K. JAYANTILAL SECURITIES, MUMBAI V. ACIT 4(3), MUMBAI

ITA 682/MUM/2011

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 70976 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 7 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 20-08-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 24-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P SINGH
• Assessee Lawyers: JEEVRAJ P JAIN
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH I , MUMBAI BEFORE SHRI B. RA MAKOTAIAH , ACCOUNTANT MEMBER AND SHRI SANJAY GARG , JUDICIAL MEMBER ITA NO .682/M/11 ASSESSMENT YEAR: 2006 - 07 M/S. K. JAYANTILAL SECURITIES PVT. LTD. PS - 4, 2 ND FLOOR, ROTUND A BUILDING, DALAL STREET, MUMBAI - 400023 PAN: AA ACK4621Q VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 4 ( 3 ), AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020 (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI JEEVRAJ P. JAIN REVENUE BY : SHRI O.P. SINGH, D.R. DATE OF HEARING : 20.08. 20 13 DATE OF PRONOUNCEMENT : 28.08.2013 O R D E R PER SANJAY GARG, JUDICIAL MEMBER : THE PRESENT APPE AL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF TH E CIT(A) DATED 19.11.10 RELEVANT TO ASSESSMENT YEAR 2006 - 07 , CONTEST ING THE CONFIRMATION OF ADDITION OF RS.1,17,268/ - MADE BY THE AO UNDER SECTION 40(A)(IA) OF THE INCOME TAX ACT, 1961. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY IS ENG AGED IN THE BUSINESS OF SHARE AND STOCK BROKING. DURING THE ASSESSMENT PROCEEDINGS UNDER SECTION 143(3) OF THE ACT , THE A SSESSING O FFICER NOTICED THAT THE ASSESSEE HAD MADE A PAYMENT OF RS. 11,72,682/ - TO SUB BROKER BUT NOT DEDUCTED TDS. THE AO HELD THAT IN CASE OF A PAYMENT TO SUB BROKER , DEDUCTION OF TDS WAS MUST , SO HE DIS ALLOWED RS.11,72,682/ AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. 3. IN APPEAL THE LEARNED CIT(A) UPHELD THE ADDITION MADE BY THE AO. ITA NO. 682/M/11 K. JAYANTILAL SECURITIES PVT. LTD. 2 4. BEFORE US THE LEARNED A.R. HAS SUBMI TTED THAT THE CASE OF THE ASSESSEE IS SQUARELY COVERED BY THE ORDER OF THE CO - ORDINATE BENCH OF THE TRIBUNAL DATED 02.01.13 PASSED IN ITA NO. 8317 & 8322 OF 2010 IN THE CASE OF DEPUTY COMMISSIONER OF INCOME TAX VS. M/S. S.J. INVESTMENT AGENCIES PVT. LTD. , W HEREIN THE TRIBUNAL HAS HELD THAT COMMISSION OR BROKERAGE AS DEFINED UNDER SECTION 194 H OF THE INCOME TAX ACT DOES NOT INCLUDE TRANSACTIONS IN SECURITIES. THE BROKERAGE RECEIVED BY THE ASSESSEE IS NOT COVERED BY TDS PROVISIONS. THE RELEVANT PARAGRAPH O F THE ORDER UNDER CONSIDERATION IS REPRODUCED AS UNDER: 6. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND MERIT IN THE PLEA OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE ISSUE IS COV ERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE (SUPRA) WHEREIN THE TRIBUNAL VIDE PARA 6 OF ITS ORDER HELD AS UNDER: - 6. AFTER CONSIDERING THE ARGUMENTS AND SUBMISSION WE AGREE WITH THE FINDINGS OF THE CIT(A). THE PROV ISIONS OF SECTION 194H ARE AS UNDER: - 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 COMM ISSION 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, DEDU CT INCOME - TAX THEREON AT THE RATE OF [TEN] PER CENT : PROVIDED ..... PROVIDED ..... PROVIDED ..... EXPLANATION. FOR THE PURPOSES OF THIS SECTION, (I) 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) ..... AS CAN BE SEEN FROM THE ABOVE PROVISION, THE COMMISSION OR BROKERAGE DEFINITION DOES NOT INCLUDE TRANSACTIONS IN SECURITIES. THERE IS NO DOUBT THAT MUTUAL FUNDS ARE CATEGORISED AS SECURITIES ON WHICH THER E IS NO OBJECTION FROM THE REVENUE EITHER BEFORE THE A.O. OR BEFORE THE CIT(A). IN FACT THE CIT(A) ALSO GIVES A FINDING THAT THE A.O. HAS NOT DISPUTED THAT UNITS OF MUTUAL FUNDS ARE SECURITIES AS PER SECURITIES CONTRACTS (REGULATION) ACT, 1956. ITA NO. 682/M/11 K. JAYANTILAL SECURITIES PVT. LTD. 3 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 BROKERAGE INCOME OF RS. 8,28,56,873/ - THE BROKERAGE INCOME OF RS. 8,27,47,095/ - IS F ROM MUTUAL FUNDS. THE BALANCE BROKERAGE OF RS. 1,09,779/ - IS TOWARDS BONDS AND FIXED DEPOSITS. THE SUB - BROKERAGE IS PAID IN RE LATION 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 RELATION TO TRANSACTIONS PERTAINING TO MUTUAL FUNDS AND AS PER THE PROVISIONS OF SECTION 194H EXPLANATION (I) THESE ARE NOT COVERED BY THE PROVISION FOR DEDUCTION OF TAX AT SOURCE. THERE IS NOTHING ON RECORD TO INDICATE THAT THE SUB - BROKERAGE IS PAID FOR ANY OTHER SERVICES OTHER THAN RELATING TO SECURITIES. THE A.O. ALSO ACCEPTS THAT THE BROKERAGE RECEIVED BY THE ASSESSEE IS NOT COVERED BY TDS WHEREAS HE WAS OF THE OPI NION THAT THE SUB - BROKERAGE PAID IS COVERED BY THE PROVISIONS. WE ARE UNABLE TO UNDERSTAND THIS LOGIC OF THE A.O. FOR THESE REASONS, WE ARE OF THE OPINION THAT THE ORDER OF THE CIT(A) DOES NOT REQUIRE ANY MODIFICATION AND ACCORDINGLY THE SAME IS CONFIRMED. REVENUES GROUNDS ON THIS ISSUE ARE ACCORDINGLY REJECTED. 7. IN THE ABSENCE OF ANY DISTINGUISHING FEATURE BROUGHT ON RECORD BY THE REVENUE, WE R ESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL (SUPRA), DECLINE TO INTERFERE WITH THE ORDER PASSED BY THE LD. CIT(A) AND ACCORDINGLY THE COMMON GROUNDS TAKEN BY THE REVENUE FOR BOTH THE ASSESSMENT YEARS ARE REJECTED. 5. IN VIEW OF THE ABOVE FINDINGS OF THE CO - ORDINATE BENCH OF TH IS TRIBUNAL NEITHER THE PAYMENT OF BROKERAGE NOR THE PAYMENT OF SUB - BROKERAGE I S COVERED WITH TDS PROVISIONS OF THE ACT. HENCE THE ASSESSEE WAS NOT LIABLE TO DEDUCT TAX AT SOURCE. RESPECTFULLY FOLLOWING THE LAW LAID DOWN BY THE CO - ORDINATE BENCH OF THE TRIBUNAL , THE APPEAL OF THE ASSESSEE IS ALLOWED AND THE ADDITION MADE BY THE AO AND FURTHER CONFIRMED BY THE CIT(A) OF RS.11,72,682/ - UNDER SECTION 40(A)(IA) IS HEREBY ORDERED TO BE DELETED. 6. IN THE RESULT THE APPEAL OF THE ASSESSEE IS HEREBY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28.08. 2013. SD/ - SD/ - ( B. RA MAKOTAIAH ) ( SANJAY GARG ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 28.08. 2013. * K ISHORE ITA NO. 682/M/11 K. JAYANTILAL SECURITIES PVT. LTD. 4 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT ( A) CONCERNED, MUMBAI THE DR C BENCH //TRUE COPY// [ BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.