ADDL CIT RG 4(2), MUMBAI V. SYKES & RAY (I) LTD, MUMBAI

ITA 7165/MUM/2010

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71947 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2013
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 11-12-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 18-10-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ASHOK SURI
• Assessee Lawyers: GOPAL BOHRA

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL E BEN CH, MUMBAI BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER ITA NO.7165/MUM/2010 ASSESSMENT YEAR:- 2007-08 ADDITIONAL CIT, RANGE-4(2), MUMBAI. VS. M/S SKYES & RAY (I) LTD. DAULATRAM MANSION, 1 ST FLOOR, KITRIDGE ROAD, OPPOSITE SASOON DOCK, COLABA, MUMBAI 400 005 PAN:- AAECS5168A APPELLANT RESPONDENT ASSESSEE BY SHRI GOPAL BOHRA DEPARTMENT BY SHRI ASHOK SURI ORDER PER I.P. BANSAL, JM THIS APPEAL IS FILED BY THE REVENUE. IT IS DIRECTED AGAINST THE ORDER PASSED BY CIT(A) DATED 9 TH AUGUST 2010 FOR ASSESSMENT YEAR 2007-08. GROUNDS O F APPEAL READS AS UNDER:- 1 I. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) ERRED IN DELETING THE DISALLOWANCE OF RS. 2 9,14734/- MADE U/S 40(A)(IA) IN RESPECT OF VSAT, LEASING AND TRANSACTI ONAL CHARGES PAID TO STOCK EXCHANGE, WITHOUT APPRECIATING THE FACTS THAT THESE WERE COMPOSITE CHARGES LQUOKBZ DH RKJH[K@ DATE OF HEARING 19-12-2013 ?KKS'K.KK DH RKJH[K@ DATE OF PRONOUNCEMENT 19-12-2013 - 2 - FOR PROFESSIONAL AND TECHNICAL SERVICES RENDERED BY THE STOCK EXCHANGE TO ITS MEMBERS AND THE ASSESSEE HAS FAILED TO DEDUCT TDS T HEREON II ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. CIT(A) ERRED IN IGNORING THE FACT THAT THESE SERVIC ES ARE ESSENTIAL IN NATURE AS THEY CAN ONLY BE AVAILED BY MEMBERS OF STOCK EXCHAN GE. III ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW THE LD. CIT(A) ERRED IN IGNORING THE FACTS THAT USE OF TECH NOLOGY AND ALGORITHMIC BASED PROGRAMS HAVE CONVERTED AN ERSTWHILE PHYSICAL MARKET INTO A DIGITALLY OPERATED MARKET. IV. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) ERRED IN IGNORING THE FACT THAT THE SERVICES RENDERED BY THE BROKERS ARE NOT STANDARD SERVICES BUT SERVICES THAT HAS BEEN DE VELOPED TO CATER TO THE NEEDS OF THE BROKER COMMUNITY TO FACILITATE TRADING . V. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) HAS OVERLOOKED THE FACT THAT THE BROKERS HAV E IN SUBSEQUENT YEARS THEMSELVES STARTED DEDUCTING THE TDS ON SUCH PAYMEN TS AND THAT THERE IS NO REASON TO GIVE A DIFFERENT TREATMENT IN THIS YEAR. VI. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE IMPUGNED ORDER OF THE LD. CIT(A) IS CONTRARY TO LAW TO BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 2. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTICED THAT THE ASSESSEE HAD DEBITED A SUM OF RS. 22,89,662/- AS LE ASE LINE CHARGES AND RS. 6,25,072/- AS VSAT CHARGES. THESE CHARGES WERE PAYA BLE TO STOCK EXCHANGE ON ACCOUNT OF SERVICES PROVIDED BY IT WITH REGARD TO T RANSACTIONS IN SECURITY THROUGH - 3 - THE EXCHANGES. THE ASSESSEE DID NOT DEDUCT TAX. HEN CE, APPLYING THE PROVISIONS OF SECTION 40(A)(IA), THE AO MADE DISALLOWANCES. LD . CIT(A) HAS DELETED THESES DISALLOWANCES ON THE BASIS OF DECISION OF TRIBUNAL IN THE CASE OF KOTAK SECURITIES LTD VS. ADDITIONAL CIT (124 TTJ 241) AND DCIT V/S A NGEL BROKING LTD. (35 SOT 457). HOWEVER LD. CIT(A) ON FIRST PAGE OF HIS ORDER DESCR IBED THE AMOUNT OF RS. 6,25072/ AS TRANSACTION CHARGES PROBABLY FOR THE REASON THAT IN THE GROUNDS OF APPEAL FILED BEFORE CIT(A), THE ASSESSEE HAD DESCRIBED THE SAID AMOUNT AS TRANS ACTION CHARGES. 3. BEFORE US, IT WAS CONTENDED THAT THE PAYMENT BY THE ASSESSEE TO THE STOCK EXCHANGES IS WITH REGARD TO LEASE LINE CHARGES AND VSAT CHARGES AND NO PART OF IT WAS CONSISTED OF TRANSACTION CHARGES. THEREFORE, IT WAS PLEADED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISIO N OF HONBLE BOMBAY HIGH COURT DATED 28 TH JULY 2011 IN INCOME TAX APPEAL (L) NO. 475 OF 2011 IN THE CASE OF INCOME TAX COMMSSIONER VS. ANGEL CAPITAL & DEBIT MARKET LTD AS PER FOLLOWING OBSERVATIONS;- AS REGARDS FIRST TWO QUESTIONS ARE CONCERNED, THE F INDING OF FACT RECORDED BY THE INCOME-TAX APPELLATE TRIBUNAL IS THAT VSAT AND LEASE LINE CHARGES PAID BY THE ASSESSEE TO STOCK EXCHANGE WERE MERELY REIMB URSEMENT OF THE CHARGES PAID/PAYABLE BY THE STOCK EXCHANGE TO THE DEPARTMEN T OF TELECOMMUNICATION. SINCE THE VSAT AND LEASE LINE CHARGES PAID BY THE A SSESSEE DO NOT HAVE ANY ELEMENT OF INCOME, DEDUCTING TAX WHILE MAKING SUCH PAYMENTS DO NOT ARISE. HENCE, QUESTION NOS. (A) AND (B) CANNOT BE ENTERTAI NED . 4. IN THIS VIEW OF THE SITUATION, WE HAVE HEARD BOT H THE PARTIES AND THEIR CONTENTIONS HAVE CAREFULLY BEEN CONSIDERED. SO FAR AS IT RELATES TO VSAT AND LEASE LINE CHARGES PAID BY THE ASSESSEE TO STOCK EX CHANGE NO DEDUCTION OF TAX WAS REQUIRED BY THE ASSESSEE. THEREFORE, DISALLOWAN CE TO THAT EXTENT COULD NOT BE MADE AND WE UPHOLD THAT IF THE CHARGES RELATES TO L EASE LINE AND VSAT THEN THE - 4 - DISALLOWANCE HAS RIGHTLY BEEN DELETED BY THE CIT(A) AND WE DECLINE TO INTERFERE. HOWEVER IN THE GROUNDS OF APPEAL REVENUE HAS MENTIO NED TRANSACTION CHARGES AS IN THE ORDER OF CIT(A) 6,25,072/- IS DESCRIBED AS T RANSACTION CHARGES, PROBABLY ON THE BASIS OF GROUNDS OF APPEAL FILED BY THE ASSE SSEE BEFORE CIT(A) WHICH READ AS UNDER:- THE LD. ASSESSING OFFICER IS ERRED IN DISALLOWAING VSAT, LEASE LINE CHARGES RS. 22,89,662/- AND TRANSACTION CHARGES RS. 6,25,072/- IN TERMS OF SECTION 40(A)(IA). 5. THEREFORE, FOR THE PURPOSE OF VERIFICATION THAT WHETHER THE SAID AMOUNT OF RS. 6,25,072/- AS VSAT CHARGES OR TRANSACTION CHARG ES. IF THE SAID AMOUNT IS VSAT CHARGES THEN NO DISALLOWANCE CAN BE MADE AND I F THE SAME IS TRANSACTION CHARGES THEN THE AO WILL RE-ADJUDICATE THIS ISSUE O NLY TO THE EXTENT OF RS. 6,25,072/- AFTER GIVING THE ASSESSEE REASONABLE OPP ORTUNITY. WITH THESE DIRECTIONS APPEAL FILED BY THE REVENUE IS TREATED AS PARTLY AL LOWED FOR STATISTICAL PURPOSE. 6. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY A LLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 19 -12-2 013. SD/- SD/- (N.K. BILLAIYA) (I.P. BANSAL) ACCOUNTANT MEMBER JUDICIAL MEMBER SKS SR. P.S, MUMBAI DATED 19-12-2013 - 5 - COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, E BENCH, ITAT, MUMBAI //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI