ITO, Ward-52(1), Kolkata, Kolkata V. Smt Usha Chowdhury, Kolkata

ITA 511/KOL/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83155 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 6 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-10-2014
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 03-04-2012
• Court: TRIBUNAL
• Department Lawyers: DILI P KR RAKSHIT
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH A , KOLKATA [BEFORE HONBLE SRI MAHAVIR SINGH, JM & HONBLE SRI SHAMIM YAHYA, AM] ITA NOS.511&512/KOL/2012 ASSESSMENT YEARS : 2007-08 & 2008-09 ( APPELLANT ) (RESPONDENT) I.T.O., WARD-52(1), .. -VS- SMT.USHA CHOWDHURY KOLKATA KOLKATA (PAN:ACSPC 5918 K) C.O.NOS.64&65/KOL/2012 A/O ITA NOS.511&512/KOL/2012 ASSESSMENT YEARS : 2007-08 & 2008-09 ( CROSS OBJECTOR) (RESPONDENT) SMT.USHA CHOWDHURY -VS- I.T.O., WARD-52(1) KOLKATA KOLKATA (PAN:ACSPC 5918 K) FOR THE DEPARTMENT SHRI DILIP KR. RAKSHIT, JCIT, SR.DR FOR THE ASSESSEE SHRI SUBASH AGARWAL, ADVOCATE DATE OF HEARING : 20.10.2014 DATE OF PRONOUNCEMENT :.22/ 10/2014. ORDER PER BENCH THESE APPEALS BY THE REVENUE AND CROSS OBJECTIONS B Y THE ASSESSEE EMANATE FROM THE ORDERS OF LD. C.I.T.(A)- XXXIII, KOLKATA F OR ASSESSMENT YEARS 2007-08 AND 2008-09 RESPECTIVELY. SINCE THE ISSUES ARE COMMON A ND THE APPEALS WERE HEARD TOGETHER THESE ARE DISPOSED OF BY A CONSOLIDATED OR DER FOR THE SAKE OF CONVENIENCE. 2. THE COMMON ISSUE RAISED IN THE REVENUES APPEAL IS THAT THE LD.CIT(A) ERRED IN DELETING THE ADDITION MADE BY REDEFINING THE TRANSA CTION INVOLVED IN THIS CASE AS SUB- BROKERAGE INSTEAD OF COMMISSION, IGNORING THE FIND INGS OF THE AO THAT THE TRANSACTION IN QUESTION WAS NOT RELATING TO SECURITIES AS ENV ISAGED IN EXPLANATION (I) OF SEC.194H. ITA.NOS.511&512/K/2012 &CO.NOS.64&65/KOL/2012 SMT.USHA CHOWDHURY A. YRS.2007-08 & 2008-09 2 2.1. THE COMMON ISSUE RAISED BY THE ASSESSEE IN THE CROSS OBJECTION IS AS UNDER :- I.FOR THAT THE PROVISION OF SEC.40(A)(IA) IS NOT APPLICABLE IN THE INSTANT CASE IN AS MUCH AS THE ENTIRE EXPENSES UNDER THE HEAD COMMISS ION WERE PAID WITHIN THE FINANCIAL YEAR AND NO SUCH AMOUNTS WERE OUTSTANDING . REVENUES APPEAL : 3. SINCE THE ISSUES ARE COMMON WE ARE ADJUDICATING THE ISSUE WITH REFERENCE TO THE FACTS AND FIGURES FOR A.YR.2007-08. IN THIS CASE AO NOTED THAT THE ASSESSEE HAS DEBITED RS.18,00,040/- TOWARDS COMMISSION AND INCENTIVE. AO ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE SAID EXPENDITURE WILL NOT BE ADDED BA CK AS THE SAME CONTRAVENES THE PROVISION OF SECTION 40(A)(IA) OF THE ACT. THE ASSE SSEE REPLIED THAT THE EXPENDITURE MAY BE TREATED AS BUSINESS PROMOTIONAL EXPENDITURE. ON FURTHER ENQUIRY FROM A.O., THE ASSESSEE FURTHER SUBMITTED THAT NO TAX AT SOURC E IS DEDUCTIBLE ON COMMISSION/BROKERAGE IN SUCH CASES. ASSESSEE ALSO F URTHER SUBMITTED AS UNDER .HENCE NO TAX AT SOURCE IS DEDUCTIBLE ON COMMIS SION OR BROKERAGE IN SUCH CASES. INCIDENTALLY, WE WOULD ALSO LIKE TO STATE TH AT ALL MUTUAL FUNDS (ASSET MANAGEMENT COMPANIES) HAVE BEEN MAKING COMMISSION O R BROKERAGE PAYMENT TO THEIR DISTRIBUTORS WITHOUT DEDUCTING TAX AT SOURCE. 5. SINCE THE BUSINESS ACTIVITIES ARE MAINLY AND EXC LUSIVELY CENTRED ON SECURITIES, THE PAYMENTS RECEIVED OR RECEIVABLE IN CONNECTION WITH SUCH ACTIVITIES, DOES IN NO CASE FALL WITHIN THE AMBIT OF SECTION 194H AND HENCE NO TAX I S DEDUCTIBLE AT SOURCE AND REMAIN OUTSIDE THE SCOPE OF SECTION 40(A)(IA) OF THE INCOM E TAX ACT, 1961. 3.1. HOWEVER, AO WAS NOT SATISFIED. HE CONCLUDED AS UNDER :- HER REPLY RECEIVED ON 29.11.2009 SHOWS SHE VIRTUAL LY ADMITTED THAT THE EXPENSE IS UNDER THE HEAD COMMISSION AS SHE ACTUALLY EMPHASIZE D ON SECTION 194H(I) WHICH STATES COMMISSION OR BROKERAGE INCLUDES ANY PAYMENT RECE IVED OR RECEIVABLE, DIRECTLY OR INDIRECTLY, BY A PERSON ACTING ON BEHALF OF ANOTHER PERSON FOR SERVICES RENDERED (NOT BEING PROFESSIONAL SERVICES) OR FOR TO ANY TRANSACT ION RELATING TO ANY ASSET, VALUABLE ARTICLE OR THING, NOT BEING SECURITIES. PARTIES WHO ARE PAID COMMISSION IN THEIR DISPOSITI ONS OR IN REPLY TO NOTICE /S 133(6) REPORTED THAT THEY HAVE RECEIVED COMMISSION FOR GIV ING BUSINESS TO USHA INVESTMENT & FINANCIAL SERVICES. THERE IS NO TRANSACTION RELATIN G TO SECURITIES BETWEEN THE ASSESSEE AND HER PARTIES WHO ARE PAID COMMISSION. HER PARTIE S SIMPLY BROUGHT SOME CONTACTS FOR THE ASSESSEE FOR WHICH THEY WERE PAID COMMISSION. H ENCE, ASSESSEE IS LIABLE TO DEDUCT TAX AT SOURCE U/S 194H. AS ASSESSEE FAILED TO DO SO , COMMISSION PAID OF RS.15,94,310/- (EXCLUDING COMMISSION PAID TO INDRANI CHAKRABORTY & PARAMITA PIPLAI) IS DISALLOWED U/S 40(A)(IA). ITA.NOS.511&512/K/2012 &CO.NOS.64&65/KOL/2012 SMT.USHA CHOWDHURY A. YRS.2007-08 & 2008-09 3 4. AGAINST THE ABOVE ORDER ASSESSEE APPEALED BEFORE LD. CIT(A).THE ASSESSEE IN HER SUBMISSION BEFORE LD. CIT(A) SUBMITTED THAT SHE WAS MAINLY ENGAGED IN DISTRIBUTION OF UNITS OF MUTUAL FUNDS AND THESE MUT UAL FUNDS ARE CONSIDERED AS SECURITIES AS PER PROVISIONS OF SECTION 194H AND NO TAX WAS DEDUCTED AT SOURCE FROM BROKERAGE BY MUTUAL FUND COMPANIES. IT WAS FURTHER SUBMITTED THAT SINCE THE ASSESSEE HAD RECEIVED BROKERAGE WITHOUT ANY DEDUCTION AT SOU RCE IN VIEW OF PROVISIONS OF SECTION 194H THE PAYMENT OF SUB-BROKERAGE ON SIMILA R LINES ALSO GETS EXEMPTION UNDER THE PROVISION OF SECTION 194H. ASSESSEE FURTHER REF ERRED TO PROVISION OF SECTION 194H AND ALSO RELIED UPON THE DECISION OF ITAT, MUMBAI I N ITA NO.320/MUM/2009 IN THE CASE OF ACIT VS M/S.S.J.INVESTMENT AGENCIES PVT. LT D. CONSIDERING THE ABOVE THE LD. CIT(A) DELETED THE ADDITION AND HELD AS UNDER :- I HAVE CONSIDERED THE SUBMISSION MADE. ON GOING TH ROUGH THE DECISION OF THE ITAT MUMBAI IN THE CASE OF M/S S.J.INVESTMENT AGENCIES P .LTD. (SUPRA) RELIED UPON BY THE APPELLANT, IT IS SEEN THAT THE IDENTICAL ISSUE WAS INVOLVED IN THAT CASE. THE TRIBUNAL HAS, AFTER ANALYZING PROVISION OF SECTION 194H, HELD TH AT THE SUB-BROKERAGE PAID IN CONNECTION WITH THE SERVICES RENDERED IN THE COURSE OF BUSINESS OF BUYING AND SELLING OF UNITS OF MUTUAL FUND OR IN RELATION TO TRANSACTION PERTAINING TO MUTUAL FUND IS NOT COVERED BY PROVISIONS OF TAX AT SOURCE IN VIEW OF E XPLANATION (I) TO SECTION 194H. THE FACTS IN THE APPELLANTS CASE ARE SIMILAR. THOUGH T HE PAYMENT UNDER CONSIDERATION HAS BEEN CALLED AS COMMISSION/INCENTIVE INSTEAD OF SUB- BROKERAGE, ITS NATURE IS OF SUB- BROKERAGE PAID IN CONNECTION WITH THE SERVICES REND ERED IN THE COURSE OF BUSINESS OF BUYING AND SELLING OF UNITS OF MUTUAL FUND OR IN RE LATION TO TRANSACTION PERTAINING TO MUTUAL FUND UNITS. THE ASSESSING OFFICER HAS STRESS ED ON THE FACT THAT PAYMENT WAS IN NATURE OF COMMISSION TO THE INTRODUCERS WHO BROUGHT THE INVESTORS TO THE APPELLANT. HOWEVER, EVEN THEN IT REMAINS TO BE COMMISSION PAID IN CONNECTION WITH THE SERVICES RENDERED IN THE COURSE OF BUSINESS OF BUYING AND SE LLING OF UNITS OF MUTUAL FUND OR IN RELATION TO TRANSACTION PERTAINING TO MUTUAL FUND U NITS, AS THE INVESTORS WERE BROUGHT FOR PURPOSE OF CARRYING OUT TRANSACTIONS IN MUTUAL FUND UNITS ONLY. ACCORDINGLY SUCH COMMISSION IS COVERED BY THE EXCLUSION FROM TDS PRO VIDED IN EXPLANATION (I) TO SECTION 194H. THERE IS NO MATERIAL TO EVEN SUGGEST THAT THE COMMISSION HAD BEEN PAID IN CONNECTION WITH ANY OTHER ACTIVITY. RESPECTFULLY FO LLOWING THE CITED DECISION, I HOLD THAT COMMISSION AND INCENTIVE OF RS.15,94,310/- WAS NOT LIABLE FOR DEDUCTION OF TAX AT SOURCE. THEREFORE, THE DISALLOWANCE MADE U/S 40(A)( IA) IS DELETED. AGAINST THE ABOVE THE REVENUE IS APPEAL BEFORE US. 5. WE HAVE HEARD BOTH THE COUNSEL AND CAREFULLY PER USED THE RECORDS. THE LD. COUNSEL OF THE ASSESSEE RELIED UPON THE ORDER OF LD . CIT(A) AND REITERATED THE RELIANCE UPON THE DECISION OF ITAT MUMBAI IN THE CASE OF M/S S.J.INVESTMENT AGENCIES (P) LTD. (SUPRA). THE LD. COUNSEL OF THE ASSESSEE ALSO PLACED RELIANCE UPON THE DECISION OF ITA.NOS.511&512/K/2012 &CO.NOS.64&65/KOL/2012 SMT.USHA CHOWDHURY A. YRS.2007-08 & 2008-09 4 ITAT, DELHI IN ITA NO.1951/DEL/2012 IN THE CASE OF ITO VS MITTAL INVESTMENT & COMPANY VIDE ORDER DATED 07.12.2012 FOR A SIMILAR P ROPOSITION. 5.1. WE FIND THAT IT IS NOT DISPUTED BY THE REVENUE THAT THE COMMISSION/BROKERAGE RECEIVED BY THE ASSESSEE WAS IN CONNECTION WITH THE MUTUAL FUND UNITS. IN THESE CIRCUMSTANCES THE ISSUE INVOLVED IN THIS CASE IS SQ UARELY COVERED BY THE DECISION OF THE TRIBUNAL IN THE CASE OF M/S. S.J.INVESTMENT AGENCIE S (P) LTD. (SUPRA). WE MAY GAINFULLY REFER TO THE TRIBUNALS DECISION IN THIS REGARD AS UNDER :- 6. AFTER CONSIDERING THE ARGUMENTS AND SUBMISSION WE AGREE WITH THE FINDINGS OF THE CIT(A). THE PROVISIONS OF SECTION 194H ARE AS UNDER :- 194H ANY PERSON, NOT BEING AN INDIVIDUAL OR A HIND U UNDIVIDED FAMILY, WHO IS RESPONSIBLE FOR PAYING, ON OR AFTER THE 1 ST DAY OF JUNE, 2001 TO A RESIDENT, ANY INCOME BY WAY OF COMMISSION (NOT BEING INSURANCE COMMISSION R EFERRED TO IN SECTION 194D) OR BROKERAGE, SHALL, AT THE TIME OF CREDIT OF SUCH INC OME TO THE ACCOUNT OF THE PAYEE OR AT THE TIME OF PAYMENT OF SUCH INCOME IN CASH OR BY TH E ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE, WHICHEVER IS EARLIER, DEDUCT INCOME-TAX THEREON AT THE RATE OF [TEN] PER CENT: PROVIDED PROVIDED. PROVIDED EXPLANATION FOR THE PURPOSES OF THIS SECTION, - (I) COMMISSION OR BROKERAGE INCLUDES ANY PAYMENT RECE IVED OR RECEIVABLE, DIRECTLY OR INDIRECTLY, BY A PERSON ACTING ON BEHALF OF ANOT HER PERSON FOR SERVICES RENDERED (NOT BEING PROFESSIONAL SERVICES) OR FOR ANY SERVICES IN THE COURSE OF BUYING OR SELLING OF GOODS OR IN RELATION TO ANY TRANSACTION RELATING TO ANY ASSET, VALUABLE ARTICLE OR THING, NOT BEING SECURITIES ; (II) .. (III) . (IV) . AS CAN BE SEEN FROM THE ABOVE PROVISION, THE COMMIS SION OR BROKERAGE DEFINITION DOES NOT INCLUDE TRANSACTIONS IN SECURITIES. THERE IS NO DOUBT THAT MUTUAL FUNDS ARE CATEGORIZED AS SECURITIES ON WHICH THERE IS NO OBJE CTION FROM THE REVENUE EITHER BEFORE THE A.O. OR BEFORE THE CIT(A). IN FACT THE CIT(A) A LSO GIVES A FINDING THAT THE A.O. HAS NOT DISPUTED THAT UNITS OF MUTUAL FUNDS ARE SECURIT IES AS PER SECURITIES CONTRACTS (REGULATION) ACT, 1956. ASSESSEE IS IN THE BUSINESS OF MUTUAL FUNDS DISTRIBUTION AND INVESTMENT AGENT. FROM THE DETAILS OF BROKERAGE REC EIVED AND SERVICE TAX DEDUCTED THERE FROM IT CAN BE SEEN THAT OUT OF THE BROKERAGE INCOM E OF RS.8,28,56,873/- THE BROKERAGE INCOME OF RS.8,27,47,095/- IS FROM MUTUAL FUNDS. TH E BALANCE BROKERAGE OF RS.1,09,779/- IS TOWARDS BONDS AND FIXED DEPOSITS. THE SUB- BROKERAGE IS PAID IN RELATION TO UNITS OF MUTUAL FUNDS. FROM THE DETAILS PLACED ON RECORD, WE ARE CONVINCED THAT THE SUB-BROKERAGE PAID IS CONNECTED WITH THE S ERVICES RENDERED IN THE COURSE OF BUYING AND SELLING OF UNITS OF MUTUAL FUNDS OR IN R ELATION TO TRANSACTIONS PERTAINING TO MUTUAL FUNDS AND AS PER THE PROVISIONS OF SECTION 1 94H EXPLANATION (I) THESE ARE NOT COVERED BY THE PROVISION FOR DEDUCTION OF TAX AT SO URCE. THERE IS NOTHING ON RECORD TO ITA.NOS.511&512/K/2012 &CO.NOS.64&65/KOL/2012 SMT.USHA CHOWDHURY A. YRS.2007-08 & 2008-09 5 INDICATE THAT THE SUB-BROKERAGE IS PAID FOR ANY OTH ER SERVICES OTHER THAN RELATING TO SECURITIES. THE A.O. ALSO ACCEPTS THAT THE BROKERAG E RECEIVED BY THE ASSESSEE IS NOT COVERED BY TDS WHEREAS HE WAS OF THE OPINION THAT T HE SUB-BROKERAGE PAID IS COVERED BY THE PROVISIONS. WE ARE UNABLE TO UNDERSTAND THIS LOGIC OF THE A.O. FOR THESE REASONS, WE ARE OF THE OPINION THAT THE ORDER OF THE CIT(A) DOES NOT REQUIRE ANY MODIFICATION AND ACCORDINGLY THE SAME IS CONFIRMED. REVENUES GROUND S ON THIS ISSUE ARE ACCORDINGLY REJECTED. 5.2. WE FIND THAT THE FACTS OF THE PRESENT CASE ARE ANALOGOUS DEALS WITH THE DECISION OF THE TRIBUNAL AS ABOVE. IT IS ALSO AN ADMITTED PO SITION HERE THAT THE ASSESSEE WAS DEALING IN MUTUAL FUND UNITS. IT HAS ALSO RECEIVED BROKERAGE WHICH WAS NOT COVERED BY TDS. HOWEVER, THE SUB-BROKERAGE IT PAID WAS CONSIDE RED BY THE AO AS LIABLE FOR DEDUCTION. HOWEVER AS EMANATING FROM THE CASE LAW D ISCUSSED ABOVE THE BROKERAGE/COMMISSION PAID IN CONNECTION WITH THE SE CURITIES WAS NOT LIABLE FOR DEDUCTION OF TAX AT SOURCE. IN THESE CIRCUMSTANCES RESPECTFULLY FOLLOWING THE PRECEDENT AS ABOVE WE UPHOLD THE ORDER OF LD. CIT(A). 6. IN THE RESULT THE APPEALS OF THE REVENUE STAND D ISMISSED. ASSESSEES CROSS OBJECTION : 7. IN THE CROSS OBJECTION THE ASSESSEE HAS AGITATED THAT AS NO TDS WAS EXIGIBLE UNDER THE HEAD COMMISSION IN AS MUCH AS COMMISSIO N WERE PAID WITHIN THE FINANCIAL YEAR AND NO SUCH AMOUNT WAS OUTSTANDING AS STATED A BOVE. SINCE THE REVENUES APPEALS HAVE ALREADY BEEN DISMISSED THE ADJUDICATIO N OF THE CROSS OBJECTION OF THE ASSESSEE IS OF ACADEMIC INTEREST. HENCE WE ARE NOT GOING INTO THE SAME. 8. IN THE RESULT THE APPEALS OF THE REVENUE STAND D ISMISSED AND THE CROSS OBJECTIONS OF THE ASSESSEE ARE HELD TO BE INFRUCT UOUS. ORDER PRONOUNCED IN THE COURT ON 22.10.2014. SD/- SD/- [ MAHAVIR SINGH ] [SHAMIM YAHYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 22.10.2014. R.G.(.P.S.) ITA.NOS.511&512/K/2012 &CO.NOS.64&65/KOL/2012 SMT.USHA CHOWDHURY A. YRS.2007-08 & 2008-09 6 COPY OF THE ORDER FORWARDED TO: 1. SMT.USHA CHOWDHURY, 56, CENTRAL ROAD, KOLKATA-70003 2. 2 I.T.O., WARD-52(1), KOLKATA. 3 . CIT(A)-XXXIII, KOLKATA. 4. CIT KOLKATA 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY, BY ORDER, ASST. REGISTRAR , ITAT, KOLKATA BENCHES