ACIT 4(2), MUMBAI V. SARVIN CAPITAL P. LTD, MUMBAI

ITA 4853/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 54963 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2007-2008
• Appeal Filed On: 11-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P ARTH SARATHI NAIK
• Keywords: Non-deduction of tax

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH F, MUMBAI BEFORE SHRI N.V.VASUDEVAN(J.M) & SHRI RAJENDRA SIN GH (A.M) ITA NO.4853/MUM/2010(A.Y. 2007-08) THE ACIT, CIR.4(2), ROOM NO.642, 6 TH FLOOR, AAYKAR BHAVAN, M.K.ROAD, MUMBAI 400 020. (APPELLANT) VS. M/S. SARVIN CAPITAL PVT. LTD. 713, MAKER CHAMBER V, NARIMAN POINT, MUMBAI 400 021. PAN: AACS 5292B (RESPONDENT) APPELLANT BY : SHRI PARTHSARATHI NAIK RESPONDENT BY : NONE DATE OF HEARING : 18.08.2011 DATE OF PRONOUNCEMENT : ORDER PER N.V.VASUDEVAN, J.M, THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER DATED 18/3/2010 OF CIT(A)-8, MUMBAI RELATING TO ASSESSMEN T YEAR 2007-08. GROUNDS OF APPEAL RAISED BY THE REVENUE READ AS FO LLOWS: 1. (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE O F RS.7,14,013/- MADE U/S. 40(A)(IA) IN RESPECT OF VSAT, LEASELINE CHARGE S AND TRANSACTION CHARGES PAID TO STOCK EXCHANGE, WITHOUT APPRECIATIN G THE FACTS THAT THESE WERE COMPOSITE CHARGES FOR PROFESSIONAL AND T ECHNICAL SERVICES RENDERED BY THE STOCK EXCHANGE TO ITS MEMBERS AND T HE 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 SERVI CES 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 CASE AND IN LAW THE LD. CIT(A) ERRED IN IGNORING THE FACTS THAT USE OF TECHNOLOGY AND ITA NO.4853/MUM/2010(A.Y. 2007-08) 2 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 C ASE AND IN LAW, THE LD. CIT(A) ERRED IN IGNORING THE FACT THAT THE SERV ICES RENDERED BY THE BROKERS ARE NOT STANDARD SERVICES BUT SERVICES THAT HAS BEEN DEVELOPED TO CATER TO THE NEEDS OF THE BROKER COMMUNITY TO FA CILITATE TRADING. V) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW THE LD. CIT(A) HAS OVERLOOKED THE FACT THAT THE BROKERS HAVE IN SUBSEQUENT YEARS THEMSELVES STARTED DEDUCTING THE TDS ON SUCH PAYMENTS AND THAT THERE IS NO REASON TO GIVE A DIFFERENT TREATME NT IN THIS YEAR 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE IMPUGNED ORDER OF THE LD. CIT(A) IS CONTRARY TO LAW TO BE S ET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 2. THE ASSESSEE IS A COMPANY. IT IS ENGAGED IN TH E BUSINESS OF STOCK BROKING AND SHARE TRADING. THE GROUND RAISED BY THE REVENUE IS WITH REGARD TO NON-DEDUCTION OF TAX AT SOURCE IN RESPECT OF PAYMENT OF VSAT, LEASE LINE CHARGES AND TRANSACTION CHARGES BY THE A SSESSEE TO THE STOCK EXCHANGE. THE AO ON THE PRESUMPTION THAT THE VSAT, LEASE LINE CHARGES AND CONTRACT CHARGES PAID BY THE ASSESSEE TO THE ST OCK EXCHANGE WAS IN THE NATURE OF A FEES FOR PROFESSIONAL AND TECHNICAL SER VICES RENDERED, WAS OF THE VIEW THAT THE ASSESSEE OUGHT TO HAVE DEDUCTED TAX A T SOURCE WHILE MAKING PAYMENT TO THE STOCK EXCHANGE. SINCE THE ASSESSEE DID NOT DEDUCT TAX AT SOURCE THE EXPENDITURE ON ACCOUNT OF LEASE LINE CHA RGES DEBITED BY THE ASSESSEE IN THE P&L ACCOUNT WAS HELD TO BE NOT DEDU CTIBLE IN COMPUTING THE TOTAL INCOME BY VIRTUE OF THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. ON APPEAL BY THE ASSESSEE THE CIT(A) HELD THAT VSAT A ND LEASE LINE CHARGES ARE NOT IN THE NATURE OF FEES FOR TECHNICAL SERVICES AN D DELETED THE ADDITION MADE BY THE AO. 3. AGGRIEVED BY THE ORDER OF THE CIT(A) THE REVENUE HAS PREFERRED GROUND NO.2 BEFORE THE TRIBUNAL. ITA NO.4853/MUM/2010(A.Y. 2007-08) 3 4.. AT THE TIME OF HEARING IT WAS AGREED BY BOTH TH E PARTIES THAT THE ISSUE AS TO WHETHER VSAT AND LEASE LINE CHARGES IS IN TH E NATURE OF FEES FOR PROFESSIONAL AND TECHNICAL SERVICES RENDERED AND A S TO WHETHER PROVISIONS OF SECTION 194J OF THE ACT WOULD APPLY AND CONSEQUENTL Y DISALLOWANCE COULD BE MADE FOR NON DEDUCTION OF TAX AT SOURCE UNDER SECTI ON 40(A)(IA) OF THE ACT COULD BE MADE HAS ALREADY BEEN DECIDED BY THIS TRIB UNAL IN THE CASE OF DCIT VS. ANGEL BROKING LTD. (2010) 35 SOT 457 (MUM). TH E TRIBUNAL IN THE AFORESAID DECISIONS HAS HELD THAT VSAT AND LEASE LI NE CHARGES ARE NOT IN THE NATURE OF FEES FOR TECHNICAL SERVICES RENDERED SO A S TO ATTRACT THE PROVISIONS OF SECTION 194J OF THE ACT. IN VIEW OF THE ABOVE W E DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) DELETING THE ADDITION MA DE BY THE AO. CONSEQUENTLY THE GROUND RAISED BY THE REVENUE IS DISMISSED. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 26 TH DAY OF AUG. 2011. SD/- SD/- (RAJENDRA SINGH ) (N.V.VASUDEVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED. 26TH AUG.2011 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3 . THE CIT CITY CONCERNED 4. THE CIT(A)- CONCERNED 5. THE D.RF BENCH. (TRUE COPY) BY ORDER ASST. REGISTRAR, I TAT, MUMBAI BENCHES MUMBAI. VM.