THE A.K. EQUITIES P. LTD, MUMBAI V. M/S. ITO 4(1)(1), MUMBAI

ITA 5720/MUM/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 7723 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-02-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 16-02-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 10-09-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIKRAM GAUR
• Assessee Lawyers: A V SONDE
• Section: 88E

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A, MUMBAI. BEFORE SHRI R.K. GUPTA, J.M. AND SHRI J. SUDHAKAR REDDY, A.M. I.T.A. NO. 57 20/MUM/2008 ASSESSMENT YEAR : 2005-06. M/S A.K. EQUITIES PVT. LTD., T HE INCOME TAX OFFICER, 6 TH FLOOR, ORCLE POINT, VS. 4(1)(1), MUMBAI. 3 GURUNANAK ROAD, BANDRA (W), MUMBAI 4000 020. PAN AACCA6830F APPELLANT RESPONDENT APPELLANT BY : SHRI A.V. SONDE. RESPONDENT BY : SHRI VIKRAM GAUR. O R D E R PER J. SUDHAKAR REDDY, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED AGAINST THE ORDER OF THE CIT(APPEALS)-IV, MUMBAI DATED 04-07-20 08 FOR THE ASSESSMENT YEAR 2005-06. 2. THE ASSESSEE IS A MEMBER OF BOMBAY STOCK EXCHAN GE LTD. AND IS ENGAGED IN THE BUSINESS OF SHARE BROKING. TH E MAJOR PART OF INCOME OF THE ASSESSEE IS FROM BROKERAGE IN RESPECT OF TRANSACTION DONE ON BEHALF OF ITS CLIENTS IN THE BOMBAY STOCK EXCHAN GE. THE AO DISALLOWED U/S 40(A)(IB) OF THE ACT, THE AMOUNT PAI D BY THE ASSESSEE ON ACCOUNT OF SECURITIES TRANSACTION TAX. A DISALLOWAN CE WAS ALSO MADE U/S 14A. ON APPEAL, THE FIRST APPELLATE AUTHORITY GRANT ED PART RELIEF. THE ASSESSEE HAS COME UP ON FURTHER APPEAL ON FOLLOWING GROUND : 2 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE HONBLE COMMISSIONER OF INCOME-TAX (APPEALS)-IV, MU MBAI ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER 4 (1)(1), MUMBAI IN ADDING RS.6,19,566 PAID TOWARDS SECURITIES TRANS ACTION TAX ON BEHALF OF CLIENTS. THE APPELLANT PRAYS THAT THE ADD ITION MADE BY THE A.O. AND CONFIRMED BY THE CIT(A) MAY PLEASE BE DELE TED. 3. WE HAVE HEARD MR. A.V. SONDE, LEARNED COUNSEL F OR THE ASSESSEE AND MR. VIKRAM GAUR, LEARNED DR. 4. SECTION 40(A)(IB) AS IT WAS THEN READ AS FOLLOW S : ANY SUM PAID ON ACCOUNT OF SECURITIES TRANSACTION TAX UNDER CHAPTER VII OF THE FINANCE (NO.2) ACT, 2004. SECTION 88E READS AS FOLLOWS : REBATE IN RESPECT OF SECURITIES TRANSACTION TAX. 88E. (1) WHERE THE TOTAL INCOME OF AN ASSESSEE IN A PREV IOUS YEAR INCLUDES ANY INCOME, CHARGEABLE UNDER THE HEAD PROFITS AND GAIN S OF BUSINESS OR PROFESSION, ARISING FROM TAXABLE SECURITIES TRANSA CTIONS, HE SHALL BE ENTITLED TO A DEDUCTION, FROM THE AMOUNT OF INCOME-TAX ON SUCH INCOME ARISING FROM SUCH TRANSACTIONS, COMPUTED IN THE MANNER PROVIDED IN SU B-SECTION (2), OF AN AMOUNT EQUAL TO THE SECURITIES TRANSACTION TAX PAID BY HIM IN RESPECT OF THE TAXABLE SECURITIES TRANSACTIONS ENTERED INTO IN THE COURSE OF HIS BUSINESS DURING THAT PREVIOUS YEAR: PROVIDED THAT NO DEDUCTION UNDER THIS SUB-SECTION SHALL BE ALLOWED UNLESS THE ASSESSEE FURNISHES ALONG WITH THE RETURN OF INCOME, EVIDENCE OF PAYMENT OF SECURITIES TRANSACTION TAX IN THE PRESCRIBED FORM: PROVIDED FURTHER THAT THE AMOUNT OF DEDUCTION UNDER THIS SUB-SECTIO N SHALL NOT EXCEED THE AMOUNT OF INCOME-TAX ON SUCH INCOME COMPUTED IN THE MANNER PROVIDED IN SUB-SECTION (2). (2) FOR THE PURPOSES OF SUB-SECTION (1), THE AMOUNT OF INCOME-TAX ON THE INCOME ARISING FROM THE TAXABLE SECURITIES TRANSACT IONS, REFERRED TO IN THAT SUB- SECTION, SHALL BE EQUAL TO THE AMOUNT CALCULATED BY APPLYING THE AVERAGE RATE OF INCOME-TAX ON SUCH INCOME. [(3) NO DEDUCTION UNDER THIS SECTION SHALL BE ALLO WED IN, OR AFTER, THE ASSESSMENT YEAR BEGINNING ON THE 1ST DAY OF APRIL, 2009.] EXPLANATION. FOR THE PURPOSES OF THIS SECTION, THE EXPRESSIONS, TAXABLE SECURITIES TRANSACTION AND SECURITIES TRANSACTION TAX SHALL HAVE THE SAME MEANINGS RESPECTIVELY ASSIGNED TO THEM UNDER CHAPTE R VII OF THE FINANCE (NO. 2) ACT, 2004.] 3 5. UNDER THE FINANCE (NO.2) ACT, 2004 IN CHAPTER V II UNDER THE HEAD SECURITIES TRANSACTION TAX, CLAUSE 100 REA DS AS FOLLOWS : 100. COLLECTION AND RECOVERY OF SECURITIES TRANSAC TION TAX.- (1) EVERY RECOGNISED STOCK EXCHANGE SHALL COLLECT THE S ECURITIES TRANSACTION TAX FROM EVERY PERSON, BEING A PURCHASE R OR SELLER, AS THE CASE MAY BE, WHO ENTERS INTO A TAXABLE SECURITI ES TRANSACTION IN THAT STOCK EXCHANGE, AT THE RATE SPECIFIED IN SECTI ON 98. (2) THE PRESCRIBED PERSON IN THE CASE OF EVERY MUT UAL FUND SHALL COLLECT THE SECURITIES TRANSACTION TAX FROM E VERY PERSON WHO SELLS A UNIT TO THAT MUTUAL FUND, AT THE RATE SPECI FIED IN SECTION 98 (3) THE SECURITIES TRANSACTION TAX COLLECTED DURIN G ANY CALENDAR MONTH IN ACCORDANCE WITH THE PROVISIONS OF SUB-SECTION (1) OR SUB-SECTION (2), SHALL BE PAID BY EVERY RECO GNISED STOCK EXCHANGE OR BY THE PRESCRIBED PERSON IN THE CASE OF EVERY MUTUAL FUND, AS THE CASE MAY BE, TO THE CREDIT OF THE CENT RAL GOVERNMENT BY THE SEVENTH DAY OF THE MONTH IMMEDIATELY FOLLOWI NG THE SAID CALENDAR MONTH. (4) ANY RECOGNISED STOCK EXCHANGE OR THE PRESCRIB ED PERSON IN THE CASE OF ANY MUTUAL FUND, WHO FAILS TO COLLEC T THE TAX IN ACCORDANCE WITH THE PROVISIONS OF SUB-SECTION (1) O R SUB-SECTION (2), SHALL, NOTWITHSTANDING SUCH FAILURE, BE LIABLE TO PAY THE TAX TO THE CREDIT OF THE CENTRAL GOVERNMENT IN ACCORDANCE WITH THE PROVISIONS OF SUB-SECTION (1) OR SUB-SECTION (2), S HALL, NOTWITHSTANDING SUCH FAILURE, BE LIABLE TO PAY THE TAX TO THE CREDIT OF THE CENTRAL GOVERNMENT IN ACCORDANCE WITH THE PROVI SIONS OF SUB- SECTION (3). 6. UNDER CLAUSE 98, CHARGE OF SECURITIES TRANSACTI ON TAX IS FASTENED ON PURCHASE/SALE OF EQUITY SHARES IN A COM PANY OR AN UNIT OF EQUITY ORIENTED FUND, AS WELL AS SALE OF DERIVATIVE AND SALE OF UNITS. IT CLEARLY STATES THAT THE TAX IS PAYABLE EITHER BY TH E PURCHASER OR THE SELLER. 6. THE ASSESSEE IN THIS CASE IS NEITHER THE PURCHA SER NOR THE SELLER. HE IS MERELY A COLLECTING AGENT OF STT ON B EHALF OF THE 4 GOVERNMENT. THUS THE ASSESSEE HAS BOTH COLLECTED TH E AMOUNT AND PAID THE SAME TO THE GOVERNMENT. THE ASSESSEE BEING A BR OKER HAS NEITHER PURCHASED SHARES ON ITS OWN NOR SOLD SHARES ON ITS OWN. IT WAS ONLY AN INTERMEDIARY. THUS IN OUR CONSIDERED OPINION, SECTI ON 40(A)(IB) OF THE ACT DOES NOT GET ATTRACTED IN THIS CASE NOR SECTION 88E BENEFIT CAN BE EXTENDED TO THE ASSESSEE IN THIS CASE. ONLY WHEN THE PURCHAS ER OR THE SELLER CLAIMS A DEDUCTION OF STT PAID, THEN ONLY 40(A)(IB) IS ATTR ACTED. THE OBSERVATIONS OF THE LEARNED CIT(APPEALS) THAT THIS IS TAX PLANNI NG OR A COLOURABLE DEVICE, IN OUR CONSIDERED OPINION, IS DEVOID OF MER IT. 7. IN THE RESULT, WE DELETE THE DISALLOWANCE IN QU ESTION AND ALLOW THE APPEAL OF THE ASSESSEE. ORDER PRONOUNCED ON THIS 24 TH DAY OF FEBRUARY, 2010. SD/- SD/- (R.K. GUPTA) (J. SUDHAKAR REDDY) JUDICIAL MEMBER. ACCOUNTANT MEMBER. MUMBAI, DATED : 24 TH FEBRUARY, 2010. WAKODE COPY FORWARDED TO : 1. APPELLANT. 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, H-BENCH. (TRUE COPY) BY ORDER ASSTT.REGISTRAR, ITAT, MUMBAI BENCHES, MUMBAI. 5