Fortune Trading corporation, CHENNAI V. ACIT, CHENNAI

ITA 3337/CHNY/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4979 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-04-2017
• Appeal Filed By: Assessee
• Bench Allotted: D
• Assessment Year: 2011-2012
• Appeal Filed On: 09-12-2016
• Court: TRIBUNAL
• Department Lawyers: R DURAIPANDIAN
• Section: 143(3); 142(1); 63

Judgement Text

, , IN THE INCOME - TAX APPELLATE TRIBUNAL D BENCH, CHENNAI , . , BEFORE SHRI CHANDRA POOJARI , ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I.T.A.NO. 3 337 /MDS/2016 / ASSESSMENT YEAR :20 12 - 1 3 M/S. FORTUNE TRADING CORPORATION , C/O. M/S. RAMESH & RAMACHANDRAN, C.AS., NEW NO. 39, OLD NO. 29/3, VISWANATHAPURAM M AIN ROAD, KODAMBAKKAM, CHENNAI 600 0 2 4. [P AN: A A BFF2763Q ] VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, NON CORPORATE WARD 7 (1 ), CHENNAI . ( / APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : SHRI Y. SRIDHAR , C.A. / RESPONDENT BY : SHRI R. DURAI PANDIAN , J CIT / DATE OF HEARING : 30 . 0 1 .201 7 / DATE OF P RONOUNCEMENT : 12 . 0 4 .201 7 / O R D E R PER DUVVURU RL REDDY , JUDICIAL MEMBER : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) 7 , C HENNAI DATED 27 . 1 0 .201 6 RELEVANT TO THE ASSESSMENT YEAR 20 12 - 1 3 . THE ONLY EFFECTIVE GROUND RAISED IN THE APPEAL OF THE ASSESSEE IS THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING I.T.A. NO . 3 337 /M/ 1 6 2 DISALLOWANCE MADE T OWARDS PAYMENT OF BROKERAGE UNDER SECTION 40(A)(IA) OF THE INCOME TAX ACT, 1961 [ ACT IN SHORT] . 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM AND IS A MEMBER IN COMMODITY EXCHANGE. THE ASSESSEE HAS FILED ITS RETURN OF INCOME O N 29.09.2012 ADMITTING INCOME OF .2,18,93,572/ - . THE RETURN FILED BY THE ASSESSEE WAS SELECTED FOR SCRUTINY AND NOTICE UNDER SECTION 143(2) OF THE ACT WAS ISSUED ON 11.08.2013. THEREAFTER, NOTICE UNDER SECTION 142(1) OF THE ACT ALONG WITH QUESTIONNAIRE WA S ISSUED ON 27.08.2014. IN RESPONSE THERETO, THE ASSESSEE S AR FURNISHED ALL DETAILS. AFTER EXAMINING THE DETAILS FURNISHED BY THE ASSESSEE AND CONSIDERING THE CASE OF THE ASSESSEE, THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT WAS COMPLETED ASSESSING TOT AL INCOME OF THE ASSESSEE AT .2,41,82,517/ - BY MAKING DISALLOWANCE OF PAYMENTS MADE TOWARDS BROKERAGE AND PAYMENTS TO NSCE. 3. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A). AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND FACTS OF THE CASE, THE LD. CIT(A) C ONFIRMED THE DISALLOWANCE MADE UNDER SECTION 40(A)(IA) OF THE ACT. 4. ON BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE LD. CIT(A) HAS FAILED TO NOTE THAT THE DERIVATE INCLUDES AN INSTRUMENT WHOSE VALUE IS DERIVED FROM THE VALUE OF ONE OR MORE UNDERLYING ASSETS LIKE COMMODITIES, CURRENCY, I.T.A. NO . 3 337 /M/ 1 6 3 SECURITIES, INDEX, ETC. EVEN THOUGH THE SECURITIES AND DERIVATIVES ARE TRADED IN DIFFERENT EXCHANGES, GOVERNED BY DIFFERENT ENACTMENTS, AND THEREF ORE, THE SAME CANNOT BE DISALLOWED UNDER SECTION 194H OF THE ACT SINCE THE EXPLANATION TO THE SAID SECTION CLEARLY PROVIDES FOR EXEMPTION FOR DEDUCTION ON BROKERAGE PAYMENTS. THEREFORE, THE LD. COUNSEL FOR THE ASSESSEE HAS PLEADED TO DELETE THE DISALLOWANC E MADE ON THIS ACCOUNT. 5. ON THE OTHER HAND, THE LD. DR SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 6. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE ASSESSEE IS ENGAGED IN TH E BUSINESS OF COMMODITIES TRADING AND DEBITED A SUM OF .21.63 LAKHS TOWARDS BROKERAGE. SINCE TDS WAS NOT DEDUCTED ON THE BROKERAGE AMOUNT, THE ASSESSING OFFICER DISALLOWED THE SAME AND BROUGHT TO TAX, WHICH WAS CONFIRMED BY THE LD. CIT(A). 6.1 ADMITTEDL Y, THE ASSESSEE IS MEMBER OF COMMODITY EXCHANGE. THE ASSESSEE HAS EARNED BROKERAGE INCOME OF .13,95,33,626/ - OUT OF WHICH BROKERAGE DISCOUNT WAS OFFERED TO THE EXTENT OF .21,63,945/ - . THE MAIN OBJECTION OF THE ASSESSING OFFICER WAS THAT THE ASSESSEE HAS NOT INCLUDED BROKERAGE ALLOWABLE TO THE CLIENT IN THE CONTRACT NOTE. BROKERAGE AND PURCHASE/SALE RATE ARE NOT MANDATORILY REQUIRED TO BE GIVEN IN THE CONTRACT I.T.A. NO . 3 337 /M/ 1 6 4 NOTE AND THE SAME CAN BE GIVEN SEPARATELY SINCE IT IS THE DISCRETION OF THE BROKER TO OFFER DISCO UNT OR OTHERWISE. THEREFORE, THIS OBJECTION CANNOT BE SUSTAINED. 6.2 THE NEXT OBJECTION OF THE ASSESSING OFFICER WAS THAT THE ASSESSEE WOULD NOT BE ABLE TO IDENTIFY THE PARTIES TO WHOM THE BROKERAGE PAYMENTS WERE MADE AND THEREFORE HE OBSERVED THAT IT CA NNOT BE RELATED TO AS A PAYMENT MADE TOWARDS BUYING AND SELLING OF COMMODITIES. THE ASSESSEE HAS FILED ALL DETAILS AS REQUIRED FOR VERIFICATION. AS PER BOOKS OF ACCOUNTS OF THE ASSESSEE, THE ASSESSEE HAS ALSO FURNISHED STATEMENT OF ACCOUNTS WITH REGARD TO PAYMENTS OF BROKERAGE TO ITS CLIENTS AND ALSO FILED A COPY OF THE SAME BEFORE THE TRIBUNAL. BEING A MEMBER OF COMMODITY EXCHANGE, WE ARE OF THE CONSIDERED OPINION THAT TRADING IN SECURITIES DOES NOT ATTRACT DISALLOWANCE UNDER SECTION 194H OF THE ACT. OTHER WISE ALSO, THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT IS NOT APPLICABLE IN THE PRESENT CASE, SINCE THE AMOUNTS HAVE BEEN ALREADY PAID TO THE PARTIES AND THERE IS NOTHING OUTSTANDING AS ON 31.03.2012 AS PER STATEMENT OF ACCOUNTS FILED BY THE ASSESSEE IN VIEW OF THE DECISION IN THE CASE OF MERILYN SHIPPING & TRANSPORTS VS. ADDITIONAL CIT IN VISAKHAPATNAM BENCH (2012) 161 ITR TRB. 1 , WHICH WAS FOLLOWED IN MANY CASES BY VARIOUS BENCHES INCLUDING CHENNAI BENCHES OF THE TRIBUNAL. UNDER THE ABOVE FACTS AND CIR CUMSTANCES, WE I.T.A. NO . 3 337 /M/ 1 6 5 DELETE THE DISALLOWANCE OF PAYMENT OF BROKERAGE MADE UNDER SECTION 40(A)(IA) OF THE ACT AND ALLOW THE GROUND RAISED BY THE ASSESSEE. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THE 12 TH APRIL, 201 7 AT CHENNAI. SD/ - SD/ - ( CHANDRA POOJARI ) ACCOUNTANT MEMBER ( DUVVURU RL REDDY ) JUDICIAL MEMBER CHENNAI, DATED, THE 12 . 0 4 .201 7 VM/ - / COPY TO: 1. / APPELLANT , 2. / RESPONDENT , 3. ( ) / CIT(A) , 4. / CIT , 5. / DR & 6. / GF.