ANGEL BROKING P.LTD, MUMBAI V. ITO (TDS) 1(2), MUMBAI

ITA 6324/MUM/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3936 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 13-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R P RASTOGI
• Assessee Lawyers: D V LAKHANI
• Keywords: Non-deduction of tax
• Section: 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A, MUMBAI BEFORE SHRI SANJAY ARORA (AM) AND SHRI RAM LAL NEGI (JM) ITA NO. 6324/MUM/2014 ASSESSMENT YEAR: 2008-09 ANGEL BROKING PVT. LTD. (SUCCESSOR TO ANGEL BROKING LTD.) G-1, AKRUTI TRADE CENTRE, ROAD, NO. 7, MIDC, ANDHERI (E), MUMBAI- 400093. PAN- AAACA8821G VS. THE ITO (TDS) - 1 (2) , 8 TH FLOOR, ROOM NO. 805, K.J.MITTAL AYURVEDIC HOSPITAL BUILDING, CHARNI ROAD (W), MUMBAI- 400 002 (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI. D.V. LAKHANI. RESPONDENT BY : SHRI. R.P.RASTOGI DATE OF HEARING: 0 5 /05 /2016 DATE OF PRONOUNCEMENT: 04/08/201 6 O R D E R PER RAM LAL NEGI, JM THIS APPEAL HAS BEEN PREFERRED BY THE APPELLAN T/ASSESSEE AGAINST ORDER DATED 14/08/2014 PASSED BY LD CIT(A)-14, MUMBAI U/S 201(1)/201(1A) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) FOR THE ASSESSMENT YEAR 2008-09. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE, A LIMITED COMPANY AND MEMBER OF BOMBAY STOCK EXCHANGE, IS ENGAGED IN THE BUSINES S OF SHARE BROKING. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED THAT THE ASSESSEE DID NOT ADMITTEDLY DEDUCT TAX AT SOURCE ON PAYMENT MADE ON ACCOUNT OF DEMATERIALIZATION (DEMAT) CHARGES AMOUNTING TO RS. 16,20,462/- AS PER THE PROVISIONS OF SECTION 194-J OF THE ACT. ACCORDINGLY , THE ASSESSEE WAS DECLARED 2 ITA NO. 6324/MUM/2014 ASSESSMENT YEAR: 2008-09 AS ASSESSEE IN DEFAULT UNDER SECTION 201(1) AND, CONSEQUENTLY U/S 201(1A) OF THE ACT FOR NON-DEDUCTION OF TAX AT SOURCE ON TECHN ICAL FEES AND NON-PAYMENT OF INTEREST THEREON RAISING DEMAND OF RS. 1,64,848/ -AND RS.12,22,620/- RESPECTIVELY THERE UNDER. 3. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL, THE ASSESSEE HAS CHALLENGED THE IMPUGNED ORDER ON THE FOLLOWING EFFE CTIVE GROUNDS:- 1. ON THE FACTS & CIRCUMSTANCES OF THE CASE THE LE ARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN ENHAN CING THE QUANTUM OF DISALLOWANCE AMOUNTING TO RS. 16,00,462/ - BEING THE PAYMENT FOR DEMAT CHARGES WHILE PASSING THE APPELLA TE ORDER AND HAS DETERMINED THE TAX LIABILITY U/S 201(1) FO THE INCOME TAX ACT, 1961 AT RS. 1,64,848/-. THE APPELLANT PRAYS THAT TH E ENHANCEMENT MADE BY THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS) IS NOT JUSTIFIED AND MAY BE DELETED. 2. ON THE FACTS & CIRCUMSTANCES OF THE CASE THE AP PELLANT PRAYS THAT THE APPELLANT IS NOT LIABLE TO DEDUCT TAX AT SOURCE U/S 194J OF THE INCOME TAX ACT, 1961 ON THE PAYMENT OF DEMAT CHARGE S. THE SAID PAYMENT DOES NOT QUALIFY WITHIN THE SCOPE OF PAYMEN T OF FEES FOR PROFESSIONAL OR TECHNICAL SERVICES. THE LEARNED COM MISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN CONCLUDING THAT T HE APPELLANT WAS LIABLE TO DEDUCTED TAX AT SOURCE U/S 194J OF TH E INCOME TAX ACT, 1961 ON THE DEMAT CHARGES. THE CONCLUSION REACHED B Y LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS ERRONEOUS. 3. ON THE FACTS & CIRCUMSTANCES OF THE CASE THE APP ELLANT PRAYS THAT THE TAX DETERMINED U/S 201(1) OF THE INCOME TAX ACT , 1961 AT RS. 1,64,848/- MAY BE DELETED. 3 ITA NO. 6324/MUM/2014 ASSESSMENT YEAR: 2008-09 4. ON THE FACTS & CIRCUMSTANCES OF THE CASE THE LEA RNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN LEVYI NG INTEREST U/S 201(1A) OF THE INCOME TAX ACT, 1961 AMOUNTING TO RS . 12,22,620/-. THE APPELLANT DENIES THE LIABILITY FOR PAYMENT OF I NTEREST U/S 201(1A) OF THE INCOME TAX ACT, 1961 AT RS. 12,22,620/-. THE APPELLANT PRAYS THAT THE INTEREST LEVIED U/S 201(1A) OF THE INCOME TAX ACT, 1961 AMOUNTING TO RS. 12,22,620/- MAY BE DELETED. 5. ON THE FACTS & CIRCUMSTANCES OF THE CASE THE APP ELLANT PRAYS THAT, WITHOUT PREJUDICE TO THE ABOVE CLAIM THAT THE APPEL LANT IS NOT LIABLE TO PAY INTEREST U/S 201(1A) OF THE INCOME TAX ACT, 1961. THERE IS AN ERROR IN DETERMINING THE QUANTUM OF INTEREST U/S 20 1(1A) OF THE INCOME TAX ACT, 1961 AT RS. 12,22,620/-. THE APPELL ANT PRAYS THAT THE INTEREST LEVIED U/S 201(1A) OF THE INCOME TAX A CT, 1961, AT RS. 12,22,620/- MAY BE DELETED. 4. AT THE VERY OUTSET, THE COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEES CASE IS SQUARELY COVERED BY THE ASSESSEES OWN CASE FOR THE A.YS. 2006-07 & 2007-08, IN WHICH THE IDENTICAL ISSUE HAS BEEN DECI DED BY THE ITAT, MUMBAI IN FAVOUR OF THE ASSESSEE. 5. ON THE OTHER HAND THE LD. DEPARTMENTAL REPRESENT ATIVE (DR) RELYING ON THE FINDINGS OF THE LD. CIT(A) CONTENDED THAT THE IMPUG NED ORDER DOES NOT SUFFER FROM ANY LEGAL INFIRMITY. THE LD. CIT(A) HAS PASSED THE IMPUGNED ORDER AFTER TAKING INTO CONSIDERATION THE SUBMISSIONS MADE BY T HE ASSESSEE. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTI ES AND ALSO PERUSED THE MATERIAL PLACED BEFORE US IN THE LIGHT OF THEIR RES PECTIVE CONTENTIONS. THE ONLY CONTENTION OF THE LD. COUNSEL IS THAT SINCE THE PAY MENT IN QUESTION DOES NOT 4 ITA NO. 6324/MUM/2014 ASSESSMENT YEAR: 2008-09 FALL WITHIN THE PURVIEW OF PAYMENT OF FEES FOR PROF ESSIONAL OR TECHNICAL SERVICES, THE ASSESSEE IS NOT LIABLE TO PAY TAX AT SOURCE U/S 194J OF THE ACT. THE CO- ORDINATE BENCH OF THE ITAT HAS DECIDED THE SAME IS SUE IN FAVOUR OF THE ASSESSEE IN THE ASSESSEES OWN CASE (IN ITA NO. 486 6/MUM/2010) FOR THE A.Y 2007-08 BY FOLLOWING ITS EARLIER DECISION RENDERED IN ASSESSEES CASE, I.E., FOR THE A.Y. 2005-06 (IN ITA NO. 7031/MUM/2008), HOLDIN G AS UNDER:- WE HAVE HEARD BOTH SIDES AND PERUSED THE RECORDS C AREFULLY. THE DISPUTE IS REGARDING ALLOWABILITY OF DEDUCTION ON A CCOUNT OF DEMAT AND DEPOSITORY CHARGES PAID BY THE ASSESSEE IN CONN ECTION WITH TRADING OF SHARES. THE DEMAT CHARGES ARE PAID FOR G ETTING THE SHARES DEMATERIALIZED INTO THE ELECTRONIC FORM AND DEPOSIT ORY CHARGES ARE FOR HOLDING THE SHARES IN DEPOSITORY ACCOUNT. THE A SSESSING OFFICER HAS HELD THAT THESE CHARGES ARE PAYMENT FOR SERVICE S WHICH ARE TECHNICAL IN NATURE AND THEREFORE COVERED UNDER THE PROVISIONS OF SECTION 40(A) (IA) WHICH DOES NOT ALLOW DEDUCTION O N ACCOUNT OF SUCH PAYMENT UNLESS TAX HAS BEEN DEDUCTED AT SOURCE AND PAID TO THE CENTRAL GOVERNMENT. WE FIND THAT ALLOWABILITY OF SI MILAR PAYMENTS SUCH AS DEMAT CHARGES, V-SAT CHARGES, LEASE LINE CH ARGES HAD BEEN CONSIDERED BY THE TRIBUNAL IN CASE OF THE ASSESSEE IN 200506. THE TRIBUNAL HELD THAT THESE CHARGES HAVE BEEN LEVIED F OR THE FACILITY PROVIDED BY THE STOCK EXCHANGE AND THE DEPOSITORY. THE TRIBUNAL ALSO HELD THAT SUCH CHARGES ARE PAYMENT FOR FACILIT Y PROVIDED AND DO NOT INVOLVE RENDERING OF ANY TECHNICAL SERVICES TO THE MEMBERS OF STOCK EXCHANGE. THE TRIBUNAL FOLLOWED THE JUDGMENT OF HONBLEE HIGH COURT OF MADRAS IN CASE OF SKYCELL COMMUNICATIONS LTD 251 ITR 53 (MAD) IN WHICH IT WAS HELD THAT MERELY COLLECTION O F FEES FOR USE OF STANDARD FACILITY PROVIDED DOES NOT AMOUNT TO FEES HAVING BEEN PAID FOR TECHNICAL SERVICES. THE TRIBUNAL ACCORDINGLY HE LD THAT PROVISIONS OF SECTION 40(A)(IA) WERE NOT APPLICABLE. THE FACTS IN THIS YEAR ARE SIMILAR. THE DEMAT CHARGES AND DEPOSITORY CHARGES A RE PAYMENT FOR STANDARD FACILITY PROVIDED. THOUGH THESE FACILITIES REQUIRE USE OF TECHNOLOGY, THERE ARE NO TECHNICAL SERVICES INVOLVE D. WE THEREFORE, SEE NO INFIRMITY IN THE ORDER OF CIT A IN DELETING THE ADDITION MADE BY ASSESSING OFFICER AND THE SAME IS THEREFORE UPHELD 5 ITA NO. 6324/MUM/2014 ASSESSMENT YEAR: 2008-09 7. THE ISSUE INVOLVED, I.E., THE APPLICABILITY OF S ECTION 194J OF THE ACT TO DEMAT CHARGES PAID BY THE ASSESSEE BROKER TO BANKS ETC., IN THE PRESENT CASE IS THE SAME AS THAT FOR THE EARLIER YEARS. WE, ACCORDINGLY , RESPECTFULLY FOLLOWING THE ORDER OF THE CO-ORDINATE BENCH OF THE TRIBUNAL FOR THE ASSESSMENT YEARS 2005- 06 AND 2007-08 (SUPRA), ALLOW THE APPEAL OF THE ASS ESSEE. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE FOR THE ASST. YEAR 2008-09 IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH AUGUST, 2016 SD/- SD/- ( SANJAY ARORA ) (RAM LAL NEGI) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED: 04/08/2016 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A)- 4. / CIT 5. !' , $ !'% , / DR, ITAT, MUMBAI 6. &' ( / GUARD FILE. / BY ORDER, ) //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI PRAMILA