DCIT 4(1), MUMBAI V. INIDA ADVANTAGE SECURITIES LTD, MUMBAI

ITA 5927/MUM/2010

• Counselvise Citation: 592719914 RSA 2010
• Duration Of Justice: 1 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-10-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Assessment Year: 2007-2008
• Appeal Filed On: 28-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 143(3); 14A; 37(1); 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, I, MUMBAI BEFORE S/SHRI D.K.AGARWAL (JM) AND B. RAMAKOTAIAH ( A.M ) ITA NO.5927/MUM/2010 (ASSESSMENT YEAR : 2007-08) ASSTT. COMMISSIONER OF INCOME TAX, 4(1), ROOM NO.640, 6TH FLOOR AAYAKAR BHAVAN, MUMBAI-400020. INDIA ADVANTAGE SECURITIES LTD., 4TH FLOOR, OM PLAZA, VASANJI LALJI ROAD, KANDIVALI (W), MUMBAI-400067. PAN :AADCP5317M APPELLANT V/S RESPONDENT DATE OF HEARING : 3.10.2011 DATE OF PRONOUNCEMENT : .10.2011 APPELLANT BY : SHRI SUNIL KUMAR SINGH RESPONDENT BY : NONE O R D E R PER D.K.AGARWAL (JM) THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 14.5.2010 PASSED BY THE LD. CIT(A) FOR THE ASSESSMENT YEAR 2007-08. 2. AT THE TIME OF HEARING, NONE WAS PRESENT ON BEHA LF OF THE ASSESSEE NOR FILED ANY APPLICATION FOR ADJOURNM ENT OF THE CASE. THEREFORE, WE DECIDE THE APPEAL EX-PARTE, QU A THE ASSESSEE, ON MERITS AFTER HEARING THE LEARNED D.R . 3. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE AS SESSEE IS ENGAGED IN THE BUSINESS AS SHARE BROKING. THE CO MPANY IS ALSO A MEMBER OF BOMBAY STOCK EXCHANGE (BSE) AND ITA NO.5927/MUM/2010 (ASSESSMENT YEAR : 2007-08) 2 NATIONAL STOCK EXCHANGE (NSE). THE RETURN WAS FIL ED DECLARING TOTAL INCOME AT RS.80,91,287/-. HOWEVER, THE ASSESSMENT WAS COMPLETED AT AN INCOME OF RS.1,07,6 7,020/- INCLUDING THE DISALLOWANCE U/S 40(A)(IA) OF RS.18,0 8,744/-, PENALTY PAID TO STOCK EXCHANGES OF RS.89,319/-, DIS ALLOWANCE U/S 14A OF RS.699,140/- AND DISALLOWANCE U/S 40(A) (IA) OF RS.78,532/- VIDE ORDER DATED 27.11.2009 PASSED U/S 143(3) OF THE INCOME TAX ACT, 1961(IN SHORT THE ACT). ON APPEAL, THE LD. CIT(A) WHILE ALLOWING SUBSTANTIAL RELIEF TO THE ASSESSEE, PARTLY ALLOWED THE APPEAL. 4. BEING AGGRIEVED BY THE ORDER OF THE LD.CIT(A), T HE REVENUE IS IN APPEAL BEFORE US. 5. GROUND NO.1 AND (I) TO (V) ARE AGAINST THE DEL ETION OF DISALLOWANCE U/S 40(A)(IA). 6. BRIEFLY STATED FACTS OF THE ABOVE ISSUE ARE THAT THE AO NOTED THAT THE ASSESSEE HAS DEBITED RS.13,87,034/- ON TRANSACTION CHARGES, RS.1,10,000/- ON VSAT CHARGES AND RS.3,11,710/- ON LEASE LINE CHARGES TOTALING TO RS.18,08,744/-. THESE CHARGES ARE PAYABLE TO STOCK EXCHANGE ON ACCOUNT OF SERVICES PROVIDED BY IT WITH REGARD TO TRANSACTIONS IN SECURITIES THROUGH THE EXCHANGE. ACCORDING TO THE AO THE ASSESSEE IS LIABLE TO DEDUCT TAX AT SOUR CE UNDER SECTION 194J/194C OF THE ACT. SINCE THE ASSESSEE HAS NOT ITA NO.5927/MUM/2010 (ASSESSMENT YEAR : 2007-08) 3 DEDUCTED THE TAX AT SOURCE, THE AO DISALLOWED THE PAYMENT OF RS.18,08,744/- UNDER SECTION 40(A)(IA) OF THE A CT AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE. ON A PPEAL, THE LD. CIT(A) FOLLOWING THE DECISION OF THE TRI BUNAL IN KOTAK SECURITIES LTD. V/S ADDL.CIT (2008) 25 SOT 44 0, HOWEVER, DELETED THE DISALLOWANCE MADE BY THE AO. 7.. AT THE TIME OF HEARING, THE LD. DR SUPPORTS THE ORDER OF THE AO. 8. HAVING CAREFULLY HEARD THE SUBMISSIONS OF THE RI VAL PARTIES AND PERUSING THE MATERIAL AVAILABLE ON RECO RD WE FIND MERIT THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN KOTAK SECURITIES LTD. VS. ADDL. CIT (SUPRA), WHEREIN IT HAS BEEN HE LD THAT THE TRANSACTION FEE PAID CANNOT BE SAID TO BE A FEE PAI D IN CONSIDERATION OF STOCK EXCHANGE RENDERING ANY TECH NICAL SERVICES. THE PROVISIONS OF SECTION 194J ARE THERE FORE NOT ATTRACTED. THEREFORE, THERE WAS NO OBLIGATION ON T HE PART OF THE ASSESSEE TO DEDUCT TAX AT SOURCE. CONSEQUENTLY, THE PROVISIONS OF S. 40(A)(IA) WERE ALSO NOT ATTRACTED. IN THE ABSENCE OF ANY DISTINGUISHING FEATURE BROUGHT ON R ECORD BY THE REVENUE, WE RESPECTFULLY FOLLOWING THE ORDER O F THE TRIBUNAL (SUPRA) HOLD THAT THE TRANSACTION CHARGES, VSAT CHARGES AND LEASE-LINE CHARGES PAID TO STOCK EXCH ANGE ITA NO.5927/MUM/2010 (ASSESSMENT YEAR : 2007-08) 4 CANNOT BE CONSIDERED AS FEES FOR TECHNICAL SERVICES RENDERED AND ACCORDINGLY WE ARE INCLINED TO UPHOLD THE ORDER OF THE LD. CIT(A) IN DELETING THE DISALLOWANCE MADE BY THE AO. THE GROUNDS TAKEN BY THE REVENUE ARE, THEREFORE, REJECT ED. 9. GROUND NO.2 IS AGAINST THE DELETION OF DISALLOWA NCE OF PENALTY OF RS.80,119/-. 10. THE BRIEF FACTS OF THE ABOVE ISSUE ARE THAT THE AO NOTED THAT THE ASSESSEE HAS PAID PENAL CHARGES OF RS.8 ,800/- TO BSE AND RS.80,519/- TO NSE TOTALING TO RS.89,319/- FOR VIOLATION OF REGULATIONS OF STOCK EXCHANGES, THE REFORE, THE SAME IS NOT ALLOWABLE IN VIEW OF EXPLANATION TO S ECTION 37(1) OF THE ACT. ON APPEAL, THE LD. CIT(A) WHILE OBSERVING THAT THE STOCK EXCHANGES ARE NOT GOVERNMENT OR SEMI - GOVERNMENT BODIES BUT THEY ARE COMPANIES HELD THAT INVOCATION OF THE PROVISIONS OF SECTION 37 TOWARDS PAYMENT MADE TO THE STOCK EXCHANGES IS NOT CORRECT AND ACC ORDINGLY DELETED THE DISALLOWANCE MADE BY THE AO. 11. AT THE TIME OF HEARING, THE LD. DR SUPPORTS TH E ORDER OF THE AO. 12. HAVING CAREFULLY HEARD THE SUBMISSIONS OF THE R IVAL PARTIES AND PERUSING THE MATERIAL AVAILABLE ON RECO RD WE FIND THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF T HE ASSESSEE ITA NO.5927/MUM/2010 (ASSESSMENT YEAR : 2007-08) 5 BY THE DECISION OF THE TRIBUNAL IN ITO V/S VRM SHA RE BROKING (P) LTD. (2009) 27 SOT 469 (MUM) AND MAST ER CAPITAL SERVICES LTD. V/S DY.CIT (2007) 108 TTJ (CH D) 389 WHEREIN IT HAS BEEN HELD THAT THERE WAS NO VIOLATIO N OF LAW BY THE ASSESSEE AND THE FINE PAID WERE ONLY FOR NON-OB SERVATION OF INTERNAL REGULATIONS OF STOCK EXCHANGE. IN THE A BSENCE OF ANY DISTINGUISHING FEATURE BROUGHT ON RECORD BY THE REVENUE WE RESPECTFULLY FOLLOWING THE CONSISTENT VIEW OF TH E TRIBUNAL SUPRA, HOLD THAT THERE WAS NO VIOLATION OF LAW BY T HE ASSESSEE AND FINE/PENALTY PAID WERE ONLY FOR NON-OB SERVATION OF INTERNAL RULES AND REGULATIONS OF THE STOCK EXCH ANGE AND ACCORDINGLY WE ARE INCLINED TO UPHOLD THE FINDING OF THE LD. CIT(A) IN DELETING THE SAME. THE GROUND TAKEN BY TH E REVENUE IS, THEREFORE, REJECTED. 13. GROUND NO.3 IS IN SUPPORT OF THE ABOVE GROUNDS . IN VIEW OF THE FINDING RECORDED HEREINABOVE, THE GENER AL GROUND TAKEN BY THE REVENUE IS, THEREFORE, REJECTED. 14. IN THE RESULT, THE REVENUES APPEAL STANDS DISM ISSED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 12TH OC T., 2011. SD SD (B. RAMAKOTAIAH) (D.K .AGARWAL) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 12 OCTOBER, 2011 ITA NO.5927/MUM/2010 (ASSESSMENT YEAR : 2007-08) 6 SRL COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. DR CONCERNED BENCH 6. GUARD FILE. BY ORDER TRUE COPY ASSTT. REGISTRAR, ITAT, MUMBAI