHEREIN THE HON'BLE SUPREME COURT HAS HELD AS UNDER :- THE SERVICE PROVIDED BY THE STOCK EXCHANGE FOR WHICH TRANSACTION CHARGES ARE PAID FAILS TO SATISFY THE AFORESAID TEST OF SPECIALIZED, EXCLUSIVE AND INDIVIDUAL REQUIREMENT OF THE USER OR CONSUMER WHO MAY APPROACH THE SERVICE PROVIDER FOR SUCH ASSISTANCE/SERVICE. IT IS ONLY SERVICE OF THE ABOVE KIND THAT, ACCORDING TO US, SHOULD COME WITHIN THE AMBIT OF THE EXPRESSION 'TECHNICAL SERVICES' APPEARING IN EXPLANATION 2 OF SECTION 9(1)(VII) OF THE ACT. IN THE ABSENCE OF THE ABOVE DISTINGUISHING FEATURE, SERVICE, THOUGH RENDERED, WOULD BE MERE IN THE NATURE OF A FACILITY OFFERED OR AVAILABLE WHICH WOULD NOT BE COVERED BY THE AFORESAID PROVISION OF THE ACT. (PARA 8) THERE IS YET ANOTHER ASPECT OF THE MATTER WHICH, IN SUPREME COURT CONSIDERED VIEW, WOULD REQUIRE A SPECIFIC NOTICE. THE SERVICE MADE AVAILABLE BY THE BOMBAY STOCK EXCHANGE [BSE ONLINE TRADING (BOLT) SYSTEM] FOR WHICH THE CHARGES IN QUESTION HAD BEEN PAID BY THE APPELLANT - ASSESSEE ARE COMMON SERVICES THAT EVERY MEMBER OF THE STOCK EXCHANGE IS I.T.A.NOS. 327 & 328/IND/2016 M/S.KALPATARU MULTIPLIER LTD., BHOPAL PAGE 8 OF 12 NECESSARILY REQUIRED TO AVAIL OF TO CARRY OUT TRADING IN SECURITIES IN THE STOCK EXCHANGE. THE VIEW TAKEN BY THE HIGH COURT THAT A MEMBER OF THE STOCK EXCHANGE HAS AN OPTION OF TRADING THROUGH AN ALTERNATIVE MODE IS NOT CORRECT. A MEMBER WHO WANTS TO CONDUCT HIS DAILY BUSINESS IN THE STOCK EXCHANGE HAS NO OPTION BUT TO AVAIL OF SUCH SERVICES. EACH AND EVERY TRANSACTION BY A MEMBER INVOLVES THE USE OF THE SERVICES PROVIDED BY THE STOCK EXCHANGE FOR WHICH A MEMBER IS COMPULSORILY REQUIRED TO PAY AN ADDITIONAL CHARGE (BASED ON THE TRANSACTION VALUE) OVER AND ABOVE THE CHARGES FOR THE MEMBERSHIP IN THE STOCK EXCHANGE. THE ABOVE FEATURES OF THE SERVICES PROVIDED BY THE STOCK EXCHANGE WOULD MAKE THE SAME A KIND OF A FACILITY PROVIDED BY THE STOCK EXCHANGE FOR TRANSACTING BUSINESS RATHER THAN A TECHNICAL SERVICE PROVIDED TO ONE OR A SECTION OF THE MEMBERS OF THE STOCK EXCHANGE TO DEAL WITH SPECIAL SITUATIONS FACED BY SUCH A MEMBER(S) OR THE SPECIAL NEEDS OF SUCH MEMBER(S) IN THE CONDUCT OF BUSINESS IN THE STOCK EXCHANGE. IN OTHER WORDS, THERE IS NO EXCLUSIVITY TO THE SERVICES RENDERED BY THE STOCK EXCHANGE AND EACH AND EVERY MEMBER HAS TO NECESSARILY AVAIL I.T.A.NOS. 327 & 328/IND/2016 M/S.KALPATARU MULTIPLIER LTD., BHOPAL PAGE 9 OF 12 OF SUCH SERVICES IN THE NORMAL COURSE OF TRADING IN SECURITIES IN THE STOCK EXCHANGE. SUCH SERVICES, THEREFORE, WOULD UNDOUBTEDLY BE APPROPRIATE TO BE TERMED AS FACILITIES PROVIDED BY THE STOCK EXCHANGE ON PAYMENT AND DOES NOT AMOUNT TO 'TECHNICAL SERVICES' PROVIDED BY THE STOCK EXCHANGE, NOT BEING SERVICES SPECIFICALLY SOUGHT FOR BY THE USER OR THE CONSUMER. IT IS THE AFORESAID LATTER FEATURE OF A SERVICE RENDERED WHICH IS THE ESSENTIAL HALLMARK OF THE EXPRESSION 'TECHNICAL SERVICES' AS APPEARING IN EXPLANATION 2 TO SECTION 9(1)(VII) OF THE ACT. (PARA 9). FOR THE AFORESAID REASONS, SUPREME COURT HELD THAT THE VIEW TAKEN BY THE BOMBAY HIGH COURT THAT THE TRANSACTION CHARGES PAID TO THE BOMBAY STOCK EXCHANGE BY ITS MEMBERS ARE FOR TECHNICAL SERVICES RENDERED IS NOT AN APPROPRIATE VIEW. SUCH CHARGES, REALLY, ARE IN THE NATURE OF PAYMENTS MADE FOR FACILITIES PROVIDED BY THE STOCK EXCHANGE. NO TDS ON SUCH PAYMENTS WOULD, THEREFORE, BE DEDUCTIBLE U/S 194J OF THE ACT. 10. WE FIND THAT THE ASSESSEE HAS USED THE SERVICES PROVIDED BY CDSL FOR WHICH PAYMENT HAS BEEN MADE, FO R I.T.A.NOS. 327 & 328/IND/2016 M/S.KALPATARU MULTIPLIER LTD., BHOPAL PAGE 10 OF 12 WHICH A MEMBER IS REQUIRED TO MAKE COMPULSORY PAYMEN T. THEREFORE, SUCH SERVICES PROVIDED BY CDSL ARE A KIN D OF A FACILITY PROVIDED TO THE CUSTOMER/MEMBER OF CDSL. W E ALSO FIND THAT THE DISALLOWANCES U/S 40(A)(IA) WERE IN RE SPECT OF PAYMENT TO CDSL WERE UPHELD ON THE BASIS OF DECISION OF HON'BLE BOMBAY HIGH COURT AND THE SAME HAS BEEN REV ERSED BY THE HON'BLE SUPREME COURT, RESPECTFULLY FOLLOWIN G THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF KO TAK SECURITIES LIMITED (SUPRA), THE SAME ARE DELETED. A CCORDINGLY, GROUND NOS. 1 TO 3 IN BOTH THE APPEALS ARE ALLOWED. 11. GROUND NO. 4 FOR ASSESSMENT YEAR 2011-12 RELATES TO DISALLOWING DEPRECIATION ON BUILDING (SHED) AT GOVIN DPURA, BHOPAL, RS. 1,00,047/- AS NO MANUFACTURING/FABRICAT ION WORK DONE DURING THE YEAR BUT UNIT WAS READY FOR USE. 12. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE AO MADE DISALLOWANCE OF RS. 1,00,047/- CLAIMED ON THE BUILDING AT GOVINDPURA AS HE NOTED THAT IT HAD NOT BEEN PUT TO USE FOR THE PURPOSE OF BUSINESS DURING THE YEAR. THE ASSESS EE I.T.A.NOS. 327 & 328/IND/2016 M/S.KALPATARU MULTIPLIER LTD., BHOPAL PAGE 11 OF 12 PREFERRED THE APPEAL BEFORE THE CIT(A), WHO HAS CONF IRMED THE DISALLOWANCE SO MADE BY THE AO. 13. BEING AGGRIEVED, THE ASSESSEE HAS FILED THE APPEAL BEFORE US. 14. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS INCURRED AN EXPENDITURE OF RS. 1,00,04 7/- ON CONSTRUCTION OF BUILDING AT GOVINDPURA. HOWEVER, T HE BUILDING WAS READY TO USE, BUT THE SAME HAS NOT BEEN PUT TO U SE DURING THE YEAR. THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE ARGUED THAT SINCE THE BUILDING WAS READY TO USE, TH E AO WAS NOT JUSTIFIED TO DISALLOW THE CLAIM OF THE DEPRECIAT ION ON THE SAID BUILDING SHED. 15. ON THE OTHER HAND, THE LD. SENIOR DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE BUILDING WAS NOT P UT TO USE DURING THE YEAR UNDER CONSIDERATION AND, THEREFORE , THE AO AND CIT(A) WERE CORRECTLY DISALLOWED THE CLAIM OF T HE ASSESSEE. 16. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND T HAT THE ASSESSEE HAS ONLY CONSTRUCTED A SHED, BUT THE SAID BUILDING I.T.A.NOS. 327 & 328/IND/2016 M/S.KALPATARU MULTIPLIER LTD., BHOPAL PAGE 12 OF 12 SHED WAS NOT PUT TO USE DURING THE YEAR UNDER APPEAL . THE DEPRECATION U/S 32 IS AVAILABLE ON THE ASSETS WHICH HAS BEEN PUT TO USE DURING THE YEAR. THEREFORE, WE DO NOT FI ND ANY INFIRMITY IN THE ORDERS OF LOWER AUTHORITIES. ACCOR DINGLY, THE DISALLOWANCES MADE BY THE AO ARE CONFIRMED. GROUND N O. 4 IS REJECTED. 17. IN THE RESULT, THE APPEAL FOR THE ASSESSMENT YEAR 2010-11 IS ALLOWED AND THE APPEAL FOR THE ASSESSMEN T YEAR 2011-12 IS PARTLY ALLOWED. THE ORDER HAS BEEN PRONOUNCED IN OPEN COURT ON THE 6 TH DECEMBER,2016. SD/- (..) (D.T.GARASIA) JUDICIAL MEMBER SD/- (..) (O.P.MEENA) ACCOUNTANT MEMBER * / DATED : 6 TH DECEMBER, 2016. CPU* 2.5