ACIT 4(2), MUMBAI V. SWIFT SECURITIES LTD, MUMBAI

ITA 3826/MUM/2009

• Counselvise Citation: 382619914 RSA 2009
• Duration Of Justice: 2 year(s) 2 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-09-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Next Hearing Date: 05-09-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 12-06-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K SINGH
• Assessee Lawyers: RAMESH BALIYA
• Keywords: TDS
• Section: 143(3); 40(a)(ia); 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, J, MUMBAI BEFORE S/SHRI D.K.AGARWAL (JM) AND RAJENDRA SINGH(A .M ) ITA NO.3826/MUM/2009 (ASSESSMENT YEAR : 2005-06) ASSISTANT COMMISSIONER OF INCOME TAX, 4(2), ROOM NO.642, 6 TH FLOOR, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI-400020 M/S SWIFT SECURITIES LTD., 3/C, AMBALAL DOSHI MARG, HAMAM STREET, FORT, MUMBAI-400001 PAN:AAACS7800B APPELLANT V/S RESPONDENT DATE OF HEARING : 5.9.2011 DATE OF PRONOUNCEMENT : APPELLANT BY : SHRI S.K.SINGH RESPONDENT BY : SHRI RAMESH BALIYA O R D E R PER D.K.AGARWAL (JM) THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 12.3.2009 PASSED BY THE LD. CIT(A) FOR THE ASSESSMENT YEAR 2005-06. 2. THE ASSESSEE VIDE LETTER DATED 2.9.2011 SOUGHT ADJOURNMENT. HOWEVER, AT THE TIME OF HEARING IT WA S POINTED OUT THAT BOTH THE ISSUES ARE COVERED, THE REPRESENT ATIVE OF THE ASSESSEE SUBMITS THAT HE IS NOT PRESSING THE AD JOURNMENT PETITION. 3. THE ASSESSEE VIDE LETTER DATED 30.4.2010 SUPPORT ED BY AFFIDAVIT OF SHRI VIPUL RANDERI, DIRECTOR OF VA R SHARES & ITA NO.3826/MUM/2009 (ASSESSMENT YEAR : 2005-06) 2 STOCKS PVT.LTD. STATED THAT SWIFT SECURITIES LTD. W AS AMALGAMATED WITH VAR SHARES & STOCKS PVT.LTD VIDE ORDER OF HONBLE BOMBAY HIGH COURT DATED 8.8.2008. HOWEV ER, IN THE ABSENCE OF ANY SUPPORTING MATERIAL, THE AO I S DIRECTED TO VERIFY AND ALLOW THE SAME. 4. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE AS SESSEE COMPANY, A CORPORATE MEMBER OF NSE, IS ENGAGED IN T HE BUSINESS OF BUYING, SELLING AND DEALING IN SHARES A ND SECURITIES. THE ASSESSEE COMPANY IS HAVING INCOM E BY WAY OF BROKERAGE ON TRANSACTIONS, SHARE TRADING AND DER IVATIVES. IT FILED RETURN DECLARING TOTAL INCOME OF RS.59,48 ,046/-. HOWEVER, THE ASSESSMENT WAS COMPLETED AT AN INCOM E OF RS.1,09,51,780/- INCLUDING DISALLOWANCE OF VSAT, LEASELINE AND TRANSACTION CHARGES OF RS.23,16,545/- AND JOBBE RS COMMISSION RS.16,60,407/- VIDE ASSESSMENT ORDER DA TED 24.12.2007 PASSED UNDER SECTION 143(3) OF THE INCO ME TAX ACT, 1961(IN SHORT THE ACT). ON APPEAL, THE LD. C IT(A) WHILE PARTLY ALLOWING THE APPEAL, HOWEVER, FOLLOWING THE ITAT ORDERS DELETED BOTH THE DISALLOWANCES. 5. BEING AGGRIEVED BY THE ORDER OF THE LD.CIT(A), T HE REVENUE IS IN APPEAL BEFORE US. ITA NO.3826/MUM/2009 (ASSESSMENT YEAR : 2005-06) 3 6. GROUND NOS.1 TO 6 ARE AGAINST THE DELETION OF DISALLOWANCE OF VSAT, LEASELINE AND TRANSACTION CHA RGES AMOUNTING TO RS.23,16,545/-. 7. BRIEF FACTS OF THE ABOVE ISSUES ARE THAT THE AO INTERALIA OBSERVED THAT THE ASSESSEE HAS INCURRED EXPENSES ON VSAT, LEASELINE AND TRANSACTION CHARGES OF RS.1,84,028, RS.4,22,619/- AND RS.17,09,898/- RESPECTIVELY. TH E AO AFTER DISCUSSING THE ISSUE IN PARAGRAPH 4 OF THE ASSESSM ENT ORDER HAS HELD THAT SINCE THE ASSESSEE HAS FAILE D TO DEDUCT TDS ON THE IMPUGNED PAYMENTS OF LEASELINE CHARGE S, VSAT AND TRANSACTION CHARGES I.E RS.23,16,545/-, HE NCE IT IS NOT ALLOWABLE AND ADDED THE SAME TO THE TOTAL IN COME OF THE ASSESSEE. ON APPEAL, THE LD. CIT(A), FOLLOWING THE ORDER OF THE TRIBUNAL IN KOTAK SECURITIES V/S ADDL. CIT IN ITA NO.1955/MUM/2008 (AY-2005-06) DATED 26.8.2008 DELET ED THE DISALLOWANCE MADE BY THE AO. 8. AT THE TIME OF HEARING, THE LD. DR SUPPORTS THE ORDER OF THE AO. 9. HAVING CAREFULLY HEARD THE SUBMISSIONS OF THE L D.DR AND PERUSING THE MATERIAL AVAILABLE ON RECORD WE FI ND THAT THE FACTS ARE NOT IN DISPUTE. WE FURTHER FIND MERIT THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSE E BY THE DECISION OF THE TRIBUNAL IN KOTAK SECURITIES LTD. VS. ITA NO.3826/MUM/2009 (ASSESSMENT YEAR : 2005-06) 4 ADDL. CIT (2008) 25 SOT 440, WHEREIN IT HAS BEEN HE LD THAT THE TRANSACTION FEE PAID CANNOT BE SAID TO BE A FE E PAID IN CONSIDERATION OF STOCK EXCHANGE RENDERING ANY TECH NICAL SERVICES. THE PROVISIONS OF SECTION 194J ARE THERE FORE NOT ATTRACTED. THEREFORE, THERE WAS NO OBLIGATION ON T HE PART OF THE ASSESSEE TO DEDUCT TAX AT SOURCE. CONSEQUENTLY, THE PROVISIONS OF S. 40(A)(IA) WERE ALSO NOT ATTRACTED. IN THE ABSENCE OF ANY DISTINGUISHING FEATURE BROUGHT ON R ECORD BY THE REVENUE, WE RESPECTFULLY FOLLOWING THE ORDER O F THE TRIBUNAL (SUPRA) HOLD THAT VSAT CHARGES, LEASELIN E CHARGES AND TRANSACTION CHARGES PAID TO STOCK EXCHANGE C ANNOT BE CONSIDERED AS FEES FOR TECHNICAL SERVICES RENDERED AND ACCORDINGLY WE ARE INCLINED TO UPHOLD THE ORDER OF THE LD. CIT(A) IN DELETING THE DISALLOWANCE MADE BY THE AO. THE GROUNDS TAKEN BY THE REVENUE ARE, THEREFORE, REJECT ED. 10. GROUND NOS.7 TO 9 ARE AGAINST THE DELETION OF DISALLOWANCE OF JOBBERS COMMISSION OF RS. RS.16,60, 407/-. 11. BRIEF FACTS OF THE ABOVE ISSUE ARE THAT THE AO NOTED THAT THE ASSESSEE HAS DEBITED JOBBERS COMMISSION T O SHRI AMRISH MODI RS.1,79,597/- AND RS.14,08,873/- AND S HRI KETAN SHAH RS.71,937/- AGGREGATING TO RS.16,60,40 7/- WITHOUT DEDUCTING THE TDS ON THE SAID AMOUNT. TH E AO AFTER DISCUSSING THE MATTER IN PARAGRAPH 5 OF THE ASSESSMENT ITA NO.3826/MUM/2009 (ASSESSMENT YEAR : 2005-06) 5 ORDER HAS HELD SINCE THE ASSESSEE HAS FAILED TO DED UCT TDS, HENCE HE DISALLOWED THE JOBBERS COMMISSION. ON AP PEAL, THE LD. CIT(A) FOLLOWING THE DECISION IN M/S PRAKAH S & SHAH SHARES AND SECURITIES PVT LTD FOR THE ASSESSMENT YE AR 2005- 06 DELETED THE DISALLOWANCE. 12. AT THE TIME OF HEARING, THE LD. DR SUPPORTS THE ORDER OF THE AO. 13. HAVING CAREFULLY HEARD THE SUBMISSIONS OF THE L D.DR AND PERUSING THE MATERIAL AVAILABLE ON RECORD WE FI ND THAT THE FACTS ARE NOT IN DISPUTE. WE FURTHER FIND THAT THE ISSUE IS SQUARELY COVERED AGAINST THE REVENUE AND IN FAVOU R OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN THE C ASE OF DCIT V/S ASSET ALLIANCE SECURITIES PVT.LTD., 2010-T IOL-460- ITAT-MUM WHEREIN IN, THE TRIBUNAL ON THE SIMILAR FACTS AND CIRCUMSTANCES OF THE CASE, HAS HELD VIDE PARAGRAPH 9 OF ITS ORDER AS UNDER : 9. .....THE FACTS SHOW THAT THERE WERE SEPARATE J OINT VENTURES ENTERED INTO BY THE ASSESSEE WITH SEVERAL JOBBERS/ARBITRAGERS AND PAYMENTS HAVE BEEN MADE TO THEM UNDER SUCH AGREEMENTS AND THE ASSESSEE'S SHARE IN THE PROFITS HAS BEEN TAKEN TO THE PROFIT AND LOS S ACCOUNT. IN THESE CIRCUMSTANCES THE PROVISIONS OF SEC.194C ARE NOT ATTRACTED BECAUSE IN ESSENCE AND SUBSTANCE THE AMOUNTS PAID TO THE JOBBERS OR ARBITRAGERS DID NOT IN REALITY REPRESENT THE EXPENS E OF THE ASSESSEE COMPANY BUT REPRESENTED PAYMENT OF THE SHARE OF THE JOBBERS/ARBITRAGERS UNDER THE AGREEMEN T ENTERED INTO WITH THEM. IN SUCH A CASE THE ASSESSE E IS ITA NO.3826/MUM/2009 (ASSESSMENT YEAR : 2005-06) 6 RIGHT IN SAYING THAT THERE WAS NO QUESTION OF DEDUC TING ANY TAX AT SOURCE. THE ABOVE FACTS ALSO ESTABLISH THAT THE RELATIONSHIP BETWEEN THE ASSESSEE AND THE JOBBERS/ARBITRAGERS WAS NOT OF PRINCIPLE AND AGENT BUT WAS THAT OF PRINCIPLE TO PRINCIPLE. BOTH HAD AGREE D TO EMBARK UPON A JOINT VENTURE TO TRADE IN SHARES AND SECURITIES IN THE STOCK EXCHANGE AND TO SHARE THE PROFIT/LOSS EQUALLY. WE DO NOT SEE HOW SUCH PAYMEN TS CAN BE TERMED AS PAYMENTS TO CONTRACTORS FOR ANY WO RK TO BE CARRIED OUT BY THEM. WE THEREFORE UPHOLD THE FINDING OF THE CIT(A) THAT THESE PAYMENTS DO NOT AT TRACT SECTION 194C AND THE ASSESSEE WAS NOT LIABLE TO DED UCT TAX THEREFROM. ACCORDINGLY SECTION 40(A)(IA) IS AL SO NOT APPLICABLE. THE PAYMENTS, IN OUR VIEW , WERE RIGHT LY ALLOWED AS DEDUCTION BY THE CIT(A)........ IN THE ABSENCE OF ANY DISTINGUISHING FEATURE BROUGH T ON RECORD BY THE LD. DR WE RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL (SUPRA) HOLD THAT THESE PAYMENTS ARE P RINCIPLE TO PRINCIPLE WHICH DO NOT ATTRACT THE APPLICABILITY OF SECTION 194C AND, HENCE, THE PROVISIONS OF SECTION 40(A)(IA ) ARE NOT APPLICABLE AND ACCORDINGLY WE ARE INCLINED TO UPHO LD THE FINDING OF THE LD. CIT(A) IN DELETING THE DISALLOWA NCE MADE BY THE ASSESSING OFFICER. THE GROUNDS TAKEN BY THE RE VENUE ARE, THEREFORE, REJECTED. 14. IN THE RESULT, THE REVENUES APPEAL STANDS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 7TH SEPTEMBER,2011. SD S D (RAJENDRA SINGH) (D. K.AGARWAL) ACCOUNTANT MEMBER JUDICIAL MEMBER ITA NO.3826/MUM/2009 (ASSESSMENT YEAR : 2005-06) 7 MUMBAI, DATED 7TH SEPTEMBER, 2011 SRL: COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. DR CONCERNED BENCH 6. GUARD FILE. TRUE COPY BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI