INCOME TAX OFFICER 4(2)(3), MUMBAI V. SHREE HARI SHARES & STOCK BROKERS PVT. LTD., MUMBAI

ITA 420/MUM/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3939 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2013
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 18-07-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 14-01-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: ADITYA BHAT
• Keywords: Depreciation
• Section: 6

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI . . , . ! , '# ' $ BEFORE SHRI I.P. BANSAL, JM AND SHRI SANJAY ARO RA, AM ./ I.T.A. NO. 420/MUM/2011 ( % % % % & & & & / ASSESSMENT YEAR : 2007-08 THE ACIT, CIR.4(2), R.NO.647, 6 TH ST FLOOR, AAYKAR BHAVAN, MK ROAD, MUMBAI - 400 020 % % % % / VS. M/S. SHREE HARI SHARES & STOCK BROKERS PVT. LTD., 215, ABHINANDAN CLOTH MARKET, 2 ND FLOOR, KALBADEVI ROAD, MUMBAI - 400 002. ' '# ./ ( ./ PAN/GIR NO. : AABCS 6210L ( ') / APPELLANT ) .. ( *+') / RESPONDENT ) ') , ' / APPELLANT BY: SHRI AARSI PRASAD *+') - , ' / RESPONDENT BY : SHRI ADITYA BHAT % - .# / DATE OF HEARING : 18/07/2013 / & - .# / DATE OF PRONOUNCEMENT : 18/07/2013 '0 / O R D E R PER I.P.BANSAL,J.M: THIS IS AN APPEAL FILED BY THE REVENUE. IT IS DI RECTED AGAINST THE ORDER PASSED BY LD. CIT(A)-8, MUMBAI DATED 3/11/2010 FOR THE ASSESSMENT YEAR 2008- 09. THE GROUNDS OF APPEAL READ AS UNDER: 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.C1T(A) ERRED IN FOLLOWING THE RATIO OF THE HONBLE SUPREME COURT JUDGMENT IN THE CASE OF M/S. TECHNO SHARES PRIVATE LTD VS CIT REPORTED IN T HE ITR, WHEN THE FACTS HAVE SUBSTANTIALLY CHANGED PAST 2005. THE BSE CARD CEASE D TO EXIST IN FY:2005-06 AFTER DEMUTUALIZATION. THE ENTIRE COST OF THE CARD GOT T RANSFERRED TO THE 10,000 SHARES OF BSE LTD. ALLOTTED ON DEMUTUALIZATION, LE. THE VALUE OF THE CARD BECAME NIL IN TERMS OF SECTION 47(XIIIA) READ WITH SECTION 55(2)(AB). ./ I.T.A. NO. 420/MUM/2011 ( % % % % & & & & / ASSESSMENT YEAR : 2007-08 2 2. (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS.2,53,876 M ADE IN RESPECT OF VSAT, LEASELINE AND TRANSACTION CHARGES U/S.40(A)(IA), WI THOUT APPRECIATING THE FACTS THAT THESE WERE COMPOSITE CHARGES FOR PROFESSIONAL AND T ECHNICAL SERVICES 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. C1T(A) ERRED IN IGNORING THE FACT THAT THESE SERVICES ARE ESSENTIAL IN NATURE AS THEY CAN ONLY BE AVAILED BY MEMBERS OF STOCK EXCHANGE. III. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN IGNORING THE FACTS THAT USE OF TECHNOLOGY AND ALGORITHMIC BASED PROGRAMS HAVE CONVERTED AN ERSTWHILE PHYSICAL MARKET INTO A DIGITALLY OPERATED MARKET. IV. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) ERRED IN IGNORING THE FACT THAT THE SERVICES RENDER ED BY THE BROKERS ARE NOT STANDARD SERVICES BUT SERVICES THAT HAS BEEN DEVELOPED TO CA TER TO THE NEEDS OF THE BROKER COMMUNITY TO FACILITATE TRADING. V. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) HAS OVERLOOKED THE FACT THAT THE BROKERS HAVE IN SUBSEQ UENT YEARS THEMSELVES STARTED DEDUCTING THE TDS ON SUCH PAYMENTS AND THAT THERE I S NO REASON TO GIVE A DIFFERENT TREATMENT IN THIS YEAR. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE IMPUGNED ORDER OF THE LD.CIT(A) IS CONTRARY TO LAW AND CONSEQUENTLY M ERITS TO BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 2. SO FAR AS IT RELATES TO GROUND NO.1, LD. A.R FA IRLY CONCEDED THAT THIS ISSUE IS COVERED AGAINST THE ASSESSEE BY THE DECISION O F ITAT IN THE CASE OF SINO SECURITIES (P) LTD. VS. ITO, 134 ITD 321 (MUM), IN WHICH IT HAS BEEN HELD DEPRECIATION OF MEMBERSHIP CARD HAVE RIGHTLY BEEN D ENIED BY THE A.O. ACCORDINGLY, AFTER HEARING BOTH THE PARTIES WE ALLO W THIS GROUND OF APPEAL FILED BY THE REVENUE. IT MAY BE MENTIONED THAT WHILE HOLDI NG SO ITAT IN AFOREMENTIONED DECISION HAS TAKEN INTO CONSIDERATION THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF TECHNO SHARES & STOCK LTD. & OTHERS VS. CIT, 234 CTR 105 (SC). ACCORDINGLY, THIS GROUND IS ALLOWED. 3. APROPOS GROUND NO.2, WHICH RELATES TO DISALLOWAN CE OF RS.2,53,876/- BEING V-SAT CHARGES. IT WAS SUBMITTED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HONBLE BOMBAY HIGH COU RT IN THE CASE OF THE INCOME TAX COMMISSIONER MUMBAI CITY-4 VS. ANGEL CAP ITAL & DEBIT MARKET LTD., ./ I.T.A. NO. 420/MUM/2011 ( % % % % & & & & / ASSESSMENT YEAR : 2007-08 3 IN INCOME TAX APPEAL (L) NO.475 OF 2011 DATED 28 TH JULY 2011 ( COPY PLACED ON RECORD.), WHEREIN THE FOLLOWING QUESTIONS WERE R EFERRED BY THE REVENUE: (A) WHETHER ON THE FACTS AND IN THE CIRCUMSTAN CES OF THE CASE AND IN LAW THE HONBLE TRIBUNAL WAS JUSTIFIED IN HOLDING THAT VSAT AND LEASE LIN CHARGES PAID TO THE STOCK EXCHANGE BY THE ASSESSEE COMPANY WERE ALL OWABLE AS A DEDUCTION FROM TAXABLE INCOME EVEN THOUGH THE ASSESSEE COMPANY HAD FAILED TO DEDUCT TDS THEREON? (B) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW THE HONBLE TRIBUNAL WAS JUSTIFIED IN HOLDING THAT VSAT AND LEASE LINE CHARGES PAID TO THE STOCK EXCHANGE BY THE ASSESSEE COMPANY WERE NO T PAID IN CONSIDERATION OF TECHNICAL SERVICES RENDERED BY THE STOCK EXCHANGE W ITHIN THE MEANING OF SECTIONL94J READ WITH EXPLANATION 2 TO SECTION 9(1) (VII) OF THE INCOME TAX ACT.? 4. THE OBSERVATIONS OF THEIR LORDSHIPS REGARDING A FOREMENTIONED QUESTIONS ARE AS UNDER: 2. AS REGARDS FIRST TWO QUESTIONS ARE CONCERNED, TH E FINDINGS OF FACT RECORDED BY THE ITAT IS THAT VSAT AND LEASE LINE CHARGES PAID BY TH E ASSESSEE TO STOCK EXCHANGE WERE MERELY REIMBURSEMENT OF THE CHARGES PAID/PAYAB LE BY THE STOCK EXCHANGE TO THE DEPARTMENT OF TELECOMMUNICATION. SINCE THE VSAT AND LEASE LINE CHARGES PAID BY THE ASSESSEE DO NOT HAVE ANY ELEMENT OF INCOME, DEDUCTING TAX WHILE MAKING SUCH PAYMENTS DO NOT ARISE. HENCE, QUESTION NOS. ( A) AND (B) CANNOT BE ENTERTAINED. 5. LD. DR DID NOT OBJECT THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE AFOREMENTIONED DECISION OF HONBLE BOMBAY HIGH COURT. IN THIS VIEW OF THE SITUATION, AFTER HEARING BOTH THE PARTIES WE DISMIS S THIS GROUND OF THE REVENUE. 6. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED IN THE MANNER AFORESAID. ORDER PRONOUNCED IN THE OPEN COURT ON 18/07/2013 . '0 - & #' 1 2%3 18/07/2013 - 4 SD/- SD/- ( SANJAY ARORA) (I.P.BANSAL) /ACCOUNTANT MEMBER '# /JUDICIAL MEMBER MUMBAI; 2% DATED 18/07/2013 ./ I.T.A. NO. 420/MUM/2011 ( % % % % & & & & / ASSESSMENT YEAR : 2007-08 4 '0 '0 '0 '0 - -- - *.56 *.56 *.56 *.56 7'6&. 7'6&. 7'6&. 7'6&. / COPY OF THE ORDER FORWARDED TO : 1. ') / THE APPELLANT 2. *+') / THE RESPONDENT. 3. 8 ( ) / THE CIT(A)- 4. 8 / CIT 5. 694 *.% , , / DR, ITAT, MUMBAI 6. 4: ; / GUARD FILE. '0% '0% '0% '0% / BY ORDER, +6. *. //TRUE COPY// < << < / = = = = (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI . % . .VM , SR. PS