Appeal details
Counselvise Citation
[2016] 132 COUNSELVISE.COM (IT) 3996 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
2 year(s) 5 month(s) 6 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
13-04-2016
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
E
Assessment Year
2010-2011
Appeal Filed On
07-11-2013
Judgement Text
1 M/S SATCO CAPITAL MARKETS LTD (FORMERLY KNOWN AS M/S SATCO SECURITIES AND FINANCIAL LTD.) ITA NO.6527/MUM/2013 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E , MUMBAI , , BEFORE SHRI B R BASKARAN , ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA , JUDICIAL MEMBER ITA NO. 6527 /MUM/201 3 (ASSESSMENT YEAR 2010 - 11) ASST COMMISSIONER OF INCOME - TAX CIRCLE - E4(2), ROOM NO. 642, 6 TH FLOOR, AAYAKAR BHAVAN, M K ROAD, MUMBAI - 400 020 VS M/S SATCO CAPITAL MARKETS LTD (FORMERLY KNOWN AS M/S SATCO SECURITIES AND FINANCIAL LTD.), 1 ST FLOOR, MAKHIJA CHAMBERS, 196, TURNER ROAD, BANDRA (WEST), MUMBAI - 400 050 .:PAN: AAACS 6813 N (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI A K NAYAK RESPONDENT BY : SHRI HARIDAS BHAT /DATE OF HEARING : 13 - 04 - 201 6 /DATE OF PRONOUNCEMENT : 13 - 04 - 2016 ORDER , . : - PER AMIT SHUKLA, J. M. : T HE AFORESAID APPEAL HAS BEEN FILED BY THE REVENUE AGAINST IMPUGNED ORDER DATED 8 TH AUGUST, 2013 PASSED BY COMMISSIONER OF INCOME - TAX (APPEALS) CIT(A) - 8, MUMBAI, FOR THE QUANTUM OF ASSESSMENT PASSED UNDER SECTION 143(3) FOR THE ASSESSMENT YEAR 2010 - 11. IN THE GROUNDS OF APPEAL, THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, WHETHER THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE DISALLOWANCE ON ACCOUNT OF STOCK EXCHANGE PEN ALTY AS 2 M/S SATCO CAPITAL MARKETS LTD (FORMERLY KNOWN AS M/S SATCO SECURITIES AND FINANCIAL LTD.) ITA NO.6527/MUM/2013 PENALTIES WHICH ARE MENTIONED AS TECHNICAL DEFAULTS ARE NOT MERELY COMPENSATORY BUT PENALIZING. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, WHETHER THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION MADE ON ACCOUNT OF NON DE DUCTION OF TDS ON SUB - BROKERAGE AND COMMISSION AS 194H GIVES IMMUNITY TO THE BROKER FROM NON DEDUCTION OF TDS BUT NOT SUB - BROKER. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE IMPUGNED ORDER OF THE LD. CIT(A) IS CONTRARY TO LAW AND CONSEQUENTLY MERITS TO BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 2. BRIEF FACTS QUA THE FIRST ISSUE IS THAT , ASSESSEE HAS DEBITED AN AMOUNT OF RS. 11,700/ - BEING PENALTY PAID TO STOCK EXCHANGE. IN RESPONSE TO THE SHOW CAUSE NOTICE BY THE AO, ASSESSEE SUBMITTED THAT THE PENALTY CHARGED BY THE STOCK EXCHANGE WAS ON ACCOUNT OF SOME MINOR MISTAKES AND DELAY IN PAYME NTS AND NOT FOR ANY CONTRAVENTION OF ANY LAW OR PENAL IN NATURE. HOWEVER, THE AO DISALLOWED THE SAID AMOUNT. 3. BEFORE THE CIT(A), IT ASSESSEE SUBMITTED THAT, PENALTY LEVIED WAS TOWARDS CERTAIN DELAY IN TECHNICAL NON - COMPLIANCE AND IS NOT COVERED IN THE N ATURE OF PAYMENT STIPULATED UNDER EXPLANATION TO SECTION 37(1). MOREOVER, IN THE EARLIER YEAR 2008 - 09, THIS ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL. THE LD. CIT(A) DELETED THE SAID ADDITION AFTER OBSERVING AS UNDER: I HAVE CONSID ERED THE FACTS OF THE CASE. THE HONBLE ITAT IN THE CASE OF APPELLANT FOR AY 2008 - 09 VIDE ORDER ITA NO.6032/MUM/2011 DATED 27 JULY, 2012 RELYING ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS 3 M/S SATCO CAPITAL MARKETS LTD (FORMERLY KNOWN AS M/S SATCO SECURITIES AND FINANCIAL LTD.) ITA NO.6527/MUM/2013 PRASAD & CO. (341 ITR 480 DEL) HAS DELETED THE PENALTY OF RS.5,79,137/ - PAID TO STOCK EXCHANGE. IN VIEW OF THE ABOVE, I DIRECT THE AO TO DELETE THE ADDITION OF PENALTY RS.11,700/ - PAID TO STOCK EXCHANGE. THIS GROUND OF APPEAL IS, THUS, ALLOWED. 3. AFTER CONSIDERING THE RELEVANT FINDING AND HEARING BOTH THE PARTIES, WE FIND THAT, NOT ONLY THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL IN THE ASSESSEES OWN CASE BUT ALSO BY DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS PRASAD & COMPANY , REPORTED IN 34 1 ITR 4 8 0. FURTHER, THE NATURE OF PAYMENT INVOLVED HERE IN THIS MATTER D OES NOT FALL WITHIN THE AMBIT OF EXPLANATION TO SECTION 37(1) AS IT IS NOT PAYMENT IN CONTRAVENTION OF ANY LAW OR PENAL IN NATURE. THUS, GROUND NO. 1 AS RAISED BY THE REVENUE IS TREATE D AS DISMISSED. 4. SO FAR AS SECOND ISSUE RELATING TO DISALLOWANCE MADE UNDER SECTION 40(A)(IA), THE RELEVANT FACTS ARE THAT, THE ASSESSEE HAS DEBITED AN AMOUNT OF RS.2,46,36,685/ - UNDER THE HEAD SUB - BROKERAGE AND COMMISSION. IN RESPONSE TO THE SHOW CAUSE NOTICE, ASSESSEE SUBMITTED THAT, IT HAS GIVEN THE SUB - BROKERAGE AND C OMMISSION ON THE DEALING OF SECURITIES, WHICH IS BEYOND THE SCOPE AND MEANING PROVIDED UNDER SECTION 194H. THE SAID SECTION CLEARLY EXCLUDES ANY PAYMENT OF COMMISSION AND BROKERAGE FROM TDS, WHE RE IT IS PAID DIRECTLY OR INDIRECTLY FOR DEALING I N THE SECURI TIES. HOWEVER, THE AO HELD THAT SECTION 194H INCLUDE S ANY PAYMENT RECEIVED BY A PERSON ACTING ON BEHALF OF THE ANOTHER PERSON FOR ALL SORTS OF SERVICES RENDERED AND ONLY EXCLUSION MADE IS PROFESSIONAL SERVICES. THE RECIPIENT OF SUB - BROKERAGE HERE A RE AGENT S WHO ARE ACTING ON BEHALF OF THE ASSESSEE IN BRINGING NEW CLIENTS TO THE ASSESSEE, WHICH IN TURN HAS INCREASED THE VOLUME OF BUSINESSES OF THE ASSESSEE . FURTHER A SSESSEE BEING A REGISTERED BROKER WITH THE STOCK EXCHANGE AND IS THE MAIN BROKER THEREFORE, O N ITS MEMBERSHIP CODE, TRADING AND SECURITIES ARE DONE ON BEHALF OF 4 M/S SATCO CAPITAL MARKETS LTD (FORMERLY KNOWN AS M/S SATCO SECURITIES AND FINANCIAL LTD.) ITA NO.6527/MUM/2013 CLIENTS. THUS, THESE BROKERS ARE ONLY DOING WORK ON BEHALF OF THE CLIENTS ON THE MAIN CODE OF THEIR P RINCIPAL THAT IS ASSESSEE. THUS, EXCEPTION PROVIDED IN SECTION IN 194H WILL NOT APP LY HERE AND ACCORDINGLY, RELYING UPON THE DECISION OF HONBLE KERALA HIGH COURT IN THE CASE OF CIT VS DIRECTOR OF PRASAR BHARATI, 198 TAXMAN 317, HE DISALLOWED THE SUM OF RS.2,46,36,695/ - UNDER SECTION 40(A)(IA). 5. BEFORE THE CIT(A), THE ASSESSEE SUBMITTED THAT, IT HAS PAID THE BROKERAGE / COMMISSION TO THE SUB - BROKERS FOR DEALING WITH THE SECURITIES ONLY AND HENCE SUCH PAYMENT IS SAVE BY EXCLUSIONARY CLAUSE AND IS NOT COVERED UNDER THE TDS PROVISION OF SECTION 194H . IN SUPPORT VARIOUS DECISIONS OF THE TRIBUNAL WERE ALSO RELIED UPON.. THE LD. CIT(A) AFTER APPRECIATING THE ENTIRE FACTS AND ALSO THE VARIOUS DECISIONS, DELETED THE SAID DISALLOWANCE AFTER OBSERVING AND HOLDING AS UNDER: 5.3 I HAVE CONSIDERED THE FACT OF THE CASE AS WELL AS GONE THROUGH THE ASSESSMENT ORDER OF THE AO AND THE SUBMISSIONS OF THE APPELLANT. I FIND THAT THIS ISSUE IS SQUARELY COVERED BY THE SEVERAL DECISION OF THE HONBLE MUMBAI TRIBUNAL. SIMILAR ISSUES AROSE FOR CONSIDERATION OF THE CALCUTTA BENCH OF ITAT AND THE ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE THE HONBLE ITAT IN THE CASE OF ACIT VS M/S S J INVESTMENT AGENCIES P TD. VIDE ITA NO. 3820/MUM/2009 (AY 2006 - 07) DATED 23.02.2011 HAS OBSERVED AS UNDER: - THERE IS NO DOUBT THAT MUTUAL FUNDS ARE CATEGORIZED AS SECURITIES ON WHICH THERE IS NO OBJECTION FROM THE REVENUE EITHER BEFORE THE ASSESSING OFFICER OR BEFORE THE CIT(A). IN FACT THE CIT(A) ALSO GIVES A FINDING THAT THE ASSESSING OFFICER HAS NOT DISPUTED THAT UNITS OF MUTUAL FUNDS AR E SECURITIES AS PER SECURITIES CONTRACTS (REGULATION) ACT, 1956. ASSESSEE IS IN THE BUSINESS OF MUTUAL FUNDS DISTRIBUTION AND INVESTMENT AGENT. FROM THE DETAILS OF BROKERAGE RECEIVED AND SERVICE TAX DEDUCTED THERE FROM IT CAN BE SEEN THAT OUT OF THE BROKER AGE RECEIVED AND SERVICE TAX DEDUCTED THERE FROM IT 5 M/S SATCO CAPITAL MARKETS LTD (FORMERLY KNOWN AS M/S SATCO SECURITIES AND FINANCIAL LTD.) ITA NO.6527/MUM/2013 CAN BE SEEN THAT OUT OF THE BROKERAGE INCOME OF RS.8,28,56,873/ - THE BROKERAGE INCOME OF RS.8,27,47,095/ - IS FROM MUTUAL FUNDS. THE BALANCE BROKERAGE OF RS.1,09,779/ - IS TOWARDS BONDS AND FIXED DEPOSITS. THE SUB BROKERAGE IS PAID IN RELATION TO UNITS OF MUTUAL FUNDS. FROM THE DETAILS PLACED ON RECORD, WE ARE CONVINCED THAT THE SUB BROKERAGE PAID IS CONNECTED WITH THE SERVICES RENDERED IN THE COURSE OF BUYING AND SELLING OF UNITS OF MUTUAL FUNDS OR IN RELAT ION TO TRANSACTIONS PERTAINING TO MUTUAL FUNDS AND AS PER THE PROVISIONS OF SECTION 194H EXPLANATION (I) THESE ARE NOT COVERED BY THE PROVISIONS FOR DEDUCTION OF TAX AT SOURCE. THERE IS NOTHING ON RECORD TO INDICATE THAT THE SUB BROKERAGE RECEIVED BY THE A SSESSEE IS NOT COVERED BY TDS WHEREAS HE WAS OF THE OPINION THAT THE SUB BROKERAGE PAID IS COVERED BY THE PROVISIONS. WE ARE UNABLE TO UNDERSTAND THIS LOGIC OF THE ASSESSING OFFICER. FOR THESE REASONS, WE ARE OF THE OPINION THAT THE ORDER OF CIT(A) DOES NO T REQUIRE ANY MODIFICATION AND ACCORDINGLY THE SAME IS CONFIRMED. REVENUES GROUNDS ON THIS ISSUE ARE ACCORDINGLY REJECTED. THEREFORE, IT IS AN ACCEPTED FACT THAT THE PROVISIONS OF SECTION 194H MAKES AN EXEMPTION AS FAR AS THE BROKERAGE OR COMMI SSION IS PAID IN RELATION TO THE TRADING IN SECURITIES. THE SUB BROKERAGE PAID TO A SUB BROKER SQUARELY COVERED BY THE EXEMPTION CLAUSE AS PROVIDED IN SECTION 194H. THE APPELLANT RELIED ON THE DECISION ON THE DCIT - 2(3) MUMBAI VS. SENATOR COMMODITIES PVT L TD ITA NO. 8321/M/2010 AY 2006 - 07, ITO WD 36(2), NEW DELHI VS MITTAL INVESTMENT AND CO. REPORTED IN (2013) 33 TAXMAN.COM 52 (DELHI TRIB) AS WELL AS DCIT CIRCLE 6 KOLKATA VS NOBLE ENCLAVE AND TOWERS PVT LTD. REPORTED IN (2012) 18 TAXMANN.COM 288 (KOL) WHI CH ARE SQUARELY BASED ON THE ISSUES INVOLVED IN THE PRESENT APPEAL. FOLLOWING THE DECISIONS OF THE HONBLE ITAT IN CASE OF M/S S J INVESTMENT AGENCIES P LTD AND OTHER CASES, IT IS HELD THAT SECTION 194H IS NOT APPLICABLE TO THE PAYMENT OF BROKERAGE IN THE CASE OF SHARE SECURITIES. THE ADDITIONS MADE BY THE ASSESSING OFFICER UNDER 6 M/S SATCO CAPITAL MARKETS LTD (FORMERLY KNOWN AS M/S SATCO SECURITIES AND FINANCIAL LTD.) ITA NO.6527/MUM/2013 SECTION 40(A)(IA) IS ACCORDINGLY DELETED. THIS GROUND OF APPEAL IS ALLOWED. 6. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE IN SUPPORT OF THE CONCLUSION OF THE LD. CIT(A) RELIED UPON THE FOLLOWING DECISIONS: (I) DCIT VS NOBLE ENCLAVE & TOWERS (P) LIMITED, ITAT KOLKATA BENCH IN ITA NO. 1241/KOL/2008; (II) DCIT VS S J INVESTMENT AGENCIES P LTD, ITAT MUMBAI BENCH IN ITA NO. 8317/MUM/2010 & 8322/MUM/2010 ; & (III) ACIT VS S J INVESTMENT AGENCIES P LTD, ITAT, MUMBAI BENCH IN ITA NO. 3820/MUM/2009 CO NO. 01/MUM/2010. 7. ON THE OTHER HAND, LD. DR STRONGLY RELIED UPON THE ORDER OF THE AO. 8. AFTER CONSIDERING THE RELEV ANT FINDING GIVEN IN THE IMPUGNED ORDERS AND VARIOUS DECISIONS RELIED UPON BY THE LD. COUNSEL, WE FIND FROM THE ORDERS THAT, ASSESSEE HAD PAID SUB - BROKERAGE AND COMMISSION TO ITS AGENTS FOR DEALING WITH THE SECURITIES , THAT IS, IN CONNECTION WITH THE SERVI CES RENDERED IN THE COURSE OF BUYING AND SELLING OF SHARES / SECURITIES. EXPLANATION TO SECTION 194H DEFINES THE COMMISSION AND BROKERAGE AS FOR THE PURPOSE OF SECTION 194 H IN THE FOLLOWING MANNER: '194H. ANY PERSON, NOT BEING AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY, WHO IS RESPONSIBLE FOR PAYING, ON OR AFTER THE 1ST DAY OF JUNE, 2001, TO A RESIDENT, ANY INCOME BY WAY OF COMMISSION (NOT BEING INSURANCE COMMISSION REFERRED TO IN SECTION 194D) OR BROKERAGE, SHALL, AT THE TIME OF CREDIT OF SUCH INCOME TO THE ACCOUNT OF THE PAYEE OR AT THE TIME OF PAYMENT OF SUCH INCOME IN CASH OR BY THE ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE, WHICHEVER IS EARLIER, DEDUCT INCOME - TAX THEREON AT THE RATE OF [TEN] PER CENT: PROVIDED .. 7 M/S SATCO CAPITAL MARKETS LTD (FORMERLY KNOWN AS M/S SATCO SECURITIES AND FINANCIAL LTD.) ITA NO.6527/MUM/2013 PROVIDED .. PROVIDED .. EXPLANATION . FOR THE PURPOSES OF THIS SECTION, - 'COMMISSION OR BROKERAGE' INCLUDES ANY PAYMENT RECEIVED OR RECEIVABLE, DIRECTLY OR INDIRECTLY, BY A PERSON ACTING ON BEHALF OF ANOTHER PERSON FOR SERVICES RENDERED (NOT BEING PROFESSIONAL SERVICES) OR FOR ANY SERVICES IN THE COURSE OF BUYING OR SELLING OF GOODS OR IN RELATION TO ANY TRANSACTION RELATING TO ANY ASSET, VALUABLE ARTICLE OR THING, NOT BEING SECURITIES ; .... ( II) .. (III) .. (IV) .. 9. THUS, COMMISSION OR BROKERAGE DEFINITION DOES NOT INCLUDE ANY TRANSACTION IN SECURITY AS IT HAS BEEN SPECIFICALLY EXCLUDED FROM PAYMENT AS STIPULATED IN EXPLANATION TO SECTION 194H. THERE IS NOTHING ON RECORD TO PROVE THAT SUB - BROKERAGE HAS BEEN PAID FOR A NY OTHER SERVICES OTHER THAN RELATING TO SECURITIES. ONCE THAT IS SO, WE DO NOT FIND ANY REASON TO DEVIATE FROM THE FINDINGS OF THE CIT(A) WHICH IN TURN IS BASED ON THE VARIOUS DECISIONS OF THE TRIBUNAL , A CCORDINGLY, THE GROUND RAISED BY THE REVENUE IS DIS MISSED. 10. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH AP R IL , 2016. SD/ - SD/ - ( ) ( ) (B R B ASKARAN ) ( AMIT SHUKLA ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 13 TH APRIL, 2016 8 M/S SATCO CAPITAL MARKETS LTD (FORMERLY KNOWN AS M/S SATCO SECURITIES AND FINANCIAL LTD.) ITA NO.6527/MUM/2013 /COPY TO: - 1 ) / THE APPELLANT. 2 ) / THE RESPONDENT. 3) THE CIT(A) - 8 , MUMBAI. 4 ) THE COMMISSIONER OF INCOME TAX - 4, MUMBAI. 5 ) , , / THE D.R. E BENCH, MUMBAI. 6 ) \ COPY TO GUARD FILE. / BY ORDER / / TRUE COPY / / , ASSTT. REGISTRAR I.T.A.T., MUMBAI * . . *CHAVAN, SR.PS
