ACIT CIR 4(2), MUMBAI V. T.J. STOCK BROKIGN SERVICES P. LD, MUMBAI

ITA 6785/MUM/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9406 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-11-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 09-11-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 24-09-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL

Judgement Text

T.J. STOCK BROKING SERVICES P. LTD., 2 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS.1,7 5,026 MADE U/S.40(A)(IA) IN RESPECT OF VSAT, LEASELINE AND TRA NSACTIONAL CHARGES PAID TO STOCK EXCHANGE WITHOUT APPRECIATING THE FACTS AN D THESE WERE COMPOSITE CHARGES FOR PROFESSIONAL AND TECHNICAL SE RVICES RENDERED BY THE STOCK EXCHANGE TO ITS MEMBER AND THE ASSESSEE HAS F AILED TO DEDUCT TDS THEREON. 4. THE ASSESSEE DEBITED LEASELINE/VSAT CHARGES OF R S.44,330 AND TRANSACTIONS CHARGES OF RS.1,30,956 AGGREGATING TO RS.1,75,286. THESE CHARGES ARE PAYABLE TO STOCK EXCHANGE ON ACCOUNT OF SERVICES PROVIDED BY IT WITH REGARDS TO TRANSACTIONS IN SECURITIES THROUGH THE EXCHANGE. THE AO STATED THAT ASSESSEE DID NOT DEDUCT TDS IN RESPECT OF ABOVE PAYMENTS AND, ACCORDINGLY, DISALLOWED THE CLA IM OF ASSESSEE U/S.40(A)(IA) OF THE ACT. BEING AGGRIEVED, ASSESSEE FILED APPEAL BEFORE LD CIT(A). 5. LD CIT(A) DELETED THE SAID DISALLOWANCE BY FOLLO WING THE DECISION OF ITAT MUMBAI IN THE CASE OF KOTAK SECURITIES VS ACIT, 124 TTJ 241 (MUM) AND ALSO THE DECISION OF DCIT VS. ANGEL BROKING LTD., 35 SOT 48 7. HENCE, THIS APPEAL BY THE DEPARTMENT. 6. DURING THE COURSE OF HEARING, LD A.R. SUBMITTED THAT IN RESPECT OF PAYMENT OF RS.1,30,956 ON ACCOUNT OF TRANSACTION CHARGES PAID BY ASSESSEE TO THE STOCK EXCHANGE IS COVERED AGAINST THE ASSESSEE IN VIEW OF DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. M/S. KOTAK SECURITIES LIMIT ED, IN INCOME TAX APPEAL NO.3111 OF 2009 VIDE ORDER DATED 21 ST OCTOBER, 2011, WHEREIN, IT WAS HELD THAT THE TRANS ACTIONS CHARGES PAID BY ASSESSEE TO A STOCK EXCHANGE ARE RE NDERING MANAGERIAL SERVICES WHICH CONSTITUTE FEE FOR TECHNICAL SERVICES U/S.194J R.W. EXPLANATION (2) TO SECTION 9(1)(VII) OF THE ACT AND HENCE, ASSESSEE WAS LIABLE TO DEDUCT TD S BEFORE CREDITING TRANSACTIONS CHARGES TO THE ACCOUNT OF EXCHANGE. HE FURTHER SUB MITTED THAT PAYMENT MADE BY ASSESSEE FOR INSTALLING VSAT /LEASELINE FACILITIES ARE THE CHARGES FOR PROVIDING INFRASTRUCTURAL FACILITIES AND ARE IN THE NATURE OF REIMBURSEMENT OF EXPENSES TO EXCHANGE. THE SAID ISSUE IS COVERED IN FAVOUR OF ASSESSEE BY THE DECISION OF ITAT MUMBAI IN THE CASE OF ANGEL BROKING LTD (SUPRA), WHICH HAS BEEN AFFIRMED BY HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF ITO VS ANG EL CAPITAL & DEBIT MARKET LTD. IN INCOME TAX APPEAL (L) NO.475 /2011 , WHEREIN, IT HA S BEEN HELD THAT VSAT AND LEASE T.J. STOCK BROKING SERVICES P. LTD., 4 ASSESSEE ON THE GROUND THAT IT WAS NEVER ASSESSEES LIABILITY TO INCUR THIS EXPENDITURE. BEING AGGRIEVED, ASSESSEE FILED APPEAL BEFORE FIRST APPELLATE AUTHORITY. 11. LD CIT(A) ACCEPTED THE CONTENTION OF ASSESSEE T HAT BROKERAGE RECEIVED FROM CLIENTS WAS INCLUSIVE OF SERVICE TAX. HE STATED TH AT IF THE ASSESSEE HAS CHARGED THE BROKERAGE WHICH AS PER AGREEMENT WITH ITS CLIENTS I S INCLUSIVE OF SERVICE TAX, IT AMOUNTS TO COLLECTION OF AMOUNT OF SERVICE TAX BY THE ASSES SEE BEING THE PROVIDER OF THE SERVICE FROM ITS CLIENTS. THEREFORE, AO WAS NOT JUSTIFIED TO MAKE THE SAID DISALLOWANCE. HENCE, THIS APPEAL BY THE DEPARTMENT. 12. AT THE TIME OF HEARING, LD D.R. SUBMITTED THAT NO EVIDENCE WAS PLACED ON RECORD AT THE TIME OF ASSESSMENT PROCEEDINGS AND/OR BEFORE LD CIT(A) THAT BROKERAGE CHARGED FROM CLIENTS INCLUDED SERVICE TAX. LD CIT(A) HAS D ELETED THE DISALLOWANCE MADE BY THE AO MERELY RELYING ON THE SUBMISSION OF ASSESSEE. 13. ON THE OTHER HAND, LD A.R. SUPPORTED THE ORDER OF LD CIT(A). HE FURTHER SUBMITTED THAT ISSUE COULD BE RESTORED TO THE FILE OF AO TO DECIDE THE SAME ON THE BASIS OF EVIDENCES WHICH ASSESSEE MAY FILE BEFORE HIM TH AT THE BROKERAGE CHARGED FROM CLIENTS INCLUDED SERVICE CHARGES WHICH ASSESSEE PAI D ON THEIR BEHALF AND CLAIMED IN THE PROFIT AND LOSS ACCOUNT. 14. ON CONSIDERATION OF FACTS OF THE CASE BEFORE US WE FIND SUBSTANCE IN THE SUBMISSION OF LD D.R. THAT NO EVIDENCE HAS BEEN PLA CED BEFORE THE AUTHORITIES BELOW AND ASSESSEE ENTERED INTO AGREEMENT WITH CERTAIN BIG CL IENTS NOT TO CHARGE SERVICE TAX OVER AND ABOVE BROKERAGE AND WHATEVER BROKERAGE WAS CHAR GED BY THE ASSESSEE INCLUDED SERVICE CHARGES. IN VIEW OF THIS, WE CONSIDER IT P RUDENT TO RESTORE THIS ISSUE TO THE FILE OF AO WITH A DIRECTION THAT ASSESSEE WILL FILE REQUISI TE DETAILS BEFORE THE AO THAT THE BROKERAGE CHARGED BY ASSESSEE FROM CERTAIN CLIENTS INCLUDED SERVICE TAX CHARGEABLE THEREON AND AO AFTER GIVING DUE OPPORTUNITY OF HEAR ING TO ASSESSEE, DECIDE THE SAME AFRESH BY A REASONED ORDER. HENCE, GROUND NO.2 IS ALLOWED FOR STATISTICAL PURPOSES. T.J. STOCK BROKING SERVICES P. LTD., 6 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS),8, MUMBAI 4. COMMISSIONER OF INCOME TAX, 4 , MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH E MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI