M/S. ARCADIA SHARE & STOCK BROKERS P. LTD., MUMBAI V. ADDL.COM OF INCOME TAX 4(1), MUMBAI

ITA 548/MUM/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4985 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 7 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-09-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Next Hearing Date: 29-08-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 20-01-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: O P SINGH
• Assessee Lawyers: NEELAM C JADHAV; DR K SHIVARAM AJAY R SINGH
• Keywords: Depreciation; Business expenditure; Earning of tax free income; Revenue expenditure
• Section: 14A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL I II I BENCH, BENCH, BENCH, BENCH, MUMBAI MUMBAI MUMBAI MUMBAI , . . . ! ! ! ! , ' ' ' ' #$ #$ #$ #$ BEFORE BEFORE BEFORE BEFORE SHRI SHRI SHRI SHRI VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM & & & & SHRI SHRI SHRI SHRI N. K. BILLAIYA N. K. BILLAIYA N. K. BILLAIYA N. K. BILLAIYA, AM , AM , AM , AM ./ I.T I.TI.T I.T.A. NO. .A. NO. .A. NO. .A. NO. 548/MUM/2011 548/MUM/2011 548/MUM/2011 548/MUM/2011 ( % % % % & & & & / ASSESSMENT YEAR : 2007-08) M/S ARCADIA SHARE & STOCK BROKERS P. LTD. 328, NINAD, 1 ST FLOOR BLG. NO. 7, SERVICE ROAD, NEAR BHAVISHYA NIDHI BHAVAN BANDRA(E)-400051 / VS. THE ADDL. COMMISSIONER OF INCOME TAX, RANGE 4(1) AAYKAR BHAVAN, M. K. ROAD, MUMBAI ( '( / APPELLANT APPELLANT APPELLANT APPELLANT) .. ( )*'( / RESPONDENT RESPONDENT RESPONDENT RESPONDENT) ./ I.T.A. NO. I.T.A. NO. I.T.A. NO. I.T.A. NO. 1083/MUM/2011 1083/MUM/2011 1083/MUM/2011 1083/MUM/2011 ( % % % % & & & & / ASSESSMENT YEAR : 2007-08) THE ADDL. COMMISSIONER OF INCOME TAX, RANGE 4(1) AAYKAR BHAVAN, M. K. ROAD, MUMBAI / VS. M/S ARCADIA SHARE & STOCK BROKERS P. LTD. 328, NINAD, 1 ST FLOOR BLG. NO. 7, SERVICE ROAD, NEAR BHAVISHYA NIDHI BHAVAN BANDRA(E)-400051 $' ' ./ + ./ PAN/GIR NO. : AAACA4562G ( '( / APPELLANT APPELLANT APPELLANT APPELLANT) .. ( )*'( / RES RES RES RESPONDENT PONDENT PONDENT PONDENT) '( '( '( '( , , , , / APPELLANT BY : DR. K. SHIVARAM, AJAY R. SINGH & NEELAM C. JADHAV )*'( )*'( )*'( )*'( - -- - , , , , /RESPONDENT BY : SHRI O. P. SINGH - -- - .' .' .' .' / DATE OF HEARING : 29 TH AUGUST 2013 /0& /0& /0& /0& - -- -.' .' .' .' /DATE OF PRONOUNCEMENT: 13 TH SEPTEMBER 2013 #1 / O R D E R PER : , . . / VIJAY PAL RAO, JM THIS CROSS APPEALS ARE DIRECTED AGAINST THE ORDER DATED 16.11.2010OF COMMISSIONER OF INCOME TAX(APPEALS) FO R THE ASSESSMENT YEAR 2007-08. ITA NO. 548 & 1083/M/2011 ARCADIA SHARE & STOCK BROKERS P. LTD. 2 IN APPEAL ITA NO. 548 IN APPEAL ITA NO. 548 IN APPEAL ITA NO. 548 IN APPEAL ITA NO. 548/M/2011 /M/2011 /M/2011 /M/2011 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS AS UNDER: 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) ERRED IN DISALLOWING RS. 12,48,083/-, BEING THE AMOUNT OF FO REIGN TRAVELLING EXPENSES INCURRED BY THE APPELLANT WHOLL Y AND EXCLUSIVELY FOR THE PURPOSES OF ITS BUSINESS. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DISALLOWING U/S. 40(A)(IA) AN AMOUNT OF RS. 9,56,08 1/-, BEING THE AMOUNT OF PROFESSIONAL FEES PAYABLE TO MR. JASWINDE R SACHDEV. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN TREATING THE EXPENSES OF RS. 52,691/- INCURRED ON P URCHASE OF SOFTWARE, AS CAPITAL IN NATURE. 4. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN RESTRICTING THE CLAIM OF DEPRECIATION ON UPS @ 15% AS AGAINST THE DEPRECIATION CLAIMED @ 60% BY THE APPELLANT. 3. GROUND NO. 1 REGARDING DISALLOWANCE OF FOREIGN T RAVELLING EXPENSES. THE ASSESSEE HAS CLAIMED AN AMOUNT OF ` 12,48,083/- AS FOREIGN TRAVELLING EXPENSES. THE ASSESSING OFFICER HAS DISALLOWED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THE ASSESSEE HAS NOT PRODUCED AN Y EVIDENCE TO SHOW THAT THE EXPENSES WERE INCURRED FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. ON APPEAL, THE CIT(A) HAS CONFIRMED THE D ISALLOWANCE MADE BY THE AO BY HOLDING THAT THE EXPENSES ARE NOTHING BUT PERSONAL EXPENSES IT IS NOT ALLOWABLE AS BUSINESS EXPENDITURE. 4. BEFORE US THE LD. AR OF THE ASSESSEE HAS POINTED OUT THAT THE ASSESSEE HAS ALREADY PAID FBT ON THE FOREIGN TRAVEL LING EXPENSES. HE HAS FURTHER SUBMITTED THAT FOR THE ASSESSMENT YEAR 2006 -07 THE TRIBUNAL HAS CONSIDERED AN IDENTICAL ISSUE VIDE ORDER DATED 25.1 .2012 IN ITA NO. 1972/M/2010 AND SET ASIDE THE ISSUE TO THE RECORD O F THE ASSESSING OFFICER ITA NO. 548 & 1083/M/2011 ARCADIA SHARE & STOCK BROKERS P. LTD. 3 FOR VERIFICATION OF THE FACT OF PAYMENT OF FRINGE B ENEFIT TAX. ACCORDINGLY, THE LD. AR HAS PLEADED THAT THE ISSUE MAY BE REMITT ED TO THE RECORD OF THE AO FOR VERIFICATION OF PAYMENT OF FRINGE BENEFIT TA X ON THIS EXPENDITURE. ON THE OTHER HAND, THE LD. DR HAS FAIRLY SUBMITTED THA T THE ISSUE MAY BE REMITTED TO THE AO FOR LIMITED PURPOSE OF VERIFICAT ION OF PAYMENT OF FRINGE BENEFIT TAX BY THE ASSESSEE. 5. HAVING CONSIDERED THE RIVAL SUBMISSIONS AND CARE FULLY PERUSAL OF THE RELEVANT RECORD WE NOTE THAT FOR THE ASSESSMENT YEA R 2006-07 THE TRIBUNAL HAS CONSIDERED AND DECIDED AN IDENTICAL IS SUE IN PARA 3 AS UNDER: 3. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PART IES AND PERUSED THE RECORDS. EVEN BEFORE ITS ALSO NOTHING HAS BEEN PRODUCED BY THE ASSESSEE EXCEPT XEROX COPIES OF THE PASS PORT AND C OPY OF LEDGER A/C THE MAIN THRUST OF THE ARGUMENT OF THE LD. COUN SEL FOR THE ASSESSEE IS THAT SHRI NITIN BRAHAMBATT IS THE CEU O F THE ASSESSEE COMPANY WHO LOOKS AFTER THE ENTIRE OPERATIONS OF TH E ASSESSEE. HE REITERATED THE ARGUMENTS MADE BEFORE THE AUTHORITIE S BELOW. THE ASSESSEE COULD NOT CONTROVERT THE FINDINGS OF THE L D. CIT (A) THAT SHRI ARJUN MUDDA AND SHRI NITIN BRAHAMBATT HAD GONE TO THE FOREIGN TOURS ALONG WITH THE FAMILY MEMBERS, IF THE ASSESSE E IS CLAIMING THE EXPENDITURE THEN THE BURDEN IS ON THE ASSESSEE TO A T LEAST PROVE BY GIVING THE PRIMARY EVIDENCE IN RESPECT OF THE PURPO SE OF THAT EXPENDITURE. GIVING OUR ANXIOUS CONSIDERATION TO TH E FINDINGS, IN OUR OPINION NO INTERFERENCE IS CALLED FOR. WE, THEREFOR E, CONFIRM THE ORDER OF THE LD. CIT(A). THE ALTERNATE ARGUMENT OF THE LD. COUNSEL IS THAT THE ASSESSEE HAS PAID THE FBT ON THE TRAVELLIN G EXPENDITURE. WE HAVE PERUSED THE COPY OF THE RETURN FILED BY THE ASSESSEE FOR THE FRINGE BENEFIT TAX (34 TO 37). THE ASSESSEE HAS SHOWN TOUR AND TRAVEL EXPENDITURE TO THE EXTENT OF 13,66,492/- BUT NO DETAILS ARE ON RECORD. AS PER THE CIRCULAR NO.8 OF 2005 ISSUED BY THE CBDT DATED 29.8.2005 277 ITR (STATUTE) 20 IF THE ASSESSEE HAS PAID THE FRINGE BENEFIT TAX ON THE EXPENDITURE THEN NO DISALLOWANCE CAN BE MADE. AS THE REQUIRED DETAILS ARE NOT BEFORE US, IT IS VE RY DIFFICULT TO ARRIVE ON ANY FINDING EN THIS ISSUE. WE, THEREFORE, RESTOR E THIS ISSUE TO THE FILE OF THE A.O. FOR LIMITED PURPOSE TO VERIFY IF T HE ASSESSEE HAS PAID THE FRINGE BENEFIT TAX THEN THE SAME SHOULD NOT BE DISALLOWED AS PER THE CBDT CIRCULAR NO.8 OF 2005 DATED 29.S.2005. ACCORDINGLY, GROUND NO. 1 IS ALLOWED FOR THE STATISTICAL PURPOSE S. ITA NO. 548 & 1083/M/2011 ARCADIA SHARE & STOCK BROKERS P. LTD. 4 6. IT IS CLEAR THAT IF THE EXPENDITURE IN QUESTION IS SUBJECTED TO PAYMENT OF FRINGE BENEFIT TAX THEN AS PER CIRCULAR NO. 8 OF 2005 DATED 29.8.2005 NO DISALLOWANCE CAN BE MADE. ACCORDINGLY, IN THE FACTS AND CIRCUMSTANCES OF THE CASE THIS ISSUE IS SET ASIDE TO THE RECORD OF T HE ASSESSING OFFICER FOR LIMITED PURPOSE OF VERIFICATION OF PAYMENT OF FRING E BENEFIT TAX ON THIS AMOUNT OF EXPENDITURE AND THEN DECIDE THE ALLOWABIL ITY OF THE SAME IN TERMS OF CBDT CIRCULAR NO. 8 OF 2005. 7. GROUND NO. 2 REGARDING DISALLOWANCE OF PROFESSIO NAL FEES U/S 40(A)(IA) OF INCOME TAX ACT. WE HAVE HEARD THE LD. AR AS WELL LD. DR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. FOR THE ASSESSMENT YEAR 2006-07 THE ASSESSING OFFICER HAS DISALLOWED THE PR OFESSIONAL FEE OF ` 9,56,081/- U/S 40(A)(IA) ON THE GROUND THAT THE ASS ESSEE HAS NOT PAID/DEDUCTED TDS ON THE PROFESSIONAL FEES PAID TO ONE MR. JASWINDER SACHDEV. SINCE THE ASSESSEE CLAIMED THIS EXPENDITUR E FOR THE ASSESSMENT YEAR 2006-07 THEREFORE, IT WAS NOT CLAIMED FOR THE ASSESSMENT YEAR UNDER CONSIDERATION HOWEVER, THE CLAIM OF THE ASSESSEE FO R THE ASSESSMENT YEAR 2006-07 HAS BEEN DISALLOWED ON THE GROUND OF NON-DE DUCTION/PAYMENT OF TDS. THE DISALLOWANCE FOR THE ASSESSMENT YEAR 2006- 07 HAS BEEN CONFIRMED BY THIS TRIBUNAL VIDE ORDER DATED 25.1.20 12. THE ASSESSEE HAS STATED THAT THE TDS HAS BEEN DEDUCTED AND PAID DURI NG THE YEAR UNDER CONSIDERATION THEREFORE AS PER THE PROVISIONS OF SE CTION 40(A)(IA) THE SAME IS ALLOWABLE FOR THE YEAR UNDER CONSIDERATION. IN V IEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE WE ARE OF THE OPINION THA T WHEN THE CLAIM OF THE ASSESSEE WAS DISALLOWED FOR THE ASSESSMENT YEAR 2006-07 DUE TO NON- ITA NO. 548 & 1083/M/2011 ARCADIA SHARE & STOCK BROKERS P. LTD. 5 DEDUCTION/PAYMENT OF TDS AND SUBSEQUENTLY THE ASSES SEE HAS DEPOSITED THE TDS DURING THE YEAR UNDER CONSIDERATION THEN ON PRINCIPLE, THE CLAIM OF THE ASSESSEE SHALL BE ALLOWED IN THIS YEAR. HOWE VER, SINE THE ISSUE HAS NOT BEEN EXAMINED BY THE AUTHORITIES BELOW THEREFOR E, IN THE INTEREST OF JUSTICE WE SET ASIDE THIS ISSUE TO THE RECORD OF TH E ASSESSING OFFICER TO VERIFY THE DEDUCTION AND PAYMENT OF TDS AS CLAIMED BY THE ASSESSEE AND ACCORDINGLY DECIDE THIS ISSUE AS PER LAW. 8. GROUND NO. 3 REGARDING DISALLOWANCE OF SOFTWARE EXPENDITURE. THE ASSESSEE HAS DEBITED AN AMOUNT OF ` 19,17,271/- ON ACCOUNT OF COMPUTER/SOFTWARE CHARGES. THE AO HAS DISALLOWED A SUM OF ` 52,691/- TREATING THE SAME AS CAPITAL IN NATURE AND ALLOWED DEPRECIATION AT 60%. ON APPEAL, THE CIT(A) HAS CONFIRMED THE DISALLOWANC E MADE BY THE AO. BEFORE US THE LD. AR OF THE ASSESSEE HAS SUBMITTED THAT THE DISALLOWANCE OF ` 52,691/- PERTAINS TO TWO ITEMS NAMELY RT PRO S UBSCRIPTION OF ` 28.060/- AND SUBSCRIPTION CHARGES TOWARDS IRIS SOFT WARE OF ` 24,631/-. THE LD. AR HAS SUBMITTED THAT AS IT IS CLEAR FOR THE NA TURE OF EXPENDITURE THIS IS ONLY A SUBSCRIPTION CHARGES AND NOT PURCHASE OF SOF TWARE THEREFORE, THE SAME IS ALLOWABLE REVENUE EXPENDITURE. HE HAS REFER RED THE DETAILS OF EXPENDITURE AT PAGE NO. 23 OF THE PAPER BOOK. ON TH E OTHER HAND, THE LD. DR HAS SUBMITTED THAT THE AO AND CIT(A) HAS GIVEN A FINDING THAT THE EXPENDITURE HAS BEEN INCURRED BY THE ASSESSEE FOR P URCHASE OF SOFTWARE AND THEREFORE IT IS NOT RECURRING NATURE OF EXPENDI TURE. HE HAS RELIED UPON THE ORDER OF THE AUTHORITIES BELOW. ITA NO. 548 & 1083/M/2011 ARCADIA SHARE & STOCK BROKERS P. LTD. 6 9. HAVING CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD WE NOTE THAT THE EXPENDITURE OF ` 52,691/ - HAS BEEN INCURRED TOWARDS RT PRO SUBSCRIPTION AND IRIS SOFTWARE SUBSC RIPTION. IF THE EXPENDITURE IS ONLY FOR SUBSCRIPTION OR RENEWED OF THE SOFTWARE FOR A LIMITED PERIOD SAY ONE YEAR THEN IT IS A RECURRING NATURE OF EXPENDITURE AND THEREFORE, ALLOWABLE AS REVENUE EXPENDITURE. HO WEVER, FROM THE DETAILS AS WELL AS THE ORDERS OF THE AUTHORITIES BE LOW IT IS NOT CLEAR WHETHER THIS SUBSCRIPTION CHARGES ARE ANNUAL OR ONCE FOR AL L OR FOR A PERIOD OF MANY YEARS. ACCORDINGLY, IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN THE INTEREST OF JUSTICE WE SET ASIDE THIS ISSUE TO THE RECORD OF THE ASSESSING OFFICER FOR LIMITED PURPOSE OF VERIFICATION OF THE FACT WHETHER THE SUBSCRIPTION CHARGES ARE ANNUAL IN NATURE OR OTHERW ISE AND THEN DECIDE THIS ISSUE AS PER LAW AND IN THE LIGHT OF OUR OBSER VATION. 10. GROUND NO. 4 REGARDING HIGHER RATE OF DEPRECIAT ION ON UPS. THE ASSESSEE CLAIMED DEPRECIATION @ 60% ON UPS BY CLAIM ING BEING PART OF COMPUTER. THE AO REJECTED THE CLAIM OF THE ASSESSEE AND ALLOWED THE DEPRECIATION @15%. ON APPEAL, THE CIT(A) HAS CONFIR MED THE ACTION OF THE AO BY FOLLOWING THE DECISIONS OF DELHI BENCHES OF T HIS TRIBUNAL IN CASE OF NESTLE INDIA LIMITED 111 TTJ 498. BEFORE US THE LD. AR OF THE ASSESSEE HAS SUBMITTED THAT IN THE BUSINESS OF THE ASSESSEE THE CONSTANT WORKING OF THE COMPUTER IS ESSENTIAL AND INEVITABLE THEREFORE, THE UPS AS AN ESSENTIAL PART OF THE COMPUTER TO FACILITATE THE INTERRUPTED WORKING OF COMPUTER. HE HAS FURTHER SUBMITTED THAT IN THE SUBSEQUENT DECISI ONS, THIS TRIBUNAL HAS ITA NO. 548 & 1083/M/2011 ARCADIA SHARE & STOCK BROKERS P. LTD. 7 TAKEN A DIFFERENT VIEW AND DECIDED THIS ISSUE IN FA VOUR OF THE ASSESSEE. HE HAS RELIED UPON THE FOLLOWING DECISIONS: ITO VS OMNI GLOBE INFORMATION TECHNOLOGIES INDIA P. LTD. 131 ITD 280 HAWORTH (INDIA) (P.) LTD. VS DCIT 131 ITD 215 ORDER DATED 19.7.2013 IN CASE OF SUNDARAM ASSET MANAGEMENT VS DCIT IN ITA NO. 1774/MDS/2012 (CHENNA I) 11. ON THE OTHER HAND, THE LD. DR HAS RELIED UPON T HE ORDER OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE UPS IS ONL Y AN UNINTERRUPTED POWER SUPPLYING INSTRUMENT/MACHINES AND IS NOT ESSE NTIAL PART OF THE COMPUTER. HE HAS FURTHER SUBMITTED THAT THE FUNCTIO N OF THE COMPUTER IS NOT DEPENDENT ON UPS BUT THE ROLE OF THE UPS IS ONL Y TO SUPPLY THE POWER WITHOUT ANY INTERRUPTION THEREFORE, THE UPS DOES NO T FALL UNDER THE TERM COMPUTER. 12. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS RELEVANT MATERIAL ON RECORD. THOUGH IN THE CASE OF NESTLE IN DIA LIMITED (SUPRA) THE DELHI BENCHES OF THIS TRIBUNAL HAS HELD THAT UPS IS NOT PART OF COMPUTER AND THEREFORE, IS NOT ELIGIBLE FOR HIGHER RATE OF D EPRECIATION AS APPLICABLE FOR COMPUTER HOWEVER, IN THE SUBSEQUENT DECISIONS A S RELIED UPON BY LD. AR THE TRIBUNAL HAS TIME AND AGAIN TAKEN A VIEW THA T THE UPS IS PART OF THE COMPUTER AND IS ELIGIBLE FOR DEPRECIATION @ 60% . IN THE CASE OF SUNDARAM ASSET MANAGEMENT VS DCIT (SUPRA), THE TRIB UNAL BY FOLLOWING THE DECISION IN CASE OF HAWORTH (INDIA) PVT. LTD. A ND ENGINEERING SYSTEMS INDIA P. LTD. HAS DECIDED THIS ISSUE AS UNDER: ITA NO. 548 & 1083/M/2011 ARCADIA SHARE & STOCK BROKERS P. LTD. 8 THE FIFTH GROUND OF APPEAL OF THE ASSESSEE RELATES TO THE ISSUE OF DEPRECIATION ON UPS: THE ASSESSEE HAS CLAIMED DEPRE CIATION ON UPS @ 60% TREATING THE SAME AS PART OF COMPUTER. ON THE OTHER HAND, THE ASSESSING OFFICER HAS CONSIDERED THE UPS AT PAR WITH PLANT & MACHINERY AND RESTRICTED THE DEPRECIATION T O 15%. IT HAS BEEN REPEATEDLY HELD IN VARIOUS DECISIONS OF THE TR IBUNAL THAT DEPRECIATION @ 60% HAS TO BE PROVIDED ON UPS TREATI NG IT TO BE THE PART OF COMPUTER. THIS ISSUE HAS BEEN DECIDED B Y THE TRIBUNAL IN THE CASE OF HAWORTH (I) P. LTD., (SUPRA ) AND MACAWBER ENGINEERING SYSTEMS (INDIA) P. LTD., (SUPRA) WHEREI N IT HAS BEEN HELD THAT UPS IS AN INTEGRAL PART OF THE COMPUTER. THIS VIEW HAS BEEN CONSISTENTLY FOLLOWED BY THE TRIBUNAL IN VARIO US OTHER APPEALS. ACCORDINGLY, THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED AND THE ASSESSEE IS ENTITLED TO CLAIM DEPRE CIATION @ 60% ON UPS. 13. THUS, IT IS CLEAR THAT IN A SERIES OF DECISION THE TRIBUNAL HAS TAKEN A VIEW THAT UPS IS AN INTEGRAL PART OF COMPUTER AND C ONSEQUENTLY ELIGIBLE FOR DEPRECIATION @ 60%. ACCORDINGLY FOLLOWING THE DECIS ION OF THIS TRIBUNAL IN FAVOUR OF THE ASSESSEE WE ALLOWED THE CLAIM OF THE ASSESSEE OF HIGHER DEPRECIATION ON UPS. IN APPEA IN APPEA IN APPEA IN APPEAL ITA NO. 1083/M/2011 L ITA NO. 1083/M/2011 L ITA NO. 1083/M/2011 L ITA NO. 1083/M/2011 14. THE REVENUE HAS RAISED THE FOLLOWING EFFECTIVE GROUNDS: 1. I ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE DISALL OWANCE OF RS.2115059/- AND RS.2608156/- MADE U/S.40(A)(IA) IN RESPECT OF VSAT CHARGES AND LEASELINE CHARGES RESPECTIVELY PAI D TO STOCK EXCHANGE, WITHOUT APPRECIATING THE FACTS THAT THESE WERE COMPOSITE CHARGES FOR PROFESSIONAL AND TECHNICAL SE RVICES RENDERED BY THE STOCK EXCHANGE TO ITS MEMBERS AND T HE ASSESSEE HAS FAILED TO DEDUCT TDS THEREON.. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS .2179155/- MADE U/S. 14A R.W. RULE 8D OF THE INCOME-TAX ACT BY ASSESSING OFFICER. ITA NO. 548 & 1083/M/2011 ARCADIA SHARE & STOCK BROKERS P. LTD. 9 15. GROUND NO. 1 REGARDING DISALLOWANCE OF VSAT AND LEASE LINE CHARGES U/S 40(A)(IA). WE HAVE HEARD THE LD. DR AS WELL AS LD. AR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE AO DISALLOWED VSAT CHARGES AND LEASE LINE CHARGES BY INVOKING SECTION 40(A)(IA) AS THE ASSESSEE HAS NOT DEDUCTED TDS. ON APPEAL, THE CIT(A) HAS DELETED THE DISALLOWANCE BY FOLLOWING THE DECISION OF THIS TRIBUNAL IN CASE OF CIT VS KOTAK SECURITIES 25 SOT 440 (MUM.) WHEREIN IT HAS BEEN HELD THAT VSAT C HARGES AND LEASE LINE CHARGES ARE PAID TO THE STOCK EXCHANGE ARE NOT LIABLE TO TDS U/S 194J BEING FEE FOR TECHNICAL SERVICES. THE LD. AR OF THE ASSESSEE HAS INVITED OUR ATTENTION THAT AN IDENTICAL ISSUE HAS BEEN CONSIDER ED BY THE HONBLE JURISDICTION HIGH COURT IN CASE OF ITO VS ANGEL CAP ITAL & DEBIT MARKET LTD. IN ITA NO. 475/2011 DATED 28.7.2011 WHEREIN THE HON BLE HIGH COURT HAS HELD IN PARA 2 AS UNDER: 2. AS REGARDS FIRST TWO QUESTIONS ARE CONCERNED, T HE FINDING OF FACT RECORDED BY THE ITAT IS THAT VSAT AND LEASE LI NE CHARGES PAID BY THE ASSESSEE TO STOCK EXCHANGE WERE MERELY REIMBURSEMENT OF THE CHARGES PAID/PAYABLE BY THE ST OCK EXCHANGE TO THE DEPARTMENT OF TELECOMMUNICATION. SI NCE THE VSAT AND LEASE LINE CHARGES PAID BY THE ASSESSEE DO NOT HAVE ANY ELEMENT OF INCOME, DEDUCTING TAX WHILE MAKING S UCH PAYMENTS DO NOT ARISE. HENCE, QUESTION NOS. (A) AND (B) CANNOT BE ENTERTAINED. 16. FOLLOWING THE DECISION OF HONBLE HIGH COURT (S UPRA) WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE ORDER OF THE CIT(A) QUA THIS ISSUE. 17. GROUND NO. 2 REGARDING DISALLOWANCE U/S 14A. TH E ASSESSING OFFICER HAS DISALLOWED A SUM OF ` 21,79,155/- U/S 14A BY AP PLYING RULE 8D OF INCOME TAX RULES, 1962. ON APPEAL, THE CIT(A) HAS H ELD THAT RULE 8D IS NOT APPLICABLE FOR THE YEAR UNDER CONSIDERATION IN VIEW OF THE DECISION OF ITA NO. 548 & 1083/M/2011 ARCADIA SHARE & STOCK BROKERS P. LTD. 10 HONBLE JURISDICTION HIGH COURT IN CASE OF GODREJ & BOYCE CO. LTD. VS DCIT 328 ITR 81 AND RESTRICTED THE DISALLOWANCE AT 5% OF THE EXEMPT INCOME. WE HAVE HEARD THE LD. DR AS WELL AS LD. AR AND CONS IDERED THE RELEVANT MATERIAL ON RECORD. AS FAR AS THE APPLICABILITY OF RULES 8D FOR THE ASSESSMENT YEAR UNDER CONSIDERATION IS CONCERNED, T HE CIT(A) HAS FOLLOWED THE DECISION OF HONBLE JURISDICTION HIGH COURT IN CASE OF GODREJ & BOYCE THEREFORE, WE DO NOT FIND ANY MERIT OR SUBSTA NCE IN THE GROUND RAISED BY THE REVENUE. FURTHER THE CIT(A) HAS DISAL LOWED THE ADMINISTRATIVE AND MANAGERIAL EXPENDITURE AT 5% OF THE DIVIDEND INCOME WHICH IN OUR VIEW IS JUST AND PROPER. ACCORDINGLY, WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE ORDER OF THE CIT(A) QUA THIS I SSUE. 18. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED AND THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 13 TH DAY OF SEPTEMBER 2013 SD/- SD/- ( . . ! ) ' #$ (N. K. BILLAIYA) ACCOUNTANT MEMBER ( ) % #$ (VIJAY PAL RAO) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 13 TH SEPTEMBER 2013 SUBODH COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI