DCITCIR 4(2), MUMBAI V. URJA INVESTMENTS P. LTD, MUMBAI

ITA 7948/MUM/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9330 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-11-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 19-11-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 18-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR MANJUNATH KARKIHALLI
• Keywords: Bonafide belief
• Section: 143(3)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI . . !'#$ , % &' BEFORE SHRI H.L. KARWA, PRESIDENT AND SHRI N.K. BILLAIYA, AM ./I.T.A. NO.7948/MUM/2010 ( ( ( ( ( / ASSESSMENT YEAR : 2007-08 THE DCIT, CIR 4(2), AAYAKAR BHAVAN, MUMBAI-400 020 / VS. M/S. URJA INVESTMENTS PVT.LTD., 8, MATRU MANDIR, 278, TARDEO ROAD, MUMBAI-400 007 ') % ./ *+ ./PAN/GIR NO. : AAACU 0637N ( ), /APPELLANT ) .. ( -.), / RESPONDENT ) ), / / APPELLANT BY: DR. MANJUNATH KARKIHALLI -.), 0 / / RESPONDENT BY : SHRI VIJAY MEHTA 0 12% / DATE OF HEARING : 19.11.2012 34( 0 12% / DATE OF PRONOUNCEMENT : 23.11.2012 &5 / O R D E R PER N.K. BILLAIYA, AM: THIS APPEAL BY THE REVENUE IS PREFERRED AGAINST THE ORDER OF THE LD. CIT(A)-8, MUMBAI DT.9.9.2010 PERTAINING TO A.Y.200 7-08. 2. THE SUM AND SUBSTANCE OF THE GRIEVANCE OF THE RE VENUE IS THAT THE LD. CIT(A) OUGHT NOT TO HAVE DELETED THE DISALLOWANCE O F RS. 17,97,220/- MADE U/S. 40(A)(IA) OF THE ACT IN RESPECT OF VSAT CHARGE S AND LEASELINE CHARGES PAID TO NSE. 3. DURING THE COURSE OF THE SCRUTINY ASSESSMENT, TH E ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS DEBITED RS. 11,53,577/- AS TRANSACTION CHARGES, RS. 2,06,921/- AS VSAT CHARGES AND RS. 4,36,722/- A S LEASELINE CHARGES. ALL ITA NO. 7948/M/2010 2 THESE CHARGES WERE MADE PAYABLE TO STOCK EXCHANGE O N ACCOUNT OF SERVICES PROVIDED BY IT WITH REGARD TO TRANSACTIONS IN SECUR ITIES THROUGH THE EXCHANGE. THE ASSESSEE WAS SHOW CAUSED AS TO WHY NO TDS WAS M ADE AND WHY THE SAME SHOULD NOT BE DISALLOWED U/S. 40(A)(IA) OF THE ACT. THE ASSESSEE STATED THAT THE NSE HAS CIRCULATED CERTAIN OPINIONS ON THE BASIS OF WHICH IT HAS STATED THAT THESE SERVICES ARE NOT ELIGIBLE TO TDS. HOWEVER, AFTER DISCUSSING AT LENGTH, THE TRADING ACTIVITIES DONE AT THE BOARD OF BSE/NSE , THE AO WAS OF THE OPINION THAT THE PAYMENTS MADE ON ACCOUNT OF TR ANSACTION CHARGES, VSAT CHARGES AND LEASELINE CHARGES ARE TECHNICAL SERVICE S FALLING WITHIN THE PURVIEW OF SEC. 194J OF THE ACT AND THEREFORE LIABL E FOR DEDUCTION OF TAX AND AS THE ASSESSEE HAS FAILED TO DEDUCT TAX AT SOURCE, WENT ON TO ADD RS. 17,97,220/- U/S. 40(A)(IA) OF THE ACT. 4. WHEN THE MATTER WAS CARRIED BEFORE THE LD. CIT(A ), THE CIT(A) DELETED THE ADDITIONS MADE BY THE AO ON THE GROUND THAT IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR 2006-07 SIMILAR ADDITIONS WERE DELETED IN APPEAL. 5. BEFORE US, THE LD. DEPARTMENTAL REPRESENTATIVE S TRONGLY SUPPORTED THE FINDINGS OF THE AO. 6. THE LD. COUNSEL FOR THE ASSESSEE DREW OUR ATTENT ION TO THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT OF BOMBAY IN ITA (L) 475 OF 2011 IN THE CASE OF ITO VS ANGEL CAPITAL & DEBIT MARKET LTD., W HEREIN THREE QUESTIONS OF LAW WERE RAISED BY THE REVENUE IN THAT APPEAL. HOW EVER, WE ARE CONCERNED WITH ONLY ISSUES RAISED IN QUESTION NO. 1 & 2 WHICH ARE AS UNDER: (A) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE HONBLE TRIBUNAL WAS JUSTIFIED IN HOLDING THAT VSAT AND LEASE LINE CHARGES PAID TO THE STOCK EXCHA NGE BY THE ASSESSEE COMPANY WERE ALLOWABLE AS A DEDUCTION FROM TAXABLE INCOME EVEN THOUGH THE ASSESSEE COMPANY HAD FAILED TO DEDUCT TDS THEREON? (B) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW THE HONBLE TRIBUNAL WAS JUSTIFIED IN HOLDING THAT VSAT AND LEASELINE CHARGES PAID TO THE STOCK EXCHAN GE BY THE ASSESSEE COMPANY WERE NOT PAID IN CONSIDERATION OF TECHNICAL ITA NO. 7948/M/2010 3 SERVICES RENDERED BY THE STOCK EXCHANGE WITHIN THE MEANING OF SECTION 194J R.W. EXPLANATION 2 TO SECTION 9(1)(VII ) OF THE INCOME TAX ACT.? 7. WE FIND THAT THE HONBLE HIGH COURT ANSWERED QUE STION NO. 1 &2 AS FOLLOWS: AS REGARDS FIRST TWO QUESTIONS ARE CONCERNED, THE FINDINGS OF FACT RECORDED BY THE ITAT IS THAT VSAT AND LEASELIN E CHARGES PAID BY THE ASSESSEE TO STOCK EXCHANGE WERE MERELY REIMBURSEMENT OF THE CHARGES PAID/PAYABLE BY THE ST OCK EXCHANGE TO THE DEPARTMENT OF TELECOMMUNICATION. S INCE THE VSAT AND LEASELINE CHARGES PAID BY THE ASSESSEE DO NOT HAVE ANY ELEMENT OF INCOME, DEDUCTING TAX WHILE MAKING S UCH PAYMENTS DO NOT ARISE. HENCE QUESTION NOS. (A) AND (B) CANNOT BE ENTERTAINED. 8. FACTS BEING IDENTICAL, RESPECTFULLY FOLLOWING TH E DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT, WE DIRECT THE AO TO DELE TE THE ADDITIONS MADE ON ACCOUNT OF VSAT AND LEASELINE CHARGES. SO FAR AS T RANSACTION CHARGES OF RS. 11,53,577/- ARE CONCERNED, HONBLE HIGH COURT OF BO MBAY IN THE CASE OF KOTAK SECURITIES LTD 340 ITR 333 HAS HELD THAT SI NCE BOTH PARTIES (ASSESSEE AND REVENUE) HAD PROCEEDED ON THE FOOTING THAT TAX WAS NOT DEDUCTIBLE FOR THE LAST SEVERAL YEARS AND THEREFORE IN THE FIRST Y EAR WHEN THE PROVISIONS WERE INVOKED BY THE DEPARTMENT, ADDITION COULD NOT BE SU STAINED. 9. THE LD. COUNSEL FOR THE ASSESSEE POINTED OUT THA T IN THE CASE OF THE ASSESSEE ALSO, NO DISALLOWANCES WERE MADE IN A.Y. 2 005-06 WHICH ASSESSMENT WAS MADE ON 30.11.2007 U/S. 143(3) OF TH E ACT BY THAT TIME FINANCIAL YEAR 2007-08 HAD ALREADY ENDED. THEREFOR E, THE ASSESSEE WAS UNDER A BONAFIDE BELIEF THAT NO TDS IS TO BE MADE. FOR A.Y. 2006-07, ALTHOUGH ADDITIONS WERE MADE BY THE AO BUT THE SAME WERE DELETED BY THE LD. CIT(A) AGAINST WHICH THE REVENUE HAS NOT PREFER RED ANY SECOND APPEAL WHICH ALSO SHOW THAT THE ASSESSEE WAS UNDER A BONAF IDE BELIEF THAT NO TDS IS TO BE MADE. THE LD. COUNSEL FURTHER POINTED OUT TH AT THE ASSESSEE HAS PROMPTLY DEDUCTED TAX FROM F.Y. 2008-09 PERTAINING TO A.Y. 2009-10. ITA NO. 7948/M/2010 4 10. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS AN D PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND HAVE ALSO THE BENEFIT OF GOING THROUGH THE JUDICIAL DECISIONS SUBMITTED BY BOTH THE PARTIES. AFTER CAR EFULLY CONSIDERING THE ORDER OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF KOT AK SECURITIES LTD (SUPRA), WE FIND THAT THE HONBLE JURISDICTIONAL HIGH COURT DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE ON THE GROUND THAT IT WAS UNDER BON AFIDE BELIEF FOR NEARLY A DECADE THAT TAX WAS NOT DEDUCTIBLE AT SOURCE ON PAY MENT OF TRANSACTION CHARGES. WE FIND THAT IN THE PRESENT CASE ALSO THE ASSESSEE HAS NOT DEDUCTED TAX AT SOURCE ON TRANSACTION CHARGES BASED ON THE F INDING OF THE REVENUE AUTHORITIES IN THE IMMEDIATELY PRECEDING ASSESSMENT YEARS I.E. 2005-06 AND 2006-07 CONSIDERING PECULIAR CIRCUMSTANCES OF THE C ASE , WE HAVE NO HESITATION TO HOLD THAT NO ADDITION ON ACCOUNT OF N ON DEDUCTION OF TAX AT SOURCE ON TRANSACTION CHARGES OF RS. 11,53,577/- CA N BE SUSTAINED. WE ACCORDINGLY DIRECT THE AO TO DELETE THE ADDITIONS M ADE ON ACCOUNT OF VSAT AND LEASELINE CHARGES FOR THE REASONS GIVEN UNDER P ARAS 6 TO 8 AND ADDITIONS ON ACCOUNT OF TRANSACTION CHARGES AS PER RESULT GIV EN UNDER PARA -10 11. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. 6 17 *' 0 8 %6* 0 *1 9# ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD NOVEMBER, 2012 . &5 0 4( % 8 :&7 4 0 ; SD/- SD/- (H.L. KARWA) (N.K. BILLAIYA) /PRESIDENT % &' / ACCOUNTANT MEMBER MUMBAI; :& DATED 23.11.2012 . . ./ RJ , SR. PS ITA NO. 7948/M/2010 5 &5 &5 &5 &5 0 00 0 -1! -1! -1! -1! ; -1 , , / DR, ITAT, MUMBAI 6. ;? / GUARD FILE. &5 &5 &5 &5 / BY ORDER, .!1 -1 //TRUE COPY// @ @@ @ / 9 9 9 9 * * * * (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI