MAHESH KUM,AR DAMANI, MUMBAI V. JT CIT 4(3), MUMBAI

ITA 4072/MUM/2012

• Counselvise Citation: 407219914 RSA 2012
• Duration Of Justice: 2 year(s) 10 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-04-2015
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 15-04-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 11-06-2012
• Court: TRIBUNAL
• Department Lawyers: S J SINGH
• Keywords: Reopening of assessment

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D , BENCH MUMBAI . , . . , BEFORE SHRI D.MANMOHAN, VICE PRESIDENT & SHRI R.C.SHARMA , A M ./ ITA NO. 4072 /MUM/20 12 ( / ASSESSMENT YEAR :200 5 - 0 6 ) MAHESH KUMAR DAMANI, 1 ST FLOOR, SURYA MAHAL,5, BURJORJI BHARUCHA MARG, FORT, MUMBAI - 400023 VS. JT.CIT - 4(3), MUMBAI ./ ./ PAN/GIR NO. : A A EPD 9125 D ( / A PPELLANT ) .. ( / RESPONDENT ) /ASSESSEE BY : SHRI HIRO RAI /REVENUE BY : SHRI S.J. S INGH / DATE OF HEARING : 1 5 TH APRIL, 2015 / DATE OF PRONOUNCEMENT : 24 TH APR IL, 2015 / O R D E R PER R.C.SHARMA ( A .M.) : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) - 8 , MUMBAI DATED 11 - 4 - 2012 FOR THE ASSESSMENT YEAR 200 5 - 0 6 , IN THE MATTER OF ORDER PASSED U/S.143(3) R.W.S.147 OF THE I.T.ACT. 2. IN THIS APPEAL THE ASSESSEE IS AGGRIEVED FOR REOPENING OF ASSESSMENT AS WELL AS MERIT OF THE ADDITION CONFIRMED ON ACCOUNT OF DISALLOWANCE OF TRANSACTION CHARGES PAID TO STOCK EXCHANGE WITHOUT DEDUCTION OF TAX AT SOURCE. 3. NOTHING WAS STATED BY LD. AR WITH REGARD TO VALIDITY OF REOPENING. ACCORDINGLY GROUND NO.1 OF ASSESSEES APPEAL IS DISMISSED. 4. WITH REGARD TO MERIT OF ADDITION, LD. AR PLACED ON RECORD ORDER OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF KOTAK SECURITIES LTD., 340 ITR IT A NO . 4072 /12 2 333, WHEREIN THE HONBLE HIGH COURT HELD THAT TRANSACTION CHARGES PAID TO STOCK EXCHANGE IS LIABLE TO DEDUCTION OF TAX AT SOURCE U/S.194J, H OWEVER, DISALLOWANCE SO MADE WAS DELETED BY THE HONBLE HIGH COURT AFTER HAVING FOLLOWING OBSERVATIONS : - (II) THAT THOUGH SECTION 1 94J WAS INSERTED WITH EFFECT FROM JULY, 1 1995, TILL THE ASSESSMENT YEAR IN QUESTION THAT IS ASSESSMENT YEAR 2005 - 06 BOTH THE REVENUE AND ASSESSEE PROCEEDED ON THE FOOTING THAT SECTION 194J WAS NOT APPLICABLE TO THE PAYMENT OF TRANSACTION CHA R GES AND ACCOR DINGLY DURING THE PERIOD FROM 1995 TO 2005 NEITHER HAD THE ASSESSEE DEDUCTED TAX AT SOURCE WHILE CREDITING THE TRANSACTION CHARGES TO THE ACCOUNT OF THE STOCK EXCHANGE NOR HAD THE REVENUE RAISED ANY OBJECTION OR INITIATED ANY PROCEEDINGS FOR NOT DEDUCTING THE TAX AT SOURCE. IN THESE CIRCUMSTANCES, IF BOTH THE PARTIES FOR NEARLY A DECADE PROCEEDED ON THE FOOTING THAT SECTION 194J WAS NOT ATTRACTED, THEN IN THE ASSESSMENT YEAR IN QUESTION NO FAULT COULD BE FOUND WITH THE ASSESSEE IN NOT DEDUCTING THE TAX AT S OURCE UNDER SECTION 194J OF THE ACT AND CONSEQUENTLY NO ACTION COULD BE TAKEN UNDER SECTION 40(A)(IA) OF THE ACT. FROM ASSESSMENT YEAR 2006 - 07 THE ASSESSEE HAD BEEN DEDUCTING TAX AT SOURCE WHILE CREDITING THE TRANSACTION CHARGES TO THE ACCOUNT OF THE STOCK EXCHANGE THOUGH NOT AS FEES FOR TECHNICAL SERVICES BUT AS ROYALTY. 5 . ON THE OTHER HAND, LD. DR RELIED ON THE ORDER OF LOWER AUTHORITIES. 6 . WE HAVE CONSIDERED RIVAL CONTENTIONS, CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE HAD ALSO D EL IBERATED ON THE JUDICIAL PRONOUNCEMENTS CITED AT BAR, WHEREIN HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF KOTAK SECURITIES (SUPRA) HELD THAT THE TRANSACTION CHARGES PAID TO THE STOCK EXCHANGE FOR MANAGERIAL SERVICES CONSTITUTE FEES FOR TECHNICAL SERVI CES U/S.194J READ WITH EXPLANATION 2 TO SECTION 9(1)(VII) AND HENCE, ASSESSEE IS LIABLE TO DEDUCT TAX AT SOURCE BEFORE CREDITING THE TRANSACTION CHARGES TO THE ACCOUNT OF THE STOCK EXCHANGE. 7 . IN ADDITION TO THE ABOVE, THE HONBLE HIGH COURT ALSO HELD THA T PROVISIONS OF SECTION 194J WAS INTRODUCED W.E.F. 1 ST JULY, 1995. FROM THE YEAR 1995 TO 2005 NEITHER THE ASSESSEE DEDUCTED TAX AT SOURCE WHILE CREDITING THE TRANSACTION CHARGES TO THE ACCOUNT OF STOCK EXCHANGE NOR IT A NO . 4072 /12 3 HA D THE REVENUE INITIAT ED ANY PROCEEDINGS FOR NOT DEDUCTING AT SOURCE. UNDER THESE CIRCUMSTANCES, IT WAS HELD THAT BOTH THE PARTIES FOR NEARLY A DECADE PROCEEDED ON THE FOOTING THAT SECTION 194J WAS NOT ATTRACTED, THEN IN THE ASSESSMENT YEAR IN QUESTION NO FAULT COULD BE FOUND WITH THE ASSESSEE I N NOT DEDUCTING THE TAX AT SOURCE UNDER SECTION 194J OF THE ACT AND CONSEQUENTLY NO ACTION COULD BE TAKEN UNDER SECTION 40(A)(IA) OF THE ACT. WE FOUND THAT IN THE CASE OF KOTAK SECURITIES (SUPRA) ALSO DISALLOWANCE WAS MADE FOR THE FIRST TIME BY THE AO IN T HE ASSESSMENT YEAR 2005 - 06. IN THE INSTANT CASE BEFORE US ALSO RELEVANT ASSESSMENT YEAR UNDER CONSIDERATION IS 2005 - 06, RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT, WE DO NOT FIND ANY MERIT IN THE DISALLOWANCE MADE U/S.40(A )(IA) ON ACCOUNT OF NON - DEDUCTION TAX AT SOURCE OUT OF THE TRANSACTION CHARGES PAID TO THE STOCK EXCHANGE. 8 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED IN PART. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 24/04 / 201 5 . 24/04 /201 5 SD/ - SD/ - ( . ) ( D.MANMOHAN ) ( . . ) ( R.C.SHARMA ) / VICE PRESIDENT / ACCOUNTANT MEMBER MUMBAI ; DATED 24/04 /201 5 . . /PKM , . / PS / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / ( ASSTT. REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. //TRUE COPY//