Shriram Insight Share Brokers Ltd., Kolkata V. JCIT, R-59(TDS), KOLKATA, Kolkata

ITA 433/KOL/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1674 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 10 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-02-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 14-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S ALLONG YADEN CIT LD
• Assessee Lawyers: MIRAJ D SHAH LD
• Section: 194C; 10B

Judgement Text

1 ITA NO. 433/KOL/2016 IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KO LKATA BEFORE: SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SHRI S.S. VISWANETHRA RAVI, JU DICIAL MEMBER I.T.A NO. 433/KO L/2016 A.Y: 2012-1 3 M/S. SHRIRAM INSIGHT VS. JCIT, RANGE-59(TDS) SHARE BROKERS KOLKATA PAN: CALIO 1614E [APPELLANT] [RESPONDEN T] FOR THE APPELLANT : SHRI MIRAJ D.SHAH, ADVOCA TE, LD.AR FOR THE RESPONDENT : SHRI SALLONG YADEN, ADDL.CI T, LD.DR DATE OF HEARING : 28-11-2017 DATE OF PRONOUNCEMENT : 09-02-2018 ORDER SHRI S.S.VISWANETHRA RAVI, JM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)- 24, KOLKATA DT. 31-12-2015 FOR THE A.Y 2011-12. 2. THE LD.AR SUBMITS THAT THE GROUNDS OF APPEAL AS RAISED IN THIS APPEAL BY THE ASSESSEE ARE SQUARELY COVERED BY THE ORDER DT. 21-06- 2017 IN ITA NO. 4106/MUM/2014 REPORTED IN 2017(8) T MI 714-ITAT MUMBAI IN THE CASE OF DESTIMONEY SECURITIES PVT. LT D VS. ITO (TDS)(OSD)-1(3), MUMBAI, COPY OF THE SAME IS ON REC ORD AND REFERRED TO PARA 11 OF SAID ORDER AND ARGUED THAT N O TDS IS REQUIRED TO BE MADE ON PAYMENTS MADE TOWARDS INTERNET AND CO MMUNICATION CHARGES. 3. ON THE OTHER HAND, THE LD.DR DID NOT CONTROVERT THE SAME BY BRINING ON RECORD CONTRARY TO THE SAID ORDER OF THE ITAT, MUMBAI. HE RELIED ON THE ORDERS OF THE AO AND CIT-A. 4. HEARD RIVAL SUBMISSIONS AND PERUSED MATERIAL ON RECORD INCLUDING THE PAPER BOOK DETAILS AND CASE LAWS. WE FIND THAT THE AO 2 ITA NO. 433/KOL/2016 ON GOING THROUGH THE DETAILS AS SUBMITTED BY THE AS SESSEE FOUND THAT THE ASSESSEE MADE PAYMENTS OF RS.69,43,089/- UNDER THE HEAD LEASELINE CHARGES TO VARIOUS PARTIES LIKE BSNL,MTNL , TATA INDICOM, SYSTEM SHYAM TELESERVICES LTD, BHARTI AIRTEL ETC. T HE AO RAISED AN OBJECTION FOR NON DEDUCTION OF TDS ON SUCH PAYMENTS U/S. 194C AND 194J OF THE ACT. THE ASSESSEE CONTENDED THAT THESE PAYMENTS WERE MADE TOWARDS MONTHLY RENTAL FOR BROADBAND USAGE CHA RGES IN DIFFERENT LOCATIONS. SUCH PAYMENTS WERE MADE FOR US E OF STANDARD FACILITIES AND THE PROVISIONS OF SECTION 194C AND 1 94J OF THE ACT ARE NOT APPLICABLE AS THERE WAS NO CONTRACT FOR CARRYI NG OUT ANY WORK AND THE PAYMENT WAS NOT A FEE FOR TECHNICAL SERVICE S. IN SUPPORT OF THIS CONTENTION, THE ASSESSEE PLACED ON VARIOUS CAS E LAWS BEFORE THE AO. THE AO FOUND THAT THE SUBMISSIONS OF THE ASSESS EE IS NOT ACCEPTABLE AND FOR NON DEDUCTION OF TDS U/S. 194C A ND 194J OF THE ACT ON SUCH PAYMENTS CHARGED INTEREST @ 1% P.M UPTO 38 MONTHS I.E. AT RS.8,32,040/- AND ADDED THE SAME TO THE TOT AL INCOME OF ASSESSEE BY TREATING THE ASSESSEE IS IN DEFAULT FOR NON DEDUCTION OF TDS BY AN ORDER DT. 31-03-2014 PASSED BY THE AO U/S . 201(1)/201(1A) OF THE ACT. 5. THE CIT-A AFTER CONSIDERING THE SUBMISSIONS OF T HE ASSESSEE PARTLY ALLOWED THE CLAIM OF ASSESSEE BY HOLDING NO TDS IS REQUIRED U/S. 194C AND 194J ON BROAD BAND CHARGES AND CONFIR MED THE PAYMENT MADE TO HCL INFINET AND HCL COMNET AND LIAB LE TO DEDUCTION OF TDS. 6. WE FURTHER FIND THAT THE CO-ORDINATE BENCH OF I TAT, MUMBAI IN THE CASE OF SUPRA , HELD THAT THERE IS NO REQUIREMENT OF DEDUCTION OF TDS ON PAYMENTS MADE TOWARDS INTERNET AND COMMUNICA TION CHARGES BY PLACING RELIANCE ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. KOTAK SECURITIES LTD REPORTED I N (2016) 383 ITR 1(SC). WE FIND THAT THE FACTS IN THE CASE OF SUPRA OF THE ITAT MUMBAI ARE SIMILAR WITH THAT OF THE CASE IN HAND. FOR BETT ER UNDERSTANDING, 3 ITA NO. 433/KOL/2016 WE MAY REFER TO THE PARA 11 OF THE ORDER DT. 21-06- 2017 OF THE ITAT MUMBAI IN THE CASE OF SUPRA, WHICH IS REPRODUCED HE REIN BELOW:- 11. WE HAVE HEARD THE AUTHORIZED REPRESENTATIVES F OR BOTH THE PARTIES, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL PR ODUCED BEFORE US. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ISSUE INVOLVED IN T HE PRESENT CASE AND FIND SUBSTANTIAL FORCE IN THE CONTENTIONS RAISED BY THE LD. A.R BEFO RE US. WE FIND THAT THE INTERNET AND COMMUNICATION CHARGES ARE NOT LIABLE FOR DEDUCTION OF ANY TAX AT SOURCE, AS THE SAME ARE MERELY IN THE NATURE OF PAYMENTS WHICH CANNOT BE CH ARACTERIZED AS HAVING BEEN MADE FOR AVAILING OF ANY SPECIAL, EXCLUSIVE OR CUSTOMIZED SE RVICES RENDERED TO THE USER OR CONSUMER WHO MAY APPROACH THE SERVICE PROVIDER FOR SUCH SERV ICE. WE FIND THAT THE ISSUE INVOLVED IN THE PRESENT CASE IS SQUARELY COVERED BY THE JUDGMEN T OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. KOTAK SECURITIES LTD. (2016) 383 IT R 1) (SC), WHEREIN THE HON'BLE APEX COURT HAD HELD AS UNDER:- '8. A READING OF THE VERY ELABORATE ORDER OF THE AS SESSING OFFICER CONTAINING A LENGTHY DISCOURSE ON THE SERVICES MADE AVAILABLE BY THE STO CK EXCHANGE WOULD GO TO SHOW THAT APART FROM FACILITIES OF A FACELESS SCREEN BASED TR ANSACTION, A CONSTANT UPGRADATION OF THE SERVICES MADE P A G E | 11 AVAILABLE AND SURVEILLAN CE OF THE ESSENTIAL PARAMETERS CONNECTED WITH THE TRADE INCLUDING THOSE OF A PARTI CULAR/ SINGLE TRANSACTION THAT WOULD LEAD CREDENCE TO ITS AUTHENTICITY IS PROVIDED FOR BY THE STOCK EXCHANGE.ALL SUCH SERVICES, FULLY AUTOMATED, ARE AVAILABLE TO ALL MEMBERS OF THE STOC K EXCHANGE IN RESPECT OF EVERY TRANSACTION THAT IS ENTERED INTO. THERE IS NOTHING SPECIAL, EXCLUSIVE OR CUSTOMISED SERVICE THAT IS RENDERED BY THE STOCK EXCHANGE. 'TECHNICAL SERVICES' LIKE 'MANAGERIAL AND CONSULTANCY SERVICE' WOULD DENOTE SEEKING OF SERVIC ES TO CATER TO THE SPECIAL NEEDS OF THE CONSUMER/USER AS MAY BE FELT NECESSARY AND THE MAKI NG OF THE SAME AVAILABLE BY THE SERVICE PROVIDER. IT IS THE ABOVE FEATURE THAT WOUL D DISTINGUISH/IDENTIFY A SERVICE PROVIDED FROM A FACILITY OFFERED. WHILE THE FORMER IS SPECIA L AND EXCLUSIVE TO THE SEEKER OF THE SERVICE, THE LATTER, EVEN IF TERMED AS A SERVICE, I S AVAILABLE TO ALL AND WOULD THEREFORE STAND OUT IN DISTINCTION TO THE FORMER. THE SERVICE PROVI DED BY THE STOCK EXCHANGE FOR WHICH TRANSACTION CHARGES ARE PAID FAILS TO SATISFY THE A FORESAID TEST OF SPECIALIZED, EXCLUSIVE AND INDIVIDUAL REQUIREMENT OF THE USER OR CONSUMER WHO MAY APPROACH THE SERVICE PROVIDER FOR SUCH ASSISTANCE/SERVICE. IT IS ONLY SERVICE OF THE ABOVE KIND THAT, ACCORDING TO US, SHOULD COME WITHIN THE AMBIT OF THE EXPRESSION 'TECHNICAL SERVICES' APPEARING IN EXPLANATION 2 OF SECTION 9(1)(VII) OF THE ACT. IN THE ABSENCE OF THE ABOVE DISTINGUIS HING FEATURE, SERVICE, THOUGH RENDERED, WOULD BE MERE IN THE NATURE OF A F ACILITY OFFERED OR AVAILABLE WHICH WOULD NOT BE COVERED BY THE AFORESAID PROVISION OF THE AC T. 9. THERE IS YET ANOTHER ASPECT OF THE MATTER WHICH, IN OUR CONSIDERED VIEW, WOULD REQUIRE A SPECIFIC NOTICE. THE SERVICE MADE AVAILABLE BY THE BOMBAY STOCK EXCHANGE [BSE ONLINE TRADING (BOLT) SYSTEM] FOR WHICH THE CHARGES IN QUE STION HAD BEEN PAID BY THE APPELLANT - ASSESSEE ARE COMMON SERVICES THAT EVERY MEMBER OF THE STOCK EXCHANGE IS NECESSARILY REQUIRED TO AVAIL OF TO CARRY OUT TRADING IN SECURI TIES IN THE STOCK EXCHANGE. THE VIEW TAKEN BY THE HIGH COURT THAT A MEMBER OF THE STOCK EXCHAN GE HAS AN OPTION OF TRADING THROUGH AN ALTERNATIVE MODE IS NOT CORRECT. A MEMBER WHO WA NTS TO CONDUCT HIS DAILY BUSINESS IN THE STOCK EXCHANGE HAS NO OPTION BUT TO AVAIL OF SU CH SERVICES. EACH AND EVERY TRANSACTION BY A MEMBER INVOLVES THE USE OF THE SERVICES PROVID ED BY THE STOCK EXCHANGE FOR WHICH A MEMBER IS COMPULSORILY REQUIRED TO PAY AN ADDITIONA L CHARGE (BASED ON THE TRANSACTION VALUE) OVER AND ABOVE THE CHARGES FOR THE MEMBERSHI P IN THE STOCK EXCHANGE. THE ABOVE FEATURES OF THE SERVICES PROVIDED BY THE STOCK EXCH ANGE WOULD MAKE THE SAME A KIND OF A FACILITY PROVIDED BY THE STOCK EXCHANGE FOR TRANSAC TING BUSINESS RATHER THAN A TECHNICAL SERVICE PROVIDED TO ONE OR A SECTION OF THE MEMBERS OF THE STOCK EXCHANGE TO DEAL WITH SPECIAL SITUATIONS FACED BY SUCH A MEMBER(S) OR THE SPECIAL NEEDS OF SUCH MEMBER(S) IN THE CONDUCT OF BUSINESS IN THE STOCK EXCHANGE. IN O THER WORDS, THERE IS NO EXCLUSIVITY TO THE SERVICES RENDERED BY THE STOCK EXCHANGE AND EAC H AND EVERY MEMBER HAS TO NECESSARILY AVAIL OF SUCH SERVICES IN THE NORMAL CO URSE OF TRADING IN SECURITIES IN THE STOCK EXCHANGE. SUCH SERVICES, THEREFORE, WOULD UNDOUBTED LY BE APPROPRIATE TO BE TERMED AS FACILITIES PROVIDED BY THE STOCK EXCHANGE ON PAYMEN T P A G E | 12 AND DOES NOT AMOUNT TO 'TECHNICAL SERVICES' PROVIDED BY THE STOCK EXCHANGE , NOT BEING SERVICES SPECIFICALLY SOUGHT FOR BY THE USER OR THE CONSUMER. IT IS THE AFORESAI D LATTER FEATURE OF A SERVICE RENDERED WHICH IS THE ESSENTIAL HALLMARK OF THE EXPRESSION ' TECHNICAL SERVICES' AS APPEARING IN EXPLANATION 2 TO SECTION 9(1)(VII) OF THE ACT. 10. FOR THE AFORESAID REASONS, WE HOLD THAT THE VIE W TAKEN BY THE BOMBAY HIGH COURT THAT THE TRANSACTION CHARGES PAID TO THE BOMBAY STOCK EX CHANGE BY ITS MEMBERS ARE FOR 'TECHNICAL SERVICES' RENDERED IS NOT AN APPROPRIATE VIEW. SUCH CHARGES, REALLY, ARE IN THE NATURE OF PAYMENTS MADE FOR FACILITIES PROVIDED BY THE STOCK EXCHANGE. NO TDS ON SUCH PAYMENTS WOULD, THEREFORE, BE DEDUCTIBLE UNDER SECTION 194J OF THE ACT.' 4 ITA NO. 433/KOL/2016 WE THUS IN LIGHT OF THE AFORESAID SETTLED POSITION OF LAW SO LAID DOWN BY THE HON'BLE APEX COURT, THEREFORE SET ASIDE THE ORDER OF THE CIT(A) HOLDING THE ASSESSEE AS BEING IN DEFAULT U/SS. 201(1)/201(1A) FOR FAILING TO DEDUCT TAX AT S OURCE ON PAYMENTS MADE TOWARDS INTERNET AND COMMUNICATION CHARGES. THE GROUND OF A PPEAL NO. 1 RAISED BY THE ASSESSEE BEFORE US IS ALLOWED. 7. IN VIEW OF THE ABOVE, WE SET ASIDE THE IMPUGNED ORDER OF THE CIT-A. ACCORDINGLY, THE GROUNDS RAISED BY THE ASSES SEE IN THE APPEAL ARE ALLOWED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 09- 02-2018 SD/- SD/- J. SUDHAKAR REDDY S.S. VISWANETHRA RAVI ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 09-02-2018 PP(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT/ASSESSEE: M/S. SHRIRAM INSIGHT SHARE BROK ERS LTD C/O D.J SHAH & CO. KALYAN BHAVAN, 2 ELGIN ROAD, KOL KATA-20. 2 RESPONDENT/REVENUE : THE JCIT (TDS), RANGE-59, 10B MIDDLETON ROW, KOLKATA-71. 3 . THE CIT(A), KOLKATA 4. 5. CIT , KOLKATA DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, SR.PS/H.O.O ITAT KOLKATA