PADMAKSHI FINANCIAL SERVICES LTD, MUMBAI V. DCIT CIR 4(2), MUMBAI

ITA 6168/MUM/2009

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 3979 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-11-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 28-10-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 26-11-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P N DEVDASAN
• Assessee Lawyers: MAHESH R AJORA
• Keywords: Earning of tax free income
• Section: 14A; 37(1); 194C

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH C, MUMBAI BEFORE SHRI N.V.VASUDEVAN, JUDICIAL MEMBER AND SHRI RAJENDRA SINGH, ACCOUNTANT MEMBER I.T.A.NO. 6168/MUM/2009 ASSESSMENT YEAR : 2006-07 M/S. PADMAKSHI FINANCIAL SRVICES PVT. LTD., 96/98, MAKER TOWER F 9 TH FLOOR, CUFFE PARADE, MUMBAI 400 005. PAN: AABCP 2260 K VS. THE ASST. COMMISSIONER OF INCOME- TAX, CIRCLE 4(2), MUMBAI. (APPELLANT) I.T.A.NO. 6446/MUM/2009 ASSESSMENT YEAR : 2006-07 THE ASST. COMMISSIONER OF INCOME- TAX, CIRCLE 4(2), MUMBAI. VS. M/S. PADMAKSHI FINANCIAL SRVICES PVT. LTD., 96/98, MAKER TOWER F 9 TH FLOOR, CUFFE PARADE, MUMBAI 400 005. PAN: AABCP 2260 K (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI MAHESH RAJORA REVENUE BY : SHRI P.N. DEVDASAN O R D E R PER N.V. VASUDEVAN, JM: ITA NO. 6168/MUM/2009 IS AN APPEAL BY THE ASSESSEE WHILE ITA NO. 6446/MUM/2009 IS AN APPEAL BY THE REVENUE. BOTH THE SE APPEALS ARE DIRECTED AGAINST THE ORDER DATED 17TH SEPTEMBER, 2009 OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-VIII, MUMBAI FOR THE ASSESSMENT YEAR 2006 -07. 2. WE SHALL FIRST TAKE UP FOR CONSIDERATION THE APPEAL IN ITA NO. 6168/MUM/2009 FILED BY THE ASSESSEE. 3. GROUND NO. 1 RAISED BY THE ASSESSEE READS AS FOLLOW S: THE COMMISSIONER OF INCOME-TAX (APPEALS)-8 ERRED I N CONFIRMING THE DISALLOWANCE OF RS.12,43,824/- U/S.14A OF THE I NCOME-TAX ACT R.W.RULE 8D OF THE INCOME-TAX RULES, 1962. YOUR APPELLANT SUBMIT THAT IT HAS ESTIMATED EXPENSE S OF RS.10,000/- AS DISALLOWABLE U/S.14A OF THE I.T. ACT WHICH IT IS SUBMITTED IS FAIR AND REASONABLE FOR EARNING AN EXEMPTED INCOME. ITA NOS.6168 & 6446/M/09 PADMAKSHI FINANCIAL SERVICES P.LTD. 2 4. THE FACTS OF THE CASE IN BRIEF ARE THAT THE ASSE SSEE IS A COMPANY ENGAGED IN THE BUSINESS OF SHARE BROKING, TRADING, ARBITRAGE A ND INVESTMENT IN SHARE AND SECURITIES. DURING THE PREVIOUS YEAR THE ASSESSEE EARNED TAX FREE DIVIDEND INCOME OF RS.5,21,445/- AND LONG TERM CAPITAL GAINS OF RS. 47 ,75,259/- WHICH WAS CLAIMED AS EXEMPT. THE A.O. NOTICED THAT THE ASSESSEE HAS NOT ALLOCATED ANY EXPENSES INCURRED FOR EARNING SUCH TAX FREE INCOME IN ACCORDANCE WITH SECTION 14A OF THE ACT. THE ASSESSEE EXPLAINED THAT IT DID NOT INCUR ANY EXPEND ITURE TO EARN INCOME WHICH WAS NOT TAXABLE TO TAX. THE A.O. HOWEVER, RELYING ON RU LE 8D OF THE INCOME-TAX RULES, 1962 READ WITH SECTION 14A OF THE ACT, MADE A DISAL LOWANCE OF RS. 12,43,824/- AS EXPENSES INCURRED IN EARNING EXEMPT INCOME AND ADDE D THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. 5. ON APPEAL BY THE ASSESSEE, THE LEARNED CIT(A) CO NFIRMED THE ORDER OF THE A.O. GIVING RAISE TO GROUND NO.1 BY THE ASSESSEE B EFORE THE TRIBUNAL. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE HONBLE BOMBAY HIGH COURT IN INCOME TAX APPEAL NO.626 OF 2010 IN THE CASE OF GODREJ & BOYCE MFG.CO.LTD. MUMBAI. VS. DY. COMMISSIONER OF INCOME TAX, RANGE 1 0(2), MUMBAI & ANR. AND W.P. 758/10 GODREJ & BOYCE MFG.CO.LTD. MUMBAI. VS.DY. COMMISSIO NER OF INCOME TAX RANGE 10(2), MUMBAI & ORS. BY JUDGMENT DATED 12 -8-2010 HAS DEALT WITH THE DISALLOWANCE THAT CAN BE MADE U/S.14-A OF THE ACT. THE HONBLE COURT ALSO DEALT WITH THE DECISION OF THE SPECIAL BENCH OF THE ITAT IN THE CASE OF DAGA CAPITAL MANAGEMENT PVT. LTD. 117 ITD 169 (MUM) (SB) AND HAS LAID DOWN THE FOLLOWING PROPOSITION: I) DIVIDEND INCOME AND INCOME FROM MUTUAL FUNDS F ALLING WITHIN THE AMBIT OF SECTION 10(33) OF THE INCOME TAX ACT 1961, AS WAS A PPLICABLE FOR ASSESSMENT YEAR 2002-03 IS NOT INCLUDIBLE IN COMPUT ING THE TOTAL INCOME OF THE ASSESSEE. CONSEQUENTLY, NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO SUCH INCOME WHICH DOES NOT FORM ITA NOS.6168 & 6446/M/09 PADMAKSHI FINANCIAL SERVICES P.LTD. 3 PART OF THE TOTAL INCOME UNDER THE ACT, BY VIRTUE O F THE PROVISIONS OF SECTION 14A(1); II) THE PAYMENT BY A DOMESTIC COMPANY UNDER SECTIO N 115O(1) OF ADDITIONAL INCOME TAX ON PROFITS DECLARED, DISTRIBUTED OR PAID IS A CHARGE ON A COMPONENT OF THE PROFITS OF THE COMPANY. THE COMPAN Y IS CHARGEABLE TO TAX ON ITS PROFITS AS A DISTINCT TAXABLE ENTITY AND IT PAYS TAX IN DISCHARGE OF ITS OWN LIABILITY AND NOT ON BEHALF OF OR AS AN AGE NT FOR ITS SHAREHOLDERS. IN THE HANDS OF THE SHAREHOLDER AS THE RECIPIENT OF DIVIDEND, INCOME BY WAY OF DIVIDEND DOES NOT FORM PART OF THE TOTAL INC OME BY VIRTUE OF THE PROVISIONS OF SECTION 10(33). INCOME FROM MUTUAL FU NDS STANDS ON THE SAME BASIS; III) THE PROVISIONS OF SUB SECTIONS (2) AND (3) OF SECTION 14A OF THE INCOME TAX ACT 1961 ARE CONSTITUTIONALLY VALID; IV) THE PROVISIONS OF RULE 8D OF THE INCOME TAX RUL ES AS INSERTED BY THE INCOME TAX (FIFTH AMENDMENT) RULES 2008 ARE NOT ULT RA VIRES THE PROVISIONS OF SECTION 14A, MORE PARTICULARLY SUB SE CTION (2) AND DO NOT OFFEND ARTICLE 14 OF THE CONSTITUTION; V) THE PROVISIONS OF RULE 8D OF THE INCOME TAX RULE S WHICH HAVE BEEN NOTIFIED WITH EFFECT FROM 24 MARCH 2008 SHALL APPLY WITH EFFECT FROM ASSESSMENT YEAR 2008-09; VI) EVEN PRIOR TO ASSESSMENT YEAR 2008-09, WHEN RUL E 8D WAS NOT APPLICABLE, THE ASSESSING OFFICER HAS TO ENFORCE TH E PROVISIONS OF SUB SECTION (1) OF SECTION 14A. FOR THAT PURPOSE, THE A SSESSING OFFICER IS DUTY BOUND TO DETERMINE THE EXPENDITURE WHICH HAS BEEN I NCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INC OME UNDER THE ACT. THE ASSESSING OFFICER MUST ADOPT A REASONABLE BASIS OR METHOD CONSISTENT WITH ALL THE RELEVANT FACTS AND CIRCUMST ANCES AFTER FURNISHING A REASONABLE OPPORTUNITY TO THE ASSESSEE TO PLACE ALL GERMANE MATERIAL ON THE RECORD; VII) THE PROCEEDINGS FOR ASSESSMENT YEAR 2002-03 SH ALL STAND REMANDED BACK TO THE ASSESSING OFFICER. THE ASSESSING OFFICER SHA LL DETERMINE AS TO WHETHER THE ASSESSEE HAS INCURRED ANY EXPENDITURE ( DIRECT OR INDIRECT) IN RELATION TO DIVIDEND INCOME / INCOME FROM MUTUAL FU NDS WHICH DOES NOT FORM PART OF THE TOTAL INCOME AS CONTEMPLATED UNDER SECTION 14A. THE ASSESSING OFFICER CAN ADOPT A REASONABLE BASIS FOR EFFECTING THE APPORTIONMENT. WHILE MAKING THAT DETERMINATION, THE ASSESSING OFFICER ITA NOS.6168 & 6446/M/09 PADMAKSHI FINANCIAL SERVICES P.LTD. 4 SHALL PROVIDE A REASONABLE OPPORTUNITY TO THE ASSES SEE OF PRODUCING ITS ACCOUNTS AND RELEVANT OR GERMANE MATERIAL HAVING A BEARING ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 7. IN VIEW OF THE DECISION OF THE HONBLE BOMBAY HI GH COURT, HOLDING THAT THE PROVISIONS OF RULE 8D OF THE INCOME TAX RULES WHICH HAVE BEEN NOTIFIED WITH EFFECT FROM 24 MARCH 2008 SHALL APPLY WITH EFFECT FROM ASS ESSMENT YEAR 2008-09 AND THAT IN RESPECT OF DISALLOWANCE U/S.14-A OF THE ACT, PRI OR TO ASSESSMENT YEAR 2008-09, WHEN RULE 8D WAS NOT APPLICABLE, THE ASSESSING OFFI CER MUST ADOPT A REASONABLE BASIS OR METHOD CONSISTENT WITH ALL THE RELEVANT FA CTS AND CIRCUMSTANCES AFTER FURNISHING A REASONABLE OPPORTUNITY TO THE ASSESSEE TO PLACE ALL GERMANE MATERIAL ON THE RECORD. IN THE CIRCUMSTANCES, WE DEEM IT FIT A ND PROPER TO SET ASIDE THE ORDER OF THE CIT(A) AND REMAND THE ISSUE TO THE AO FOR FRESH CONSIDERATION. THIS IS BECAUSE, THE AO AND THE CIT(A) WHILE MAKING THE IMPUGNED DIS ALLOWANCE HAD APPLIED RULE-8D OF THE INCOME TAX RULES, 1962. WE ACCORDINGLY SET ASIDE THE ORDER OF CIT(A) AND REMAND THE ISSUE TO THE AO FOR FRESH CONSIDERATION AS ABOVE. 8. GROUND NO. 2 RAISED BY THE ASSESSEE READS AS FOL LOWS: THE CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 24,221/- BEING PENALTY LEVIED BY THE STOCK EXCHANGE/CLEARING CORPORATION FOR VIOLATION OF ITS BYE-LAWS FOR PROCEDURAL MATTER. YOUR APPELLANT SUBMITS THAT EXPLANATION TO SECTION 37(1) DOES NOT APPLY TO THE NATURE OF PENALTIES LEVIED BY THE STOC K EXCHANGE/CLEARING CORPORATION AND HENCE NO DISALLOW ANCE IS CALLED FOR IN THE MATTER. 9. DURING THE PREVIOUS YEAR THE ASSESSEE HAD MADE A PAYMENT OF RS.24,221/- TO THE STOCK EXCHANGE. ACCORDING TO THE ASSESSEE THESE PAYMENTS WERE MADE TOWARDS CERTAIN DELAYS/TECHNICAL NON-COMPLIANCES ET C., AND THEREFORE, NOT HIT BY EXPLANATION TO SECTION 37(1) OF THE ACT. THE ASSES SING OFFICER, HOWEVER, HELD THAT THE PENALTY WAS PAID UNDER SEBI (PROCEDURE FOR HOLD ING ENQUIRY AND IMPOSING PENALTY BY THE ADJUDICATING OFFICER) RULES , 1955. THE A.O. HELD THAT THE PAYMENT IN QUESTION WAS A PENALTY IMPOSED FOR VIOLATION OF LAW AND, THEREFORE, HIT BY ITA NOS.6168 & 6446/M/09 PADMAKSHI FINANCIAL SERVICES P.LTD. 5 EXPLANATION TO SECTION 37(1) OF THE ACT. ACCORDING LY A SUM OF RS. 24,221/- WAS DISALLOWED AND ADDED TO THE TOTAL INCOME OF THE ASS ESSEE. 10. ON APPEAL BY THE REVENUE, THE LEARNED CIT(A) CO NFIRMED THE ORDER OF THE A.O. 11. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSES SEE HAS RAISED GROUND NO. 2 BEFORE THE TRIBUNAL. 12. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE LEARNE D COUNSEL FOR THE ASSESSEE SUBMITTED THAT BOTH THE A.O. AND THE CIT(A) PROCEED ED ON AN ERRONEOUS ASSUMPTION THAT THE SUM IN QUESTION WAS PAID TO SEBI WHEREAS THE SUM IN QUESTION WAS ACTUALLY PAID TO NSE/BSE. WE HAVE CONSIDERED THE SUBMISSION S OF THE ASSESSEE AND FIND THAT NEITHER THE A.O. NOR THE CIT(A) HAS DISCUSSED ANYTH ING ABOUT THE NATURE OF PENALTY WHICH IS DISPUTED BEFORE US. WE ARE, THEREFORE, OF THE VIEW THAT UNLESS THE NATURE OF PENALTY IS SPELT OUT, IT CANNOT BE CONCLUDED AS TO WHETHER THE PAYMENT IN QUESTION IS FOR INFRACTION OF LAW OR COMPENSATORY IN NATURE. IF THE PAYMENT IN QUESTION IS COMPENSATORY, THEN THE ASSESSEE WOULD BE ENTITLED T O CLAIM DEDUCTION. WE, THEREFORE, SET ASIDE THE ORDER OF THE CIT(A) AND RE MAND THE ISSUE TO THE A.O. FOR FRESH CONSIDERATION. THE ASSESSEE WILL EXPLAIN THE CORRECT THE NATURE OF THE PENALTY WITH SUPPORTING DOCUMENTS AND A.O. WILL DECIDE THE ISSUE IN ACCORDANCE WITH LAW AFTER AFFORDING THE ASSESSEE AN OPPORTUNITY OF BEIN G HEARD. 13. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D FOR STATISTICAL PURPOSES. ITA NO.6646/MUM/2009 - FILED BY THE REVENUE. 14. THE GRIEVANCE PROJECTED IN GROUND NO. 1 BY THE REVENUE IS WITH REGARD TO THE ACTION OF THE LEARNED CIT(A) IN DELETING THE DI SALLOWANCE OF RS.1,53,236/- IN RESPECT OF LEASELINE AND TRANSACTION CHARGES OF RS. 14,25,509/-. THE A.O. MADE DISALLOWANCE ON THE GROUND THAT THE AFORESAID CHARG ES WERE PAID BY THE ASSESSEE TO THE STOCK EXCHANGE FOR RENDERING PROFESSIONAL AND T ECHNICAL SERVICES AND, THEREFORE, THE ASSESSEE OUGHT TO HAVE DEDUCTED TAX AT SOURCE W HILE MAKING PAYMENT TO THE ITA NOS.6168 & 6446/M/09 PADMAKSHI FINANCIAL SERVICES P.LTD. 6 STOCK EXCHANGE. SINCE THE ASSESSEE DID NOT DEDUCT TAX AT SOURCE, THE A.O. DID NOT ALLOW THE AFORESAID EXPENSES AS DEDUCTION INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. THE LEARNED CIT(A), HOWEVER, DELETED THE DISALLOWANCE MADE BY THE A.O. BY FOLLOWING THE ORDERS OF THE I.T.A.T MUM BAI IN THE CASE OF KOTAK SECURITIES V. ADDL.CIT, MUMBAI IN ITA NO. 1955/MUM/ 08 FOR ASSESSMENT YEAR 2005- 06. THIS ISSUE HAD COME UP CONSIDERATION IN ASSESSE ES OWN CASE IN THE EARLIER ASSESSMENT YEAR AND THIS TRIBUNAL CONFIRMED SIMILAR ORDERS OF THE CIT(A) ITA NO. 5943/MUM/2009 FOR A.Y.2005-06, WHICH READS AS FOLLO WS: WE FIND THE CO-ORDINATE BENCHES OF THE TRIBUNAL ARE TAKING THE CONSISTENT VIEW THAT FEES PAID BY THE ME MBERS TO THE STOCK EXCHANGE IS NOT FOR ANY TECHNICAL SERVI CES RENDERED SINCE THE STOCK EXCHANGE DOES NOT PROVIDE MANAGERIAL SERVICES AND, THEREFORE, NO TAX IS DEDUCTIBLE ON SUCH PAYMENT. THEREFORE, THE ORDER OF THE CIT(A) DOE S NOT SUFFER FROM ANY INFIRMITY, WHO HAS FOLLOWED THE DECISIO N OF THE TRIBUNAL. ACCORDINGLY, THE SAME IS UPHELD AND THE GROUND RAISED BY THE REVENUE IS DISMISSED. 15. RESPECTFULLY FOLLOWING THE AFORESAID DECISION O F THE TRIBUNAL, GROUND NO. 1 RAISED BY THE REVENUE IS DISMISSED. 16. GROUND NO. 2 RAISED BY THE REVENUE IS WITH REGA RD TO THE ACTION OF THE CIT(A) IN DELETING THE ADDITION MADE BY THE A.O. ON ACCOUNT OF PAYMENT TO JOBBERS/ARBITRAGE OF RS.65,50,269/-. ACCORDING TO THE A.O. AT THE TIME OF MAKING THESE PAYMENTS THE ASSESSEE OUGHT TO HAVE DEDUCTED TAX AT SOURCE AS REQUIRED UNDER SECTION 194C OF THE ACT. SINCE THE ASSESSEE DID NOT DEDUCT THE TAX AT SOURCE, THE A.O. INVOKING THE PROVISIONS OF SECTION 40(A)(I A) OF THE ACT, DISALLOWED THE CLAIM OF THE ASSESSEE FOR DEDUCTION OF THE AFORESAID AMOU NT. ACCORDING TO THE ASSESSEE, THE AFORESAID AMOUNT THE AFORESAID TRANSACTIONS AS JOBBERS/ARBITRAGERS WERE ON PRINCIPAL TO PRINCIPAL BASIS AND THEY WERE DEALING WITH ON THEIR OWN ACCOUNTS AND THEREFORE, THERE WAS NO OBLIGATION ON THE PART OF T HE ASSESSEE TO DEDUCT TAX AT SOURCE WHILE MAKING PAYMENTS UNDER SECTION 194C OF THE ACT. THIS ISSUE HAD COME ITA NOS.6168 & 6446/M/09 PADMAKSHI FINANCIAL SERVICES P.LTD. 7 UP FOR CONSIDERATION IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2005-06 IN ITA NO. 5943/M/2009 AND THIS TRIBUNAL ON THIS ISSUE OBSERVED AS FOLLOWS: IN GROUND NO.3, THE REVENUE HAS CHALLENGED THE ORDER OF CIT(A) IN HOLDING THE RELATIONSHIP BETWEEN MEMBER/BROKER AND JOBBER AS A PRINCIPAL TO PRINCIPAL RELATIONSHIP AND THEREFORE NOT ELIGIBLE FOR TAX DEDUCTION U/S.194C OF THE I.T. ACT. THE FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE HAS DEBITED AN AMOUNT OF RS. 43,89,541/- ON ACCOUNT OF PAYMENT MADE TO JOBBERS/ARBITRAGERS. THE AO NOTED THA T THESE PAYMENTS HAVE BEEN BOOKED IN THE BOOKS OF ACCOUNT AS COMMISSION PAYMENT. SINCE THE ASSESSEE HAS NOT DEDUCTED ANY TDS ON THIS AMOUNT, THE AO CONFRONTED THE SAME TO THE ASSESSEE. NOT BEING SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSEE AND REFERRING TO THE PROVISIONS OF SEC. 194(1), THE AO HELD THAT THE COMPANY HAS ENLISTED THE SERVICES OF JOBBERS FOR CARRYING OUT THE WORK WHICH PRIMARILY BELONGS TO THE COMPANY. THE PAYMENTS MADE ARE IN LIEU OF SERVICES RENDERED FOR CARRYING OUT CERTAIN WORK AND THE PAYMENTS MADE THERE IN FALL WITHIN THE PURVIEW OF SEC. 194C OF THE I.T. ACT SINCE IT IS THE ASSESSEE WHO HAS TO CARRY OUT THE WORK OF JOBB ING THROUGH ONE SET OF JOBBERS OR ANOTHER YEAR AFTER YEA R. THE WORK CAN ONLY BE SAID TO BE BELONGING TO THE ASSESSEE IN WHOSE PROPRIETARY ACCOUNT THIS WORK IS BEING CARRIED OUT AND WHO HAS HIRED THESE PERSONS, IRRESPECTIVE OF THE TERMS OF CONTRACT AND COMPENSATION PAID. THEREFORE, THE ASSESSEE WAS BOUND TO DEDUCT TAX ON THE PAYMENTS MA DE IN RESPECT OF THE SERVICES OFFERED BY THE JOBBERS. HE ACCORDINGLY DISALLOWED THE PAYMENT OF RS.43,89,541/- U/S. 40(A)(IA) READ WITH SEC. 194C OF THE I.T. ACT SINCE THE ASSESSEE HAD NOT DEDUCTED TAX. IN APPEAL, THE LD. CIT(A), FOLLOWING HIS OWN DECISION IN THE CASE OF M/S. PRAKASH K. SHAH SHARE & SECURITIES PVT. LTD., DELETED THE ADDITION BY HOLDING AS UNDER : THE ROLE OF JOBBERS AS SUMMARIZED IN ENCYCLOPAEDIA OF BRITANNICA VOLUME 23, PAGES 517 & 518 IS THAT A JOBBER TRANSACTS BUSINESS ON THE FLOOR OF THE EXCHANGE BUT DOES NOT DEAL WITH THE PUBLIC AND THE JOBBER SERVES ONLY IN THE CAPACITY OF A PRINCIPAL, BUYING AND SELLING FOR HIS OWN ACCOUNT AND DEALING ONLY WITH BROKERS AND OTHER JOBBERS. THUS, IN EFFECT THE TRANSACTIONS ARE ON PRINCIPLE TO PRINCIPLE BASIS. THE JOBBER SEEKS TO MAXIMIZE HIS PROFITS BY ADJUSTING HIS BUYING AND SELLING PRICES AND THE TRADE ON THEIR ITA NOS.6168 & 6446/M/09 PADMAKSHI FINANCIAL SERVICES P.LTD. 8 OWN ACCOUNT AND IN VIEW OF GROWING VOLUME OF TRANSACTIONS, THE JOBBERS ENTERED INTO AGREEMENT FOR FELICITATION OF THEIR TRADE AND MINIMIZATION OF MARKET RISKS. THE JOBBERS ARE IN FACT CLIENTS ACTING ON THEI R OWN ACCOUNT AND THE JOBBERS DEAL IN SHARES AND SECURITIES ON PROFIT/LOSS SHARING BASIS AS DECIDED MUTUALLY AND PERIODICALLY THE PROFIT/LOSS INCURRED BY A JOBBER IS ASCERTAIN AND SHARES BETWEEN THE APPELLANT AND THE JOBBER AFTER DEDUCTING THE COST. THE RELATIONSHIP BETWEEN THE JOBBER AND THE APPELLANT COMPANY IS THAT OF CO-SHARER OF PROFIT/LOSS, THEREFORE, PROVISIONS OF SECTION 194C IS NOT ATTRACT ED. AS PROVISIONS OF SECTION 194C IS NOT ATTRACTED, THE DISALLOWANCE U/S. 40(A)(IA) IS HELD TO BE NOT PROPER. AGGRIEVED WITH SUCH ORDER OF CIT(A), THE REVENUE IS IN APPEAL BEFORE US. 9. THE LD. D.R. RELIED ON THE ORDER OF THE CIT(A). 9.1 THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, RELIED ON THE ORDER OF CIT(A) AS WELL AS THE TERM S & CONDITIONS OF THE MOU AND SUBMITTED THAT IT IS SHARE OF PROFIT AND NOT EVEN PAYMENT OF ANY SALARY SINCE THE AO HAS ALSO NOT INVOKED PROVISIONS OF SEC. 192 OF THE I.T. ACT. 10. AFTER HEARING BOTH THE SIDES, WE FIND THE CIT(A) , FOLLOWING HIS OWN DECISION IN THE CASE OF M/S. PRAKASH K. SHAH SHARE & SECURITIES PVT. LTD. (SUPRA), DELETED THE DISALLOWANCE MADE BY THE AO ON THE GROUND THAT THE RELATIONSHIP BETWEEN THE JOBBERS AND THE ASSESSEE COMPANY IS THAT OF CO-SHARER OF PROFIT/LOSS AND THER EFORE THE PROVISIONS OF SEC. 194C ARE NOT ATTRACTED. HE HAS NOT GIVEN ANY INDEPENDENT FINDING IN THIS CASE. FURTHER, NEITHER THE LD. D.R. NOR THE LD. COUNSEL COULD THROW ANY LIGHT AS TO WHETHER THE ORDER OF THE CIT(A) IN THE CASE OF PRAKA SH K. SHAH SHARES & SECURITIES P. LTD. (SUPRA) HAS BEEN ACCEPTED BY THE REVENUE OR THE REVENUE HAS FILED ANY APPEAL B EFORE THE TRIBUNAL AND, IF SO, THE OUTCOME OF THE SAME. WE, THEREFORE, DEEM IT PROPER TO RESTORE THIS MATTER TO T HE FILE OF AO WITH A DIRECTION TO ADJUDICATE THE ISSUE AFRESH A ND IN ACCORDANCE WITH LAW AFTER GIVING DUE OPPORTUNITY OF B EING HEARD TO THE ASSESSEE. WE HOLD AND DIRECT ACCORDINGLY . THE GROUND RAISED BY THE REVENUE IS ACCORDINGLY ALLOWED F OR STATISTICAL PURPOSES. 16. IN THE PRESENT ASSESSMENT YEAR ALSO THE CIT(A) HAD GIVEN RELIEF BY FOLLOWING THE DECISION IN THE CASE OF M/S. PRAKASH K. SHAH SHARE & SECURITIES PVT. LTD. DATD ITA NOS.6168 & 6446/M/09 PADMAKSHI FINANCIAL SERVICES P.LTD. 9 13.10.2008. THE FACTS AND CIRCUMSTANCES OF CASE, B EING IDENTICAL IN THE PRESENT ASSESSMENT YEAR, WE DEEM IT AND PROPER TO SET ASIDE THE ORDER OF CIT(A) ON THIS ISSUE AND RESTORE THIS ISSUE TO THE FILE OF THE A.O . FOR FRESH ADJUDICATION AS PER THE DIRECTIONS GIVEN BY THE TRIBUNAL IN THE ASSESSMENT YEAR 2005-06. 17. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED FOR STATISTICAL PURPOSES WHILE THE APPEAL BY THE REVENUE IS PARTLY ALLOWED F OR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 4 TH DAY OF NOVEMBER, 2010. SD. SD. (RAJENDRA SINGH) (N.V. VASUDEVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED THE 4 TH NOVEMBER, 2010. KN COPY TO: 1. THE ASSESSEE 2. THE REVENUE 3. THE CIT-4, MUMBAI 4. THE CIT(A)-8, MUMBAI 5. THE DR C BENCH, MUMBAI BY ORDER /TRUE COPY/ ASST. REGISTRAR, ITAT, MUMBAI