DCIT CIR 4(2), MUMBAI V. RAVINDRA J. SHAH, MUMBAI

ITA 3682/MUM/2010

• Counselvise Citation: 368219914 RSA 2010
• Duration Of Justice: 1 year(s) 7 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 15-12-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 07-05-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: C G K NAIK
• Assessee Lawyers: C N VZE

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER, A ND SHRI V. DURGA RAO, JUDICIAL MEMBER ITA NO. 3682/MUM./2010 (A.Y : 2006-07 ) ASSTT. COMMISSIONER OF INCOME TAX CIRCLE-4(2), ROOM NO.642 AAYAKAR BHAVAN, 101 M.K. ROAD MUMBAI 400 020 .. APPELLANT V/S MR. RAJENDRA J. SHAH 101, ABICH APARTMENTS SAROJINI NAIDU ROAD MULUND (W), MUMBAI 400 080 PAN AAGPS8087H .... RESPONDENT REVENUE BY : MR. C.G.K. NAIK ASSESSEE BY : MR. C.N. VZE DATE OF HEARING 15.12.2011 DATE OF ORDER 23.12.2011 O R D E R PER J. SUDHAKAR REDDY, A.M. THIS APPEAL PREFERRED BY THE REVENUE, IS DIRECTED AGAINST THE IMPUGNED ORDER DATED 12 TH ?FEBRUARY 2010, PASSED BY THE COMMISSIONER (APPEALS)-VIII, MUMBAI, FOR ASSESSMENT YEAR 2006-07 , ON THE FOLLOWING GROUNDS:- 1(I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE O F RS.91,158/- MADE U/S.40(A)(IA) IN RESPECT OF VSAT, LEASELINE AND TRA NSACTION CHARGES MR. RAJENDRA J. SHAH ITA NO.3682/M/2010 2 PAID TO STOCK EXCHANGE, WITHOUT APPRECIATING THE FA CTS THAT THESE WERE COMPOSITE CHARGES FOR PROFESSIONAL AND TECHNICAL SE RVICES RENDERED BY THE STOCK EXCHANGE TO ITS MEMBERS AND THE ASSESSEE HAS FAILED TO DEDUCT TDS THEREON. II. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW THE LD. CIT(A) ERRED IN IGNORING THE FACT THAT THESE SE RVICES ARE ESSENTIAL IN NATURE AS THEY CAN ONLY BE AVAILED BY MEMBERS OF ST OCK EXCHANGE. III. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW THE LD. CTT(A) ERRED IN IGNORING THE FACTS THAT USE OF TECHNOLOGY AND ALGORITHMIC BASED PROGRAMS HAVE CONVERTED AN ERSTWH ILE PHYSICAL MARKET INTO A DIGITALLY OPERATED MARKET. IV. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN IGNORING THE FACT THAT THE SERVICES RENDERED BY THE BROKERS ARE NOT STANDARD SERVICES BUT SERVICES THAT HAS BEEN DEVELOPED TO CATER TO THE NEEDS OF THE BROKER COMMU NITY TO FACILITATE TRADING. V. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) HAS OVERLOOKED THE FACT THAT THE BRO KERS HAVE IN SUBSEQUENT YEARS THEMSELVES STARTED DEDUCTING THE T DS ON SUCH PAYMENTS AND THAT THERE IS NO REASON TO GIVE A DIFF ERENT TREATMENT IN THIS YEAR. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION MADE ON ACCOUNT OF SHARING OF JOBBING PROFITS OF RS.18,55,129/- WITHOU T APPRECIATING THE FACT THAT THE ISSUE IS COVERED BY HONBLE SUPREME C OURT DECISION IN THE CASE OF CIT VS PANIPAT WOOLLEN & GENERAL MILLS . 2. COMING TO GROUND NO.1, THE HON'BLE JURISDICTIONAL H IGH COURT IN CIT V/S KOTAK SECURITIES LTD., INCOME TAX APPEAL NO.3111 OF 2009, JUDGMENT DATED 21 ST OCTOBER 2011, CONSIDERED THE FACT AS TO WHETHER TH E TRANSACTION CHARGES PAID BY THE ASSESSEE TO THE STOCK EXCHANGES WERE FE E FOR TECHNICAL SERVICES OR NOT. THE HONBLE COURT HELD THAT THE TRANSACTION CHARGES PAID BY THE ASSESSEE TO THE STOCK EXCHANGE CONSTITUTE FEE FOR T ECHNICAL SERVICES. LEARNED COUNSEL FOR THE ASSESSEE ARGUED THAT THIS JUDGMENT REFERS ONLY TO THE TRANSACTION CHARGES AND NOT TO OTHER PAYMENTS, WHIC H WERE LEVIED ON THE ASSESSEE. ON A QUERY FROM THE BENCH, HE SUBMITTED T HAT HE IS NOT IN A POSITION TO GIVE A BREAK-UP OF THE VARIOUS CHARGES. HE FURTHER SUBMITTED THAT IN VIEW OF THESE DIFFICULTIES, HE GIVES A CONCESSIO N THAT THE ISSUE MAY BE DECIDED AGAINST HIM. IN VIEW OF THE CONCESSION GIVE N BY THE ASSESSEE, WE MR. RAJENDRA J. SHAH ITA NO.3682/M/2010 3 ALLOW THIS GROUND OF THE REVENUE BY APPLYING THE PR OPOSITIONS LAID DOWN BY THE HON'BLE JURISDICTIONAL HIGH COURT ON COMPOSITE CHARGES. 3. COMING TO GROUND NO.2, LEARNED DEPARTMENTAL REPRESE NTATIVE SUBMIT THAT THERE IS NO AGREEMENT BETWEEN JEETAL B. PARIKH AND THE ASSESSEE. HE ARGUED THAT IN THE ABSENCE OF SUCH AN AGREEMENT, AL LOCATIONS OF REVENUE CANNOT BE MADE. THE ASSESSEE RELIED ON THE DECISION OF MUMBAI A BENCH OF THE TRIBUNAL IN DCIT V/S ASSET ALLIANCE SECURITY PV T. LTD. ITA NO.1488/ MUM./2009, ORDER DATED 16 TH JULY 2010, AND SUBMITTED THAT THIS IS A TRADE PRACTICE AND THE TRIBUNAL HAS RECOGNISED THIS TRADE PRACTICE AND HELD THAT IN ESSENCE AND SUBSTANCE, THE AMOUNTS PAID TO THE JOBB ERS OR ARBITRATORS DO NOT, IN REALITY, REPRESENT THE EXPENDITURE OF THE A SSESSEE COMPANY BUT REPRESENTED PAYMENT OF THE SHARE, TO JOBBERS / ARBI TRATORS AND THAT THE RELATIONSHIP BETWEEN THE ASSESSEE AND THE JOBBERS / ARBITRATOR WAS THAT OF PRINCIPAL-TO-PRINCIPAL. HE REFERRED TO THE GROUNDS ON WHICH THE ASSESSING OFFICER MADE THE DISALLOWANCE AND SUBMITTED THAT TH E FACTS IN PONDECHERY RAILWAY CO. LTD. V/S CIT, AIR 1931 PC 165, IS DIFF ERENT ON FACTS. 4. AFTER HEARING RIVAL CONTENTIONS, WE FIND THAT THE S OLE GROUND ON WHICH THE ASSESSING OFFICER DISALLOWED THE AMOUNT WAS THA T M/S. VYOMA SHAH AND M/S. NIMEETA SHAH, HAVE NOT DONE ANY JOBBING AND HA VE NO EXPOSURE OR KNOWLEDGE OF JOBBING AND THE HON'BLE SUPREME COURT IN PANIPAT WOOLEN MILLS LTD., HELD THAT A JOINT VENTURE TO DIVIDE THE PROFI TS AFTER THE SAME ARE ASCERTAINED, CANNOT BE DEEMED TO BE AN EXPENDITURE. THE COMMISSIONER (APPEALS) HAS POINTED OUT THAT THE ASSESSING OFFICE R HAS MADE A FACTUAL MISTAKE AS NO AMOUNTS WERE PAID TO M/S. VYOMA R. SH AH, OR M/S. NIMEETA R. SHAH. MR. JITENDRA P. PARIKH, HAS, UNDER AN ARRA NGEMENT, DONE JOBBING USING THE INFRASTRUCTURE OF THE ASSESSEE. THE RELAT IONSHIP BETWEEN THE ASSESSEE AND THE JEETAL P. PARIKH, ARE NOT THAT OF A PRINCIPAL AND AN AGENT BUT WAS FROM PRINCIPAL-TO-PRINCIPAL. LEARNED COUNSE L ALSO FILED INCOME TAX DETAILS OF JEETAL P. PARIKH, TO SHOW THAT HE OFFERE D HIS SHARES OF INCOME TO TAX. THE TRIBUNAL IN ASSETS ALLIANCE SECURITIES P. LTD. (SUPRA), CONSIDERED A SIMILAR ISSUE AND RECOGNISED THE FACT THAT ONLY NET INCOME FROM JOINT VENTURE MR. RAJENDRA J. SHAH ITA NO.3682/M/2010 4 WAS ACCOUNTED FOR IN THE ASSESSEES BOOK. HE FURTHE R HELD THAT IN ESSENCE AND SUBSTANCE, THE AMOUNT PAID TO THE JOBBERS OR AR BITRATORS DO NOT, IN REALITY, REPRESENTS THE EXPENDITURE OF THE COMPANY BUT REPRESENTED PAYMENT OF SHARES OF THE JOBBERS UNDER THE AGREEMENT ENTERE D INTO WITH THEM. WE RESPECTFULLY FOLLOW THIS DECISION. THUS, IN VIEW OF THE ABOVE DISCUSSION, WE DISMISS GROUND NO.2 OF THE REVENUE. 5. IN THE RESULT, REVENUES APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD DECEMBER 2011 SD/- V. DURGA RAO JUDICIAL MEMBER SD/- J. SUDHAKAR REDDY ACCOUNTANT MEMBER MUMBAI, DATED: 23 RD DECEMBER 2011 COPY TO : (1) THE ASSESSEE; (2) THE RESPONDENT; (3) THE CIT(A), MUMBAI, CONCERNED; (4) THE CIT, MUMBAI CITY CONCERNED; (5) THE DR, D BENCH, ITAT, MUMBAI. TRUE COPY BY ORDER PRADEEP J. CHOWDHURY ASSISTANT REGISTRAR SR. PRIVATE SECRETARY ITAT, MUMBAI BENCHES, MUMBAI