ACIT 4(2), MUMBAI V. MEHTA EQUITIES LTD, MUMBAI

ITA 6463/MUM/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9001 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-09-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 06-09-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 01-09-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL

Judgement Text

PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH B MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT & SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER I.T.A.NO.6463/MUM/2010 ASSESSMENT YEAR : 2005-06 ASST. COMMISSIONER OF I.T. CIRCLE 4(2), MUMBAI. VS. M/S RENAISSANCE SECURITIES LTD. (NOW KNOWN AS MEHTA EQUITIES LTD.) 612, ARUN CHAMBERS, TARDEO, MUMBAI 400 034. PAN: AAACR 4143 C (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI MOHIT JAIN. RESPONDENT BY : NONE. DATE OF HEARING: 06-09-2012. DATE OF PRONOUNCEMENT: 14-09-2012. O R D E R PER D.KARUNAKARA RAO, AM: THIS APPEAL IS FILED BY THE REVENUE THE AGAINST TH E ORDER OF THE CIT[A] DATED 10-6-2010. THE GROUNDS RAISED ARE ARGU MENTATIVE ON THE CORE ISSUE MENTIONED IN GROUND NO. 1.I WHICH READS AS UNDER: 1. I ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS.14, 42,744/- MADE U/S. 40(A)(IA) IN RESPECT OF VSAT, LEASE LINE AND TRANSA CTION CHARGES PAID TO STOCK EXCHANGE, WITHOUT APPRECIATING THE FACT THAT THESE WERE COMPOSITE CHARGES FOR PROFESSIONAL AND TECHNICAL SERVICES REN DERED BY THE STOCK EXCHANGE TO ITS MEMBERS AND THE ASSESSEE HAS FAILED TO DEDUCT TDS THEREON. 2. AT THE OUTSET, IT MAY BE MENTIONED THAT NONE APP EARED ON BEHALF OF THE ASSESSEE. HOWEVER, WE FIND THAT THE ISSUE IS COVERED BY THE DECISION OF THE TRIBUNAL MUMBAI BENCH IN THE CASE O F KOTAK SECURITIES DATED 26-8-2008 [25 SOT 440] AND THE RATIO OF THE B INDING JUDGMENT OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF KOTAK SECURITIES LTD. [340 ITR 333] IN RESPECT OF THE CERTAIN CHARGES PAID TO THE STOCK EXCHANGES AND THEREFORE, WE HAVE TAKEN UP THE APPEAL FOR ADJUDICA TION. I.T.A. NO. 6463/MUM/2010 M/S MEHTA EQUITIES LTD . PAGE 2 OF 4 3. THE ONLY ISSUE THAT IS RAISED IN THE GROUND RELA TES TO THE INVOKING PROVISIONS OF SEC.40(A)(IA) OF THE ACT FOR DISALLOW ING A SUM OF RS.14,42,744/- RELATING TO VSAT CHARGES, TRANSACTIO N CHARGES AND LEASE LINE CHARGES PAID TO THE STOCK EXCHANGES. THE AO WA S OF THE VIEW THAT THE SAID CHARGES PAID CONSTITUTES THE TECHNICAL SERVICES , IN THAT CASE TEY ARE LIABLE FOR TDS U/S 194J OF THE ACT. FAILURE TO MAKE TDS SHALL ATTRACT THE PROVISIONS OF SEC.40A(A)(IA) OF THE ACT. THESE ARE THE PAYMENTS MADE TO THE BOMBAY STOCK EXCHANGE AND NATIONAL STOCK EXCHAN GE. FINALLY, AO CAME TO THE CONCLUSION THAT THE PAYMENTS ARE MADE O N ACCOUNT OF THE SAID CHARGES TO THE EXCHANGES SHOULD BE DISALLOWED IN VIEW OF THE PROVISIONS OF SECTION 40(A)(IA) R W S 194J OF THE A CT AND CONSEQUENTLY, HE MADE ADDITION OF RS.14,42,744/-, WHICH IS THE SUBJE CT MATTER IN THIS APPEAL. 4. DURING THE FIRST APPELLATE PROCEEDINGS, THE LD.C IT[A] IN HIS CRYPTIC ORDER MENTIONED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL MUMBAI BENCH IN THE CASE O F KOTAK SECURITIES DATED 26-8-2008 [25 SOT 440] WHEREIN THE TRIBUNAL H ELD THAT STOCK EXCHANGE DOES NOT PROVIDE MANAGERIAL SERVICES AND THE TRANSACTION CHARGES/FEE PAID TO THE STOCK EXCHANGE IS NOT FOR A NY TECHNICAL SERVICES RENDERED, THEREFORE, THE SAID PAYMENTS ARE OUTSIDE THE SCOPE OF TDS PROVISIONS. BEING AGGRIEVED, REVENUE IS BEFORE US. 5 DURING THE COURSE OF HEARING, LD DR FILED A COPY OF THE JUDGMENT OF THE BOMBAY HIGH COURT IN THE CASE OF KOTAK SECURITI ES LTD. [340 ITR 333] AND INFORMED THAT THE HONBLE HIGH COURT UPHELD THE VIEW OF THE TRIBUNAL ON THE TRANSACTION CHARGES ISSUE AND IN FAVOUR OF T HE ASSESSEE CITING DIFFERENT REASONS GIVEN IN PARA 30 TO 32 OF THE JUD GMENT. HONBLE HIGH COURT, THOUGH UPHELD IN PRINCIPLE THE TECHNICAL NAT URE OF THE SERVICES RENDERED BY THE STOCK EXCHANGES, DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE ON THE GROUNDS OF THE BONA FIDE NATURE OF THE CLAIMS. PARA 32 OF THE SAID JUDGEMENT IS RELEVANT AND THE SAME IS R EPRODUCED HEREIN BELOW: I.T.A. NO. 6463/MUM/2010 M/S MEHTA EQUITIES LTD . PAGE 3 OF 4 ACCORDINGLY, WE HOLD THAT THE TRANSACTION CHARGES PAID BY THE ASSESSEE TO THE STOCK EXCHANGE CONSTITUTE 'FEES FOR TECHNICA L SERVICES' COVERED UNDER SECTION 194J OF THE ACT AND, THEREFORE, THE ASSESSEE WAS LIABLE TO DEDUCT TAX AT SOURCE WHILE CREDITING THE TRANSACTIO N CHARGES TO THE ACCOUNT OF THE STOCK EXCHANGE. HOWEVER, SINCE BOTH THE REVENUE AND THE ASSESSEE WERE UNDER THE BONA FIDE BELIEF FOR NEARLY A DECADE THAT TAX WAS NOT DEDUCTIBLE AT SOURCE ON PAYMENT OF TRANSACT ION CHARGES, NO FAULT CAN BE FOUND WITH THE ASSESSEE IN NOT DEDUCTING THE TAX AT SOURCE IN THE ASSESSMENT YEAR IN QUESTION AND CONSEQUENTLY DISALLOWANCE MADE BY THE ASSESSING OFFICER UNDER SECTION 40(A)(IA) OF TH E ACT IN RESPECT OF THE TRANSACTION CHARGES CANNOT BE SUSTAINED. WE MAKE IT CLEAR THAT WE HAVE ARRIVED AT THE ABOVE CONCLUSION IN THE PEC ULIAR FACTS OF THE PRESENT CASE, WHERE BOTH THE REVENUE AND THE ASSESS EE RIGHT FROM THE INSERTION OF SECTION 194J IN THE YEAR 1995 TILL 200 5 PROCEEDED ON THE FOOTING THAT THE ASSESSEE IS NOT LIABLE TO DEDUCT T AX AT SOURCE AND IN FACT IMMEDIATELY AFTER THE ASSESSMENT YEAR IN QUESTION, I.E., FROM THE ASSESSMENT YEAR 2006-07 THE ASSESSEE HAS BEEN DEDUC TING TAX AT SOURCE WHILE CREDITING THE TRANSACTION CHARGES TO THE ACCO UNT OF THE STOCK EXCHANGE. 6. THEREFORE, FOR THE AYS FORM 1995-96 TILL THE AY 2005-06, THE CLAIM OF THE ASSESSEE IN RESPECT OF THE TRANSACTION CHARG ES ARE ALLOWABLE CONSIDERING THE BONA FIDE NATURE OF THE CLAIMS. THE REFORE, THE CLAIM OF THE ASSESSEE IN THE INSTANT CASE IS ALLOWABLE AS REVENU E NEVER DEMONSTRATED ANY MALA FIDE IN THE CLAIMS OF THE ASSESSEE. NOTHIN G IS BROUGHT ON RECORD TO SHOW THAT THE FACTS OF THE PRESENT CASE ARE NOT THE SAME AS THAT THE CASE OF THE KOTAK SECURITIES LTD (SUPRA). FURTHER, THE OTHER CHARGES IE VSAT CHARGES AND THE LEASE LINE WERE THE PAYMENTS A LSO MADE TO THE STOCK EXCHANGES AND IT IS NOT CASE OF THE REVENUE T HAT THEY ARE DIFFERENT IN NATURE FROM THAT OF THE TRANSACTION CHARGES. FUR THER, IT IS NOT THE CASE OF THE REVENUE THEY WERE MADE UNDER MALA FIDE BELIE F. IN VIEW OF THE ISSUE BEING COVERED BY THE ORDER OF THE TRIBUNAL AS WELL AS THE ABOVE CITED HIGH COURT JUDGMENT, WE FIND THAT THE ORDER OF THE LD.CIT[A] DOES NOT REQUIRE ANY INTERFERENCE. THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 1 4TH SEPTEMBER 2012. SD/- SD/- (D.MANMOHAN) ( D.KARUNAKARA RAO) VICE PRESIDENT ACC OUNTANT MEMBER 14/9/12. I.T.A. NO. 6463/MUM/2010 M/S MEHTA EQUITIES LTD . PAGE 4 OF 4 P/-*