ITO (TDS) (OSD)-1(2), MUMBAI V. H.J. SECURITIES P.LTD, MUMBAI

ITA 677/MUM/2014

• Counselvise Citation: 67719914 RSA 2014
• Duration Of Justice: 1 year(s) 5 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2008-2009
• Appeal Filed On: 29-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JEETENDRA KUMAR
• Assessee Lawyers: PRIYANKA J MARU
• Section: 194C; 201(1)

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI H BENCH , , , BEFORE S/SH. JOGINDER SINGH ,JUDICIA L MEMBER & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO. 677 /MUM/201 4 , / ASSESSMENT YEAR - 200 8 - 0 9 TAX RECOVERY OFFICER - (TDS) - 1 ROOM NO.812, K.G. MITTAL HOSPITAL BLDG., CHARNI ROAD, MUMBAI - 400 002. VS M/S. H.J. SECURITIES PVT. LTD. 2 4/16, GROUND FLOOR, CAMA BUILDING, DALAL STREET, FORT , MUMBAI - 400 001. PAN: AAACH 5600 E ( / APPELLANT ) ( / RESPONDENT ) /ASSESSEE BY : MS. PRIYANKA J. MARU / REVENUE BY :SHRI JEETENDRA KUMAR - DR / DATE OF HEARING : 08 - 0 7 - 2015 / DATE OF PRONOUNCEMENT : 22 - 0 7 - 2015 , 1961 254 ( 1 ) ORDER U/S.254(1)OF THE INCOME - TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER DATED 08.11.2013 OF THE CIT(A) - 14, MUMBAI ,THE ASSESSING OFF ICER(AO) HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT THE TRANSACTION BETWEEN THE ASSESSEE AND THE JOBBER IS A TRANSACTION DONE ON PRINCIPAL TO PRINCIPAL BASIS. 2. LD. CIT(A) HAS ERRED IN LAW A ND ON FACTS IN HOLDING THAT THE AGREEMENT BETWEEN THE ASSESSEE AND THE JOBBER TO SHARE PROFIT OR LOSS OF THE TRANSACTION IS IN THE NATURE OF JOINT VENTURE. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND ALSO IN LAW, THE LD. COMMISSIONER OF INCOME TAX( APPEALS) } ERRED IN HOLDING THAT THE ASSESSEE IS NOT IN DEFAULT U/S 201 (1) OF THE ACT AND LIABLE TO PAY ON ACCOUNT OF TAX DEDUCTIBLE AT SOURCE OF RS. 8,49,820/ INCLUSIVE OF INTEREST U/S 201 ( 1 A) OF THE ACT. 4. THE APPELLANT CRAVES TO LEAVE OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY AT THE TIME OF HEARING OF THE CASE OR THEREAFTER. 2. FIRST GROUND OF APPEAL IS ABOUT HOLDING THE TRANSACTIONS BETWEEN THE ASSESSEE AND THE J OBBERAS A TRANSACTION DONE ON P RINCIPLE TO PRINCIPLE BASI S. DURIN G THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS NOTICED THAT THE ASSESSEE HAD MADE A PAYMENT OF 2.78 CRORES TO JOBBERS ON WHICH NECESSARY TDS WAS NOT DEDUCTED. THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY TDS HAD NOT BEEN DEDUCTED AS PER PROVISIONS OF S.194C OF T HE ACT. IN ITS REPLY,DT.29.3.12, THE ASSESSEE RELIED UPON THE DECISION OF THE T RIBUNAL DELIVERED IN THE CASE OF M/S. ASSET ALIANCE SECURITIES P.LTD. (ITA / 1488/MUM/2009) AND STATED THAT PROVISIONS OF S.194C WERE NOT APPLICABLE IN ITS CASE. AFTER CONSID ERING THE EXPLANATION OF THE ASSESSEE AND THE COPY OF THE AGREEMENT, DT.9.5.2003, ENTERED BETWEEN THE ASSESSEE AND VIKAS P. THAKAR, THE TRO(TDS) HELD THAT THE JOBBER WOULD WORK ON BEHALF OF THE ASSESSEE, THAT IN RE ALITY THE WORK WAS OF AN AGENT, THAT THE PA YMENT MADE BY THE ASSESSEE TO THE JOBBER WAS PAYMENT TO CONTRACTOR, THAT THE ASSESSEE HAD FAILED TO DEDUT TAX AT SOURCE IN RESPECT OF THE PAYMENTS MADE/CREDITED TO THE ACCOUNT OF THE JOBBER FOR THE YEAR UNDER APPEAL, THAT IT HAD ALSO FAILED TO PAY THE TAX D EDUCTED TO THE CREDIT OF CENTRAL GOVERNMENT WITHIN ITA/ 677 /MUM/201 4 ,AY. 0 8 - 09 - HJ SECURITIES 2 THE SPECIFIED TIME, THE ASSESSEE HAD TO BE TREATED AS ASSESSEE IN DEFAULT U/S. 201(1) OF THE ACT IN RESPECT OF A SUM OF RS.5.74 LACS (AMOUNT OF TAX DEDUCTIBLE @2.06% ON RS.2.78 CR.).THE TRO (TDS) FIXED THE INTEREST LIABILITY AT 2.75 LACS FOR 48 MONTHS @1% ON DELAYED PAYMENT OF DEDUCTIBLE TAX.FINALLY THE ASSESSEE WAS DIRECTED TO PAY THE TOTAL TAX LIABILITY OF R S.8.49 LACS (5.74 LACS +2.75 LACS). 3. AGGRIEVED BY THE ORDER OF THE TRO(TDS) ,THE ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA). BEFORE HER, IT WAS SUBMITTED THAT THE IDENTICAL ISSUE HAD COME UP FOR ADJUDICATION BEFO RE THE TRIBUNAL FOR AY 05 - 06, THAT IN T H AT ORDER IT WAS HELD THAT THE ASSESSEE WAS NOT REQUIRED TO DEDUCT TDS ON PAY MENT MADE TO JOBBER. THE FAA RELYING UPON THE ORDER OF THE TRIBUNAL HELD THAT THE ASSESSEE WAS NOT REQUIRED TO DEDUCT TDS ON PAYMENT MADE TO JOBBER. 4. DURING THE COURSE OF HEARING B EFORE US, R EPRESENTATIVES OF BOTH THE SIDES AGREED THAT THE ISSUE WAS SQUAR ELY COVERED BY THE ORDER OF THE T RIBUNAL (ITA/260 AND 2457/MUM/09 - AY . 05 - 06 AND 60 - 07). WE FIND THAT THE TRIBUNAL HAD DECIDE D THE APPEAL FOR THE ABOVE MENTIONED TW O AYS AS UNDER : 5. WE HAVE HEARD THE PARTIES AND PERUSED THE RECORDS. THE LD. COUNSEL SUBMIT S THAT THE ARRANGEMENT BETWEEN THE ASSESSEE AS A BROKER AND THE JOBBER IS ON THE PRINCIPAL TO PRINCIPAL BASIS AND JOBBER TAKES S AWAY THE SHARE OF PROFIT IN THE BUSINESS DONE BY USING THE INFRASTRUCTURE OF THE ASSESSEE. HE SUBMITS THAT THIS ISSUE STANDS CO VERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE ITAT MUMBAI BENCH IN THE CASE OF DY. CIT VS. M/S. ASSET ALLIANCE SECURITIES P. LTD. IN ITA NO.1488/MUM/2009 DATED 18.07.2010 (2010) TIOL 460 ITAT MUM. WE HAVE ALSO HEARD THE LD. D.R. WE FIND THAT THE NATURE OF THE PAYMENTS MADE BY THE SHARE BROKERS TO THE JOBBERS HAS BEEN CONSIDERED BY THE ITAT MUMBAI BENCH IN THE CASE OF M/S. ASSET ALLIANCE SECURITIES PVT. LTD. (SUPRA) AND IT IS HELD AS UNDER: THE FACTS SHOW THAT THERE WERE SEPARATE JOINT VENTURES ENTERED INTO BY THE ASSESSEE WITH SEVERAL JOBBERS/ARBITRAGERS AND PAYMENTS HAVE BEEN MADE TO THEM UNDER SUCH AGREEMENTS AND THE ASSESSEE'S SHARE IN THE PROFITS HAS BEEN TAKEN TO THE PROFIT AND LOSS ACCOUNT. IN THESE CIRCUMSTANCES THE PROVISIONS OF SECTION 194C ARE NOT ATTRACTED BECAUSE IN ESSENCE AND SUBSTANCE THE AMOUNTS PAID TO THE JOBBERS OR ARBITRAGERS DID NOT IN REALITY REPRESENT THE EXPENSE OF THE ASSESSEE COMPANY BUT REPRESENTED PAYMENT OF THE SHARE OF THE JOBBERS/ ARBITRAGERS UNDER THE AGREEMENT ENT ERED INTO WITH THEM. IN SUCH A CASE THE ASSESSEE IS RIGHT IN SAYING THAT THERE WAS NO QUESTION OF DEDUCTING ANY TAX AT SOURCE. THE ABOVE FACTS ALSO ESTABLISH THAT THE RELATIONSHIP BETWEEN THE ASSESSEE AND THE JOBBERS/ARBITRAGERS WAS NOT PRINCIPAL AND AGENT BUT WAS THAT OF PRINCIPAL TO PRINCIPAL. BOTH HAD AGREED TO EMBARK UPON A JOINT VENTURE TO TRADE IN SHARES AND SECURITES IN THE STOCK EXCHANGE AND TO SHARE THE PROFIT /IOSS EQUALLY. WE DO NOT SEE HOW SUCH PAYMENTS CAN BE TERMED AS PAYMENTS TO CONTRACTORS F OR ANY WORK TO BE CARRIED OUT BY THEM. WE THEREFORE OLD THE FINDING OF THE CIT (A) THAT THESE PAYMENTS DO NOT ATTRACT SECTION 194C AND THE ASSESSEE WAS NOT LIABLE TO DEDUCT TAX THEREFROM. ACCORDINGLY SECTION 40(A)(IA) IS ALSO NOT APPLICABLE. THE PAYMENTS, IN VIEW, WERE RIGHTLY ALLOWED AS DEDUCTION BY THE CIT (A). THE GROUNDS 7 TO 10 ARE DISMISSED. WE, THEREFORE, FOLLOWING THE DECISION OF THE CO ORDINATE BENCH IN CASE OF M/S. ASSET ALLIANCE SECURITIES PVT. LTD. (SUPRA), CONFIRM THE ORDER OF THE LD. CIT (A ) IN BOTH THE ASSESSMENT YEARS AND THE RESPECTIVE I.E. NOS. 1, 2 & 3, TAKEN BY THE REVENUE IN THE A. Y. 2005 06 AND GROUNDS 1 & 2 IN THE A. Y. 2006 07 ARE DISMISSED. ITA/ 677 /MUM/201 4 ,AY. 0 8 - 09 - HJ SECURITIES 3 RESPECTFULLY, FOLLOWING ABOVE ORDER OF THE T RIBUNAL , WE DECIDE THE FIRST GROUND OF APPEA L IN FAVOUR OF THE ASSESSEE . GROUND NO.2 AND 3 ARE INTERLINKED WITH GROUND NO.1. AS WE HAVE ALREADY DECIDED THE FIRST GROUND OF APPEAL IN FAVOUR OF THE ASSESSEE , THEREFORE, REMAINING TWO GROUNDS ARE NOT ADJUDICATED. AS A RESULT,APPEAL FILED BY THE AO STANDS DISMISSED . . ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND JU LY ,2015. 22 ND 2015 SD/ - SD/ - ( / JOGINDER SINGH ) ( / RAJENDRA) / JUDICIAL MEMBE R / ACCOUNTANT MEMBER / MUMBAI, /DATE: 22 .7. 2015 . . JV . SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR A BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , / ITAT, MUMBAI.