ACIT 4(1), MUMBAI V. ANANT INVESTMENTS, MUMBAI

ITA 6428/MUM/2010

• Counselvise Citation: 642819914 RSA 2010
• Duration Of Justice: 1 year(s) 9 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-06-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: misc
• Appeal Filed On: 31-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P K B MENON
• Assessee Lawyers: VIJAY MEHTA
• Keywords: Business expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A, MUMBAI BEFORE SHRI B.R. MITTAL, J.M. AND SHRI RAJENDRA SI NGH, A.M. ITA NO.6428/M/2010 ASSESSMENT YEAR : 2007-08 DY. COMMISSIONER OF INCOME TAX -4(1), 6 TH FLOOR ROOM NO.640, AAYAKAR BHAVAN MUMBAI-400 020. ANANT INVESTMENTS 214, DATTANI TRADE CENTRE CHANDAVARKAR LANE, BORIVALI(W) MUMBAI-400 082. PAN NO. AAAFA 8332 K (APPELLANT) VS. (RESPONDENT) APPELLANT BY : SHRI P.K.B. MENON RESPONDENT BY : SHRI VIJAY MEHTA DATE OF HEARING : 24.5.2012 DATE OF PRONOUNCEMENT : 6/6/2012 O R D E R PER RAJENDRA SINGH, AM: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDE R DATED 7.6.2010 OF CIT(A) FOR THE ASSESSMENT YEAR 2007-08. THE ONLY DISPUTE RAISED BY THE REVENUE IN THIS APPEAL IS REGARDING ALLO WABILITY OF EXPENSES ON ACCOUNT OF VSAT, LEASELINE, DEPOSITORY AND TR ANSACTION CHARGES PAID TO STOCK EXCHANGE. ITA NO.6428/M/10 A.Y.07-08 2 2. FACTS IN BRIEF ARE THAT THE AO DURING THE ASSESSMENT NOTED THAT THE ASSESSEE HAD CLAIMED THE FOLLOWING EXPENSES ON ACCOUNT OF VARIOUS CHARGES PAID TO STOCK EXCHANGE. I) TRANSACTION CHARGES NSE RS.3,64,599/- II) VSAT USER CHARGES RS.1,10,300/- III) DEPOSITORY CHARGES RS .1,32,086/- IV) LEASELINE CHARGES RS.1,22,735/- TOTAL RS .7,29,719/- 2.1 THE AO OBSERVED THAT ANY EXPENDITURE ON ACCOUNT OF FEES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SERVICES ON WHICH T AX IS DEDUCTIBLE IS NOT ALLOWABLE AS DEDUCTION UNLESS THE TAX HAD BEEN DEDUCTED AND PAID DURING THE YEAR OR IN THE SUBSEQUENT YEAR. THE AO ALSO OBSERVED THAT THE FEES FOR TECHNICAL SERVICES MEANT AN Y CONSIDERATION FOR RENDERING OF ANY MANAGERIAL, TECHNICA L OR CONSULTANCY SERVICES. THE ABOVE CHARGES HAD BEEN PAID FOR SERVICES INV OLVING SPECIFIED KNOWLEDGE, EXPERIENCE AND SKILL IN THE FIELD OF SHARE TRADING AND, THEREFORE, THESE WERE OF THE NATURE OF TECHNICAL SERVICES AND PARTLY OF THE NATURE OF MANAGERIAL SERVICES AND, THER EFORE, PROVISIONS OF SECTION 40(A)(IA) WERE APPLICABLE AS THE ASSESSEE WAS RE QUIRED TO DEDUCT TAX AT SOURCE. THE AO THEREFORE DISALLOWED THE C LAIM UNDER SECTION 40(A)(IA). IN APPEAL CIT(A) FOLLOWING THE DECI SION OF THE MUMBAI BENCH OF TRIBUNAL IN CASE OF KOTAK SECURITIES VS. ADDL. CIT (25 SOT 440) HELD THAT STOCK EXCHANGES DO NOT PROVIDE ANY M ANAGERIAL SERVICES OR TECHNICAL SERVICES AND, THEREFORE, TDS PROVISIO NS WERE NOT ITA NO.6428/M/10 A.Y.07-08 3 APPLICABLE, ACCORDINGLY HE DELETED THE ADDITION MADE B Y AO AGGRIEVED BY WHICH, REVENUE IS IN APPEAL BEFORE THE TRIBUNAL . 3. BEFORE US, THE LD. AR SUBMITTED THAT IN SO FAR AS VS AT AND LEASELINE CHARGES ARE CONCERNED, THE ISSUE IS COVERED IN FAV OUR OF THE ASSESSEE BY THE JUDGMENT OF THE HON'BLE HIGH COURT OF BOM BAY IN THE CASE OF ANGEL CAPITAL & DEBIT MARKET LTD. IN INCOME TA X APPEAL (L) NO.475 OF 2011 DATED 28.7.2011. THE ISSUE OF TRANSFER CHARGES WAS ALSO COVERED BY THE JUDGMENT OF THE HON'BLE HIGH COURT OF BOMBAY IN CASE OF CIT VS. KOTAK SECURITIES LTD. (340 ITR 333) IN WHICH THOUGH THE HONBLE HIGH COURT HELD THAT TRANSACTION CHARGES CO NSTITUTED FEES FOR TECHNICAL SERVICES, THE CLAIM WAS ALLOWED AS IN THE EA RLIER YEARS BOTH THE PARTIES HAD PROCEEDED ON THE FOOTING THAT TH E TAX WAS DEDUCTIBLE UNDER SECTION 194J. AS REGARDS DEPOSITORY CHAR GES, IT WAS SUBMITTED THAT THESE WERE PAID TO DEPOSITORY FOR MAINT AINING THE ACCOUNTS IN DEMAT FORM AND THESE WERE ALLOWABLE AS NORMA L BUSINESS EXPENDITURE. THE LD. DEPARTMENTAL REPRESENTATIVE PLA CED RELIANCE ON THE ORDER OF AO. 4. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE MATTER CAREFULLY. THE DISPUTE IS REGARDING ALLOWABILITY OF EX PENSES ON ACCOUNT OF VSAT, LEASELINE, TRANSACTION CHARGES AND DEPOSITORY C HARGES. THE AO HAD MADE DISALLOWANCE ON THE GROUND THAT THESE CHARG ES WERE OF ITA NO.6428/M/10 A.Y.07-08 4 THE NATURE OF FEES FOR TECHNICAL SERVICES AND, THEREFORE , TAX WAS REQUIRED TO BE DEDUCTED WHICH WAS NOT DONE BY THE ASSESSE E. ACCORDINGLY THE AO DISALLOWED THE CLAIM UNDER SECTION 40 (E)(IA). THE HON'BLE HIGH COURT OF BOMBAY IN THE CASE OF ANGEL CAPI TAL & DEBIT MARKET LTD. (SUPRA), HAVE HELD THAT VSAT AND LEASELIN E CHARGES PAID BY ASSESSEE TO STOCK EXCHANGE WERE MERELY REIMBURSEMENT CHAR GES PAID/PAYABLE BY THE STOCK EXCHANGE TO DEPARTMENT OF TELECOMMUNICATIONS AND, THEREFORE, THESE DID NOT HAVE ANY INCOME ELEMENT AND ACCORDINGLY TAX WAS NOT REQUIRED TO BE DE DUCTED. FOLLOWING THE SAID JUDGMENT, THE ORDER OF CIT(A) DEL ETING DISALLOWANCE IN RESPECT OF VSAT AND LEASELINE CHARGES IS UPHELD. AS REG ARDS TRANSACTION CHARGES, HON'BLE HIGH COURT OF BOMBAY IN CASE OF KOTAK SECURITIES LTD. (SUPRA) HAVE HELD THAT THESE CHARGES CONSTI TUTE FEES FOR TECHNICAL SERVICES. HOWEVER, THE HONBLE COURT ALSO HELD IN THAT CASE THAT SINCE BOTH PARTIES HAD PROCEEDED ON THE FOOTING T HAT TAX WAS NOT DEDUCTIBLE FOR LAST SEVERAL YEARS AND THEREFORE, IN TH E FIRST YEAR WHEN THE PROVISIONS WERE INVOKED BY THE DEPARTMENT, ADDIT ION COULD NOT BE SUSTAINED. THE LD. AR FOR THE ASSESSEE HAS SUBMITTED THAT I N THIS CASE ALSO, IN EARLIER YEARS I.E., ASSESSMENT YEAR 2005-06 AND ASSESSMENT YEAR 2006-07 IN WHICH ORDERS WERE MADE UNDER SECTION 14 3(3), NO DISALLOWANCE HAD BEEN MADE. THE ASSESSMENT YEAR 2007-08 WAS THE FIRST YEAR IN WHICH DISALLOWANCE WAS MADE THIS CLAIM WAS NOT ITA NO.6428/M/10 A.Y.07-08 5 CONTROVERTED BY THE LD. DR. THEREFORE, FOLLOWING THE JUDGMENT OF HONBLE HIGH COURT IN THE CASE OF KOTAK SECURITIES LTD. ( SUPRA), THE DISALLOWANCE OF TRANSACTION CHARGES IN ASSESSMENT YEAR 2007- 08 CAN NOT BE UP HELD. THUS ORDER OF CIT(A) DELETING THE AD DITION ON ACCOUNT OF TRANSACTION CHARGES IS SUSTAINED. AS REGARDS DEPOSITORY CHARGES, FEES HAVE BEEN PAID TO DEPOSITORY FOR MAINTAINING THE ACCOUNTS OF THE SHARES IN DEMAT FORMS AND FOR DEMATERIALIZING OF SHARE S. THESE DO NOT REQUIRE ANY TECHNICAL SERVICES AND, THEREFORE, DISALLOWAN CE OF DEPOSITORY CHARGES HAS BEEN RIGHTLY DELETED BY THE CIT (A). WE THUS CONFIRM THE ORDER OF CIT(A). 5. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 6.6.2012 SD SD (B.R. MITTAL ) JUDICIAL MEMBER (RAJENDRA SINGH) ACCOUNTANT MEMBER MUMBAI, DATED: 6.6.2012. JV. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.