TRUSTED SHARES & INVESTMENTS LTD, MUMBAI V. ITO 4(2)(2), MUMBAI

ITA 648/MUM/2015

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2230 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 30-01-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B S BIST
• Keywords: Earning of tax free income; Question of law; Initiation of penalty proceedings
• Section: 234B; 14A

Judgement Text

- IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI , BEFORE SHRI SANJAY ARORA , A M ./ I.T.A. NO. 648/MUM/2015 ( / ASSESS MENT YEAR: 2010 - 11 ) TRUSTED SHARES & INVESTMENTS LTD. 112, CHURCHGATE CHAMBERS, 5, NEW MARINE LINES, CHURCHGATE, MUMBAI - 400 020 / VS. ITO - 4(2)(2), AAYAKAR BHAVAN, MUMBAI - 400 020 ./ ./ PAN/GIR NO. AAACT 4465 H ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI BHUPENDRA SHAH / RESPONDENT BY : SHRI B. S. BIST / DATE OF HEARING : 16.11.2015 / DATE OF PRONOUNCEMENT : 27 .11.2015 / O R D E R PER SANJAY ARORA, A. M.: THIS IS AN A PPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 9, MUMBAI (CIT(A) FOR SHORT) DATED 23.12.2014 , PARTLY ALLOWING THE A SSESSEES APPEAL CONTESTING ITS ASSE SSMENT U/S.143(3) OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) FOR THE ASSESSMENT YEAR (A.Y.) 2010 - 11 VIDE ORDER DATED 15.3.2013. 2 ITA NO. 648/MUM/2015 (A.Y. 2010 - 11) TRUSTED SHARES & INVESTMENTS LTD. VS. ITO 2. THE APPEAL RAISES FOUR GROUNDS, WHICH WE SHALL TAKE UP IN SERIATIM. THE FIRST GROUND AGITATES THE DISALLOWANCE OF T RANSACTION CHARGES ALLOWED BY THE ASSESSEE, A COMPANY IN THE BUSINESS OF SHARE BROKING, TO BOMBAY STOCK EXCHANGE (BSE) (RS.4,42,512/ - ). THE SAME STANDS EFFECTED U/S. 40(A)(IA) DUE TO THE NON - DEDUCTION OF TAX AT SOURCE THEREON, RELYING ON THE DECISION IN T HE CASE OF CIT VS. KOTAK SECURITIES LTD. [2012] 340 ITR 333 (BOM) , WHICH HOLD S THE TRANSACTION CHARGES PAID TO STOCK EXCHANGE S A S EXIGIBLE TO TAX DEDUCT ION AT SOURCE U/S.194 - J , SO THAT NON - DEDUCTION THERE OF WO ULD A TTRACT SECTION 40(A)(IA). THE DISALLOWANCE WOULD STAND, THUS, DEFERRED TO THE YEAR OF DEDUCTION AND DEPOSIT OF THE TAX AT SOURCE TO THE CREDIT OF THE CENTRAL GOVERNMENT. THE ASSESSEE, ON THE OTHER HAND, RELIES ON THE DECISION IN THE CASE OF DY. CIT VS. JAMNADAS KHUSALDAS & CO. (IN ITA NO. 480/MUM/2 011 DATED 14.6.2013) AND MAPE SECURITIES PVT. LTD. VS. DCIT (IN ITA NO. 842/MUM/2012 DATED 24.11.2014), WHEREIN, TAKING A LIBERAL VIEW, THE T RIBUNAL HELD THAT IN VIEW OF THE DISPUTE WITH REGARD TO THE APPLICATION OF SECTION 194J ON THE TRANSACTION CHARGES PERSISTING FOR A LONG TIME, WHICH STOOD RESOLVED ONLY ON THE DECISION IN KOTAK SECURITIES LTD. (SUPRA), THE SAID DECISION WOULD APPLY ALSO FOR THE YEARS SUBSEQUENT TO THE SAID DECISION. 3. THE PARTIES HAVE BEEN HEARD, AND THE MATERIAL ON RECORD PERUSED. THE ISSUE DECIDED BY HON'BLE JURISDICTIONAL HIGH COURT IN KOTAK SECURITIES LTD. (SUPRA) IS A QUESTION OF LAW. THE SAME, THUS, PERTAINS TO THE YEAR TO WHICH IT RELATES (A.Y. 2005 - 06) OR, IN F A CT, BEING IN RELATION TO THE INTERPRETATION OF A PROVISION OF LA W, TO THE TIME WHEN THE PROVISION WAS BROUGHT ON THE STATUTE - BOOK. THE HONBLE COURT MADE AN EXCEPTION FOR A.Y. 2 0 05 - 06 ONLY, WHILE THE YEAR UNDER REFERENCE IS A.Y. 2010 - 11. AT THE SAME TIME, HOWEVER, THE ASSESSEE HAS PER ITS PAPER - BOOK PRODUCED A CERTIFIC ATE (DATED 06.9.2013) FROM BS E STATING THAT IT HAD INCLUDED THE ENTIRE TRANSACTION CHARGES OF RS.4.43 LACS IN ITS INCOME OFFERED TO TAX FOR THE YEAR (PB PG .28) . THE APEX COURT IN HINDUSTAN COCA C OLA B E VERAGE P. LTD. VS. CIT [2007] 293 ITR 226 ( SC) H AS CLAR IFIED THAT TAX COULD NOT BE RECEIVED BY THE REVENUE TWICE; TDS 3 ITA NO. 648/MUM/2015 (A.Y. 2010 - 11) TRUSTED SHARES & INVESTMENTS LTD. VS. ITO BEING ONLY A MANNER OF THE RECOVER Y OF TAX. THOUGH RENDERED IN THE CONTEXT OF TDS PROVISION S , THE QUESTION IS IF THE TAX C AN NOT BE RECOVERED (BY THE D EPARTMENT) FROM THE ASSESSEE S , HOW WOULD TH E CONDITION OF SECTION 40(A)(IA) BE MET BY THE ASSESSEE - PAYER S ? IT IS THIS DICHOTOMY THAT STANDS HIGHLIGHTED BY THE TRIBUNAL IN JAMNADAS KHUSALDAS & CO. (SUPRA). THE DECISION BY THE TRIBUNAL IN MAPE SECURITIES (P.) LTD. (SUPRA) IS AGAIN BASED ON THE PAYMEN T OF TAX O N THE RELEVANT SUM BY THE PAYEE ITSELF. FURTHER , THE LAW HAS SINCE BEEN AMENDED, ADDRESSING THE SAID DICHOTOMY, SO THAT WHERE THE PAYEE FURNISHES A CERTIFICATE TO THE EFFECT THAT TAX ON TH E IMPUGNED SUM STANDS DEPOSITED , THE PAYER WOULD NOT BE DE EMED TO BE IN DEFAULT, SAVING THE R IGOR OF SECTION 40(A)(IA). THOUGH THE SAID AMENDMENT STANDS MADE BY FINANCE ACT , 2012 W.E.F. APRIL 1 , 2013 , THE HON'BLE DELHI HIGH COURT IN CIT VS. ANSAL LANDMARK TOWNSHIP PVT. LTD. ( VIDE ITS DECISION IN ITA NO.160 AND 16 1 OF 2015 DATED 26/08/2015 ) HAS HELD THE SAME AS C LARIFICATORY AND , HENCE, RETROSPECTIVE, SO THAT IT SHALL APPLY TO THE CURRENT YEAR AS WELL. THIS VIEW STANDS ADOPTED BY THE TRIBUNAL IN IDBI CAPITAL MARKET VS. DY. CIT ( IN ITA NO. 888/MUM/2014 DATED 13/10/2 015) . THE ASSESSEE IN THE PRES E N T CASE, AS AFORE - STATED, HAS ALREADY FURNISHED A CERTIFICATE FROM BSE TO THIS EFFECT. THERE IS, HOWEVER, NO CORRESPONDING FINDING BY THE REVENUE , WITH THE CERTIFICATE BEING IN FACT NOT BEFORE THE ASSESSING OFFICER (A.O.) . T HE MATTER IS, ACCORDINGLY, RESTORED TO THE FILE OF THE ASSESSING AUTHORITY WHO SHALL DELETE THE DISALLOWANCE U/S. 40(A)(IA) UPON VERIFICATION OF THE ASSESSEES CLAIM, I.E., OF PAYMENT OF TH E TAX ON THE IMPUGNED SUM BY BSE (PAYEE) BY INCLUDING THE SAME IN I TS INCOME OFFERED TO TAX FOR THE YEAR. IN OTHER WORDS, THAT THE CONDITION OF THE AMEND ED SECTION 40(A)(IA) STANDS MET. I DECIDE ACCORDINGLY , SO THAT , SUBJECT TO THE SAID VERIFICATION AND RETURN ING A POSITIVE FINDING, THE ASSESSEE SUCCEEDS. 4. GROUND # 2 OF THE APPEAL RELATES TO AN ADDITION FOR RS.1,61,681/ - ON ACCOUNT OF BROKERAGE INCOME. THE A.O. IN ASSESSMENT PROCEEDINGS OBSERVED THE ASSESSEE TO HAVE PAID SERVICE TAX IN A SUM HIGHER THAN THAT WHICH IT WAS OBLIGED TO PAY ON THE BASIS OF 4 ITA NO. 648/MUM/2015 (A.Y. 2010 - 11) TRUSTED SHARES & INVESTMENTS LTD. VS. ITO THE BROKERAGE INC OME A S RECORDED IN ITS BOOKS OF ACCOUNT FOR THE YEAR. THE ASSESSEES CLAIM THAT THE AMOUNT (OF TAX) TO THE EXTENT OF RS.1,23,473/ - WAS COUNTED DOUBLY WHILE DEPOSITING THE TAX , DID NOT FIND FAVOUR WITH HIM. BEFORE THE LD. CIT(A) , WHO ALSO CALLED FOR A REMAN D REPORT, THE ASSESSEES CLAIM WAS THAT THIS AMOUNT WAS, AS A MEASURE OF PRECAUTION, DEPOSITED AD HOC IN EXCESS, PENDING THE AUDIT OF THE ACCOUNTS. THE FIRST APPELLATE AUTHORITY CONFIRMED THE ADDITION AS THE ASSESSEE WAS NOT ABLE TO RECONCILE THE DIFFERENC E, I.E., BETWEEN THE BROKERAGE INCOME AS PER BOOKS OF ACCOUNT AND THAT ON WHICH TAX STOOD DEPOSITED. HE, ACCORDINGLY, CONFIRM ED THE AD DITION, SO THAT, AGGRIEVED, THE ASSESSEE I S IN SECOND APPEAL. 5. THE PARTIES WERE HEARD, AND THE MATERIAL ON RECORD PERUS ED. THE CONTROVERSY, IN MY VIEW, IS MUCH ADO ABOUT NOTHING. THE ASSESSEE CLAIMING TO HAVE PAID TAX IN A HIGHER SUM, THE ONUS TO EXHIBIT SO IS ON IT. THE ASSESSEES ACCOUNTS HAVING BEEN SINCE AUDITED, THE (SERVICE) TAX RETURN , AS FURNISHED SUBSEQUENTLY , WO ULD ONLY BE IN CONFORMITY WITH THE AUDITED ACCOUNTS, REFLECTING THE SERVICE TAX AS HAVING BEEN PAID IN EXCESS BY WHATEVER AMOUNT. THAT IS, THE VALIDITY OF THE ASSESSEES CLAIM WOULD GET PROVED WITH REFERENCE TO ITS AUDITED ACCOUNTS AND TAX RETURN / S. THE MATTER CANNOT BE DECIDED ON THE BASIS OF BALD/UNSUBSTANTIATED CLAIMS. THE REVENUE AUTHORITIES OUGHT TO HAVE CALLED FOR THE SAID RETURNS. UNDER THE CIRCUMSTANCES , IT IS CONSIDERED ONLY PROPER AND IN THE INTEREST OF JUSTICE THAT THE MATTER IS RESTORED BACK T O THE ASSESSING AUTHORITY TO ALLOW THE ASSESSEE AN OPPORTUNITY TO ESTABLISH ITS CLAIM/S. THE A.O. SHALL DECIDE THE SAME BY ISSUING DEFINITE FINDINGS OF FACT , AND IN ACCORDANCE WITH THE LAW. I DECIDE ACCORDINGLY. 6. THE THIRD GROUND OF APPEAL RELATES TO T HE DISALLOWANCE U/S. 14A R/W R ULE 8D. THE ASSESSEE HAVING NOT DISALLOWED ANY SUM U/S.14A QUA ITS TAX - EXEMPT INCOME S OF DIVIDEND (RS.3.37 LACS) AND LONG - TERM CAPITAL GAIN (RS.22.60 LACS), T HE A.O. INVOKED R ULE 8D AND WORK ED OUT THE DISALLOWANCE U/S.14A A T R S.58,283/ - . THE ASSESSEES CASE 5 ITA NO. 648/MUM/2015 (A.Y. 2010 - 11) TRUSTED SHARES & INVESTMENTS LTD. VS. ITO BEFORE THE REVENUE AS WELL AS BEFORE TH IS TRIBUNAL WAS THAT IT HAD NOT INCURRED ANY EXPENDITURE TOWARD OR IN RELATION TO THE TAX - EXEMPT INCOMES, WHICH STANDS REPELLED BY THE REVENUE, PLACING RELIANCE ON THE DECISION IN GODRE J & BOYCE MFG. CO. LTD. V. DY. CIT [2010] 328 ITR 81 (BOM) . 7. THE PARTIES STAND HEARD, AND THE MATERIAL ON RECORD PERUSED. WITHOUT DOUBT, THE DISALLOWANCE U/S. 14A IS ONLY OF THE EXPENDITURE INCURRED. HOWEVER, WHEN THE ASSESSEE CLAIMS TO HAVE NOT INCURR ED ANY EXPENDITURE, IT IS IT ON WHICH THE ONUS TO EXHIBIT THE SAME LIES. THE LAW PRESCRIBES THE SAID EXHIBITION TO BE WITH REFERENCE TO ITS ACCOUNTS (SECTION 14A(2) R/W S. 14A(3) ), SO THAT WHERE NOT SO DONE, THE PRESCRIPTION OF R ULE 8D SHALL APPLY. IN THE PRESENT CASE, THE DISALLOWANCE IS NOT QUA ANY DIRECT EXPENDITURE OR INDIRECT INTEREST EXPENDITURE, BUT QUA INDIRECT, ADMINISTRATIVE EXPENDITURE , COVERED UNDER R ULE 8D(2)(III). NO MATERIAL HAS BEEN LED EVEN BEFORE THE TRIBUNAL TO SHOW THAT NO ADMINISTRATIVE EXP ENDITURE , I.E., RELATING (DIRECTLY OR INDIRECTLY) TO TAX - EXEMPT INCOMES, STANDS INCURRED BY THE ASSESSEE FOR THE RELEVANT YEAR. THE PRESUMPTION IN LAW WOULD UNDER THE CIRCUMSTANCES HOLD. THE REVENUE HAS IN MY VIEW RIGHTLY INVOKED THE DECISION BY THE HO N'BLE JURISDICTIONAL HIGH COURT IN GODREJ & BOYCE MFG. CO. LTD . (SUPRA) , WHICH IS EXPLICIT ON THE POINT (REFER PARAS 81 TO 85 OF THE REPORTS ) . I DECIDE ACCORDINGLY , AND THE REVENUE SUCCEED S . 8. VIDE GROUND 4, THE ASSESSEE CHALLENGES THE CHARGE OF INTERES T U/S.234 (IMPLYING SECTIONS 234A, 234B AND 234C IN - AS - MUCH AS THERE IS NO SECTION 234 ) AND INITIATION OF PENALTY U/S.271(1)(C). THE CHARGE OF INTEREST IS MANDATORY, WHILE THE INITIATION OF PENALTY PROCEEDINGS IS NOT APPEALABLE. THE GROUND IS ACCORDINGLY D ISMISSED. 9. IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON NOVEMBER 27 , 201 5 (S ANJAY ARORA) MUMBAI ; DATED : 27 . 11 .2015 / A CCOUNTANT MEMBER 6 ITA NO. 648/MUM/2015 (A.Y. 2010 - 11) TRUSTED SHARES & INVESTMENTS LTD. VS. ITO . . ./ ROSHANI , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI