Dy.Commissioner of Income Tax, Lucknow V. M/s A.M Consultants, Lucknow

ITA 720/LKW/2014

• Counselvise Citation: 72023714 RSA 2014
• Duration Of Justice: 1 year(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-10-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 23-09-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 12-09-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: YOGESH AGGRAWAL
• Section: 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI. A. K. GARODIA, ACCOUNTANT MEMBER ITA NO.720/LKW/2014 ASSESSMENT YEAR:2008-09 DY. CIT RANGE VI LUCKNOW V. M/S A. M. CONSULTANTS LUCKNOW TAN/PAN:AAHFA2890B (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI. AMIT NIGAM, D.R. RESPONDENT BY: SHRI. YOGESH AGGRAWAL, ADVOCATE DATE OF HEARING: 23 09 2015 DATE OF PRONOUNCEMENT: 07 10 2015 O R D E R PER SUNIL KUMAR YADAV: THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A) ON A SOLITARY GROUND THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN DELETING THE ADDITION OF RS.35,56,116/- BEING THE DISALLOWANCE UNDER SECTION 40 (A)(IA) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER CALLED IN SHORT THE ACT'), IGNORING THE FACTS THAT THE COMMISSION PAID BY THE ASSESSEE TO ITS AGENT IN RELATION TO ANY TRANSACTION RELATING TO SECURITIES FOR PROCURING BUSINESS FOR IT, FALLS UNDER THE CATEGORY OF PAYMENT RECEIVED OR RECEIVABLE DIRECTLY OR INDIRECTLY BY A PERSON FOR SERVICES RENDERED, WITHIN THE PROVISIONS OF SECTION 194H OF THE ACT, HENCE DISALLOWABLE UNDER SECTION 40 (A)(IA) OF THE ACT. 2. THE FACTS IN BRIEF BORNE OUT FROM THE RECORD ARE THAT THE ASSESSMENT WAS REOPENED BY THE ASSESSING OFFICER HAVING TAKEN NOTE OF THE FACT THAT THE ASSESSEE HAS MADE PAYMENT OF RS.35,56,116/- AS :- 2 -: COMMISSION TO ITS AGENT FOR PROCURING BUSINESS FOR IT, BUT THE ASSESSEE HAD NOT DEDUCTED TAX AT SOURCE ON THE PAYMENT AS APPLICABLE UNDER SECTION 194H OF THE ACT. THE ASSESSING OFFICER ACCORDINGLY FORMED A BELIEF THAT AN AMOUNT OF RS.35,56,116/- HAS ESCAPED ASSESSMENT DUE TO FAILURE ON THE PART OF THE ASSESSEE AND ACCORDINGLY ISSUED NOTICE UNDER SECTION 148 OF THE ACT AFTER RECORDING REASONS FOR REOPENING OF THE CASE UNDER SECTION 147 OF THE ACT. THOUGH THE ASSESSEE HAS CONTENDED DURING THE COURSE OF ASSESSMENT PROCEEDINGS BEFORE THE ASSESSING OFFICER THAT THE PAYMENT WAS MADE TO THE AGENTS OR SUB-BROKERS FOR PROCURING MUTUAL FUND BUSINESS AND AS PER SECTION 194H OF THE ACT, NO TAX IS REQUIRED TO BE DEDUCTED ON PAYMENT OF SUCH COMMISSION FOR MUTUAL FUND BUSINESS, AS MUTUAL FUND IS COVERED UNDER THE DEFINITION OF SECURITIES UNDER SECURITIES CONTRACT (REGULATION) ACT, 1956. THEREFORE, TAX WAS NOT DEDUCTED ON COMMISSION PAYMENT FOR PROCURING MUTUAL FUND BUSINESS. HE HAS ALSO PLACED RELIANCE UPON THE ORDER OF THE KOLKOTA BENCH OF THE TRIBUNAL IN THE CASE OF CIT VS. NOBLE ENCLAVE & TOWERS (P) LTD. THE ASSESSING OFFICER WAS NOT CONVINCED WITH THE EXPLANATIONS OF THE ASSESSEE AND ACCORDINGLY HELD THAT THE COMMISSION HAS NOT BEEN PAID BY THE ASSESSEE TO ITS AGENT IN RELATION TO ANY TRANSACTION RELATING TO SECURITIES AND HE ACCORDINGLY DISALLOWED THE SAID PAYMENT HAVING INVOKED THE PROVISIONS OF SECTION 40 (A)(IA) OF THE ACT RESULTING INTO AN ADDITION OF RS.35,56,116/-. 3. ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) AND FILED WRITTEN SUBMISSIONS, WHICH WERE DULY RECORDED BY THE LD. CIT(A) IN HIS ORDER. BEING CONVINCED WITH THE EXPLANATIONS OF THE ASSESSEE, THE LD. CIT(A) HAS DELETED THE ADDITION. THE RELEVANT OBSERVATIONS OF THE LD. CIT(A) ARE EXTRACTED HEREUNDER FOR THE SAKE OF REFERENCE:- :- 3 -: I HAVE EXAMINED THE FINDING GIVEN BY A.O. IN ASSESSMENT ORDER IN RESPECT OF DISALLOWANCE U/S 40 (A)(IA) OF I.T. ACT, 1961 OF RS.35,56,116/- AND WRITTEN SUBMISSION OF APPELLANT MENTIONED SUPRA AND I FIND MUCH FORCE IN THE ARGUMENT OF APPELLANT THAT THE COMMISSION PAYMENT TO ITS AGENTS ON ACCOUNT OF PROCURE TO BUSINESS OF MUTUAL FUNDS ETC ON WHICH THE APPELLANT HAS EARNED COMMISSION, DO NOT ATTRACT THE PROVISIONS OF SECTION 194H OF I.T. ACT, 1961 AND ACCORDINGLY THE DISALLOWANCES COULD NOT BE MADE U/S 40A (IA) OF I.T. ACT. AS MENTIONED EARLIER THE APPELLANT HAS PAID COMMISSION FOR MOBILIZING MUTUAL FUND BUSINESS AS STATED BELOW: - 'THE ASSESSEE HAS PAID COMMISSION ONLY FOR MOBILIZING MF BUSINESS AND AS PER INCOME TAX ACT, NO TDS IS REQUIRED TO BE DEDUCTED. MOREOVER, AO 'S CONTENTION THAT THE PAYMENTS MADE BY THE ASSESSEE FOR PROCURING BUSINESS FOR IT FALLS UNDER THE CATEGORY 'PAYMENTS RECEIVED OR RECEIVABLE, DIRECTLY OR INDIRECTLY BY A PERSON FOR SERVICES RENDERED' IS WRONG AS NO COMMISSION IS REQUIRED TO BE PAID ON AGENCY FEES AND INSURANCE COMMISSION AND ALL PAYMENTS MADE BY THE ASSESSEE TOWARDS COMMISSION ARE FOR MF BUSINESS. ' AS MENTIONED SUPRA IN THE WRITTEN SUBMISSION OF APPELLANT THE HON'BLE ITAT DELHI BENCH AND CALCUTTA HELD THAT NO TDS DEDUCTIBLE ON MUTUAL FUNDS COMMISSION INCENTIVE. CONSIDERING THE WRITTEN SUBMISSION OF APPELLANT AND CASE LAW CITED ON THIS ISSUE BY THE APPELLANT IN ITS WRITTEN SUBMISSION AND FACTS & CIRCUMSTANCES OF APPELLANT PRESENT CASE, I HOLD THAT THE A.O. WAS NOT JUSTIFIED IN MAKING THE :- 4 -: DISALLOWANCES OF RS.35,56,1167- U/S 40A (IA) OF I.T. ACT, 1961 ON ACCOUNT OF NON DEDUCTION OF TDS ON PAYMENT OF COMMISSION ON PROCURE THE MUTUAL FUND BUSINESS. IT IS WORTHWHILE TO MENTION HERE THAT THE SAID COMMISSION WAS PAID BY APPELLANT TO ITS WORKING AGENTS IN LIEU OF BUSINESS PROCURE FROM MUTUAL FUND COMPANIES. THE A.O. HAS NOT DOUBTED THE PAYMENT OF COMMISSION TO WORKING AGENTS BY APPELLANT DURING ASSESSMENT YEAR UNDER CONSIDERATION. THE A.O. HAS ALSO NOT DOUBTED ABOUT THE SERVICES RENDERED BY THESE WORKING AGENTS TO APPELLANT FOR PROCURE THE BUSINESS OF MUTUAL FUNDS. THEREFORE, THE IDENTITY OF THESE WORKING AGENTS ARE PROVED & AS WELL AS THE GENUINENESS AND CORRECTNESS OF THE PAYMENTS OF COMMISSION ACCEPTED BY THE A.O. LOOKING INTO THESE FACTS & CIRCUMSTANCES, THE DISALLOWANCES MADE BY A.O. OF RS.35,56,116/- IS HEREBY DELETED. THUS THE APPELLANT GETS RELIEF OF RS.35,56,116/-. GROUND NOS. 1 TO 3 ARE ALLOWED. 4. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL AND HAS PLACED RELIANCE UPON THE ORDER OF THE ASSESSING OFFICER; WHEREAS THE LD. COUNSEL FOR THE ASSESSEE HAS CONTENDED THAT EVEN ON MERIT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDERS OF THE TRIBUNAL IN THE CASES OF DCIT VS. NOBLE ENCLAVE & TOWERS (P) LTD., (2012) 50 SOT 5 (KOL); KRANTI ROAD TRANSPORT (P) LTD. VS. ACIT, (2012) 50 SOT 15; I.T.O. VS. M/S KJH FINANCIAL SERVICES (P) LTD IN I.T.A. NO. 6039/DEL/2012; DCIT VS. M/S DEEP MANAGEMENT & ECO CONSULTANT PVT. LTD. IN I.T.A. NO. 641/LKW/2011 AND ACIT VS. M/S TANDON & MAHENDRA IN I.T.A. NO. 66/LKW/2011. :- 5 -: 5. HAVING CAREFULLY EXAMINED THE ORDERS OF THE LOWER AUTHORITIES IN THE LIGHT OF THE RIVAL SUBMISSIONS, WE FIND THAT THE IMPUGNED ISSUE IS SQUARELY COVERED BY VARIOUS ORDERS OF THE TRIBUNAL IN FAVOUR OF THE ASSESSEE. THIS BENCH OF THE TRIBUNAL HAS ALSO TAKEN A VIEW IN THE CASE OF ACIT VS. M/S TANDON & MAHENDRA (SUPRA) THAT TDS IS NOT REQUIRED TO BE DEDUCTED ON SUCH PAYMENT OF COMMISSION IN RELATION TO SECURITIES UNDER SECTION 194H OF THE ACT. THE RELEVANT OBSERVATIONS OF THE TRIBUNAL ARE EXTRACTED HEREUNDER FOR THE SAKE OF REFERENCE:- 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND HAVE ALSO GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND THE JUDGMENTS CITED BY LEARNED A.R. FOR THE ASSESSEE. AS PER THE FACTS NOTED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER, IT IS SEEN THAT THE ASSESSEE HAS RECEIVED AN AMOUNT OF RS.73,28,868/- BEING COMMISSION RECEIVED FROM VARIOUS MUTUAL FUND REGISTRARS ON ACCOUNT OF BROKERAGE OR COMMISSION FOR SUBSCRIBING TO VARIOUS MUTUAL FUNDS BY A NUMBER OF INVESTORS. THE ASSESSING OFFICER HAS ALSO NOTED THAT THE ASSESSEE HAS ACTED AS A MUTUAL FUND BROKER UNDER BROKER CODE ARN-8814 FOR SUCH INVESTORS AND HAD EARNED COMMISSION TO THIS EXTENT. THE ASSESSING OFFICER HAS ALSO NOTED THAT THE ASSESSEE HAD DEBITED BROKERAGE AMOUNT OF RS.51,27,815/- TO ONE COMPANY NAMELY M/S TAPASYA PROJECTS LTD. THEREAFTER, THE ASSESSING OFFICER HAS NOTED THAT THE ASSESSEE DID NOT MAKE ANY DEDUCTION OF TDS WHILE DEBITING THE ABOVE BROKERAGE AMOUNT IN FAVOUR OF M/S TAPASYA PROJECTS LTD. THE ASSESSING OFFICER DISPUTED THE ALLOWABILITY OF THIS AMOUNT ON TWO COUNTS AS TO WHETHER M/S TAPASYA PROJECTS LTD. HAD RENDERED ANY ACTUAL SERVICES TO THE ASSESSEE OR NOT AND WHETHER THE AMOUNT IS TO BE DISALLOWED UNDER THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. ON THE FIRST ASPECT I.E. REGARDING RENDERING OF SERVICE, THE :- 6 -: ASSESSING OFFICER HAS HELD AND DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BUT REGARDING ALLOWABILITY OF AMOUNT U/S 40(A)(IA) OF THE ACT, IT WAS HELD BY HIM THAT SINCE THE ASSESSEE HAS NOT DEDUCTED THE TDS, THIS AMOUNT IS NOT ALLOWABLE U/S 40(A)(IA) OF THE ACT AND ON THIS BASIS, HE DISALLOWED THIS AMOUNT. THE LEARNED CIT(A) HAS DELETED THIS DISALLOWANCE ON THE BASIS THAT SINCE THE COMMISSION INCOME EARNED BY THE ASSESSEE AND COMMISSION EXPENDITURE INCURRED BY THE ASSESSEE WERE IN RELATION TO SECURITIES, AS PER THE PROVISION OF SECTION 194H, NO TDS WAS REQUIRED TO BE DEDUCTED ON SUCH EXPENDITURE AND CONSEQUENTLY, NO DISALLOWANCE IS TO BE MADE U/S 40(A)(IA) OF THE ACT FOR THIS AMOUNT. 5.1 IN THE LIGHT OF THE FACTS OF THE PRESENT CASE, AS NOTED ABOVE, WE NOW EXAMINE THE APPLICABILITY OF VARIOUS DECISIONS OF THE TRIBUNAL CITED BY LEARNED A.R. OF THE ASSESSEE. THE FIRST TRIBUNAL DECISION IS DATED 23/02/2011 PASSED BY BOMBAY TRIBUNAL IN THE CASE OF ACIT-2(3), MUMBAI VS. M/S S.J. INVESTMENT AGENCIES P. LTD. (SUPRA). AS PER THE FACTS NOTED BY THE TRIBUNAL, IN THAT CASE ALSO THE DISPUTE WAS SIMILAR. IN THAT CASE ALSO, THE ASSESSEE WAS ENGAGED AS DISTRIBUTOR OF MUTUAL FUND UNITS AND HE HAD APPOINTED A SUB AGENT FOR THE SAME AND COMMISSION WAS PAID TO THE SUB AGENT. UNDER THESE FACTS, IT WAS HELD BY THE TRIBUNAL THAT AS PER EXPLANATION (I) TO SECTION 194H, NO TDS WAS REQUIRED TO BE DEDUCTED FROM SUCH PAYMENT OF COMMISSION BECAUSE IT IS IN RELATION TO SECURITIES. IN THE PRESENT CASE ALSO, THE FACTS ARE SIMILAR AND, THEREFORE, THIS TRIBUNALS DECISION IS SQUARELY APPLICABLE IN THE FACTS OF THE PRESENT CASE. 5.2 IN OTHER TWO DECISIONS ALSO, UNDER SIMILAR FACTS, SIMILAR ISSUE WAS DECIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE. LEARNED D.R. OF THE REVENUE COULD NOT POINT OUT ANY DIFFERENCE IN THE FACTS OF THE PRESENT CASE AND IN THESE THREE CASES CITED BY LEARNED A.R. FOR THE ASSESSEE. WE, THEREFORE, DO NOT FIND ANY REASON TO TAKE A CONTRARY VIEW IN THE PRESENT CASE. RESPECTFULLY FOLLOWING THE TRIBUNAL DECISIONS, WE DECLINE TO INTERFERE IN THE ORDER OF CIT(A) IN :- 7 -: THE PRESENT CASE ALSO. REGARDING THE WRITTEN SUBMISSIONS OF LEARNED D.R. OF REVENUE, WE WOULD LIKE TO OBSERVE THAT PAYMENT OF COMMISSION IN RELATION TO SECURITIES IS COVERED BY EXPLANATION (I) TO SECTION 194H AND HENCE, TDS IS NOT DEDUCTIBLE. HENCE, THE WRITTEN SUBMISSIONS ARE NOT HELPING THE REVENUE. 6. ON A CAREFUL PERUSAL OF THE AFORESAID ORDER, WE ARE OF THE VIEW THAT THE IMPUGNED ISSUE, RATHER ON MERIT IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE. THEREFORE, WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A), WHO HAS ADJUDICATED THE ISSUE IN THE LIGHT OF VARIOUS ORDERS OF THE TRIBUNAL. ACCORDINGLY WE CONFIRM THE ORDER OF THE LD. CIT(A). 7. IN THE RESULT, APPEAL OF THE REVENUE STANDS DISMISSED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTIONED PAGE. SD/- SD/- [A. K. GARODIA] [SUNIL KUMAR YADAV] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 7 TH OCTOBER, 2015 JJ:2309 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR ASSISTANT REGISTRAR