ACIT RG 4(2), MUMBAI V. SANAT M DALAL SECURITIES P.LTD, MUMBAI

ITA 8259/MUM/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9405 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-11-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2007-2008
• Appeal Filed On: 29-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E , MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT, AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO. : 8259/MUM/2010 ASSESSMENT YEAR : 2007-08 ADDL. CIT 4(2), ROOM NO. 642, 6 TH FLOOR, AAYKAR BHAVAN, MAHARSHI KARVE MARG, MUMBAI-400 020 VS. M/S. SANAT M. DALAL SECURITIES PRIVATE LTD. G-3, ORICON HOUSE, 12-K, DUBASH MARG, MUMBAI-400 003 PAN NO: AAFCS 1400 A (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI DINESH KUMAR RESPONDENT BY : NONE DAT E OF HEARING : 14.11.2012 DATE OF PRONOUNCEMENT : 21.11.2012 ORDER PER B. RAMAKOTAIAH, A.M. : THIS IS REVENUES APPEAL AGAINST THE ORDER OF THE LD. CIT(A)-8, MUMBAI DATED 27.09.2010. THE REVENUE HAS RAISED TW O GROUNDS. WHEN THE CASE WAS TAKEN UP FOR HEARING, IT WAS NOTICED T HAT THE NOTICE SENT TO ASSESSEE WAS RETURNED UNSERVED, DESPITE THE NOTICE SENT TO THE ASSESSEES ADDRESS HAS BEEN REDIRECTED TO ANOTHER ADDRESS. CHA NGE OF ADDRESS WAS NOT COMMUNICATED TO REGISTRY. CONSIDERING THESE, T HE APPEAL IS DECIDED EX PARTE RESPONDENT AFTER HEARING THE LD. DR. ITA NO : 8259/MUM/2010 M/S. SANAT M. DALAL SECURITIES PRIVATE LTD. 2 2. GROUND NO. 1 IS WITH REFERENCE TO THE DISALLOWAN CE OF `. 16,57,868/- MADE U/S. 14A READ WITH RULE 8D BY THE A.O. THE AS SESSEE HAS EARNED INTEREST FREE INCOME OF `. 2,74,849/- WHICH HAD BEEN CLAIMED AS EXEMPT BUT NO EXPENDITURE HAS BEEN ALLOCATED FOR EARNING S UCH INCOME AS REQUIRED U/S. 14A. THE A.O. INVOKING THE PROVISION OF SECTION 14A READ WITH RULE 8D MADE A DISALLOWANCE OF `. 16,57,868/-. THE LD. CIT(A) WHILE STATING THAT RULE 8D HAS NO APPLICATION TO THE IMPU GNED ASSESSMENT YEAR AS HELD IN THE CASE OF GODREJ & BOYCE MANUFACT URING COMPANY LTD. VS. DCIT [328 ITR 81] (BOM), HOWEVER, DIRECTED THE A.O. TO DISALLOW A REASONABLE AMOUNT. HOWEVER, THE LD. CIT(A) IN THE GUISE OF ALLOWING A REASONABLE AMOUNT DIRECTED THE A.O. TO DETERMINE TH E QUANTUM OF SUCH EXPENDITURE BY APPLYING THE RATIO MENTIONED IN HIS ORDER, WHICH IS NOTHING BUT APPLYING RULE 8D IN A DIFFERENT WAY. TH IS DIRECTION OF THE LD. CIT(A), IN OUR VIEW, SHOULD NOT CAUSE ANY GRIEVANCE TO THE REVENUE AS COMPLYING WITH THAT RATIO PROVIDED IN THE ORDER MAY IN A WAY DISALLOW MORE OR LESS SAME AMOUNT, AS HAS BEEN DONE BY THE A .O. INVOKING RULE 8D. IN OUR VIEW, THE ASSESSEE SHOULD HAVE A GRIEVA NCE AND WHETHER IT HAS PREFERRED ANY APPEAL OR NOT HAS NOT BEEN INFORM ED TO US. THEREFORE, WITHOUT ADJUDICATING THE MERITS OF THE LD. CIT(A)S DIRECTIONS, AS IT MAY RESULT IN DECIDING THE CROSS APPEAL IF ANY, WE ARE OF THE OPINION THAT THE REVENUE SHOULD NOT HAVE ANY GRIEVANCE ON THE DIRECT ION GIVEN BY THE LD. CIT(A). ACCORDINGLY THE SAME IS DISMISSED. 3. GROUND NO. 2 IS WITH REFERENCE TO THE DISALLOWAN CE OF AN AMOUNT OF `. 3,32,584/- MADE U/S.40(A)(IA) IN RESPECT OF LEASELI NE CHARES PAID TO STOCK EXCHANGE ON THE REASON THAT THE ASSESSEE FAIL ED TO DEDUCT THE TDS THEREON. THE LD. CIT(A) DELETED THE SAME FOLLOWING THE DECISION OF THE ITAT IN THE CASE OF KOTAK SECURITIES VS. ADDL. CIT [124 TTJ 241 (MUM)] AND DCIT VS. ANGEL BROKING LTD.( 35 SOT 457) WHERE IN IT WAS HELD THAT ITA NO : 8259/MUM/2010 M/S. SANAT M. DALAL SECURITIES PRIVATE LTD. 3 NO TAX WAS DEDUCTIBLE ON SUCH PAYMENT AND, THEREFOR E, THE PROVISIONS OF SECTION 40(A)(IA) WERE NOT APPLICABLE. THE REVENUE IS AGGRIEVED ON ABOVE. 4. AFTER CONSIDERING THE DRS ARGUMENTS, WE ARE OF THE OPINION THAT THERE IS NO NEED TO DISTURB THE FINDINGS OF THE LD. CIT(A) AS PROVISIONS OF TDS WERE NOT APPLICABLE TO THE PAYMENTS MADE TO THE STOCK EXCHANGE TOWARDS LEASELINE CHARGES. THE A.O. HIMSELF HAS RE CORDED A FINDING THAT THE DEPARTMENT HAS FILED THE APPEAL IN THE HIGH COU RT IN THE CASE OF KOTAK SECURITIES (SUPRA), THEREFORE HE WAS MAKING T HE DISALLOWANCE WHICH FACT IS NOT CORRECT AS THE REVENUE DID NOT AP PEAL TO THE HONBLE BOMBAY HIGH COURT ON THE PAYMENTS MADE TOWARDS THE LEASELINE CHARGES AND THE ISSUE TAKEN BEFORE THE HONBLE HIGH COURT I S ONLY ON THE TRANSACTION CHARGES PAID TO STOCK EXCHANGE. IN THE CASE OF CIT VS. ANGEL BROKING LTD (SUPRA) IN ITA NO.475 OF 2011 DATED 28 TH JULY, 2011, THE HON'BLE HIGH COURT HELD THAT VSAT AND LEASE LINE CH ARGES PAID TO THE STOCK EXCHANGE ARE NOT PAID IN CONSIDERATION OF TEC HNICAL SERVICES. THEREFORE, THERE IS NO NEED FOR DEDUCTING TAX. THE SAME PRINCIPLES WERE REITERATED BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. STOCK AND BOND TRADING COMPANY IN ITA NO.4117 OF 2010 DAT ED 14 TH OCTOBER,2011 WHEREIN VSAT CHARGES, NSE LEASE LINE C HARGES AND TRANSACTION CHARGES WERE CONSIDERED AND HELD AGAINS T THE REVENUE FOLLOWING THE DECISION IN THE CASE OF DCIT VS. ANGE L BROKING LTD (SUPRA). THE SAME PRINCIPLES WERE REITERATED IN THE CASE OF CIT VS. KOTAK SECURITIES LTD 203 TAXMANN 86 (BOM). TO THE EXTENT OF VSAT, LEASE LINE CHARGES THE REVENUE DID NOT EVEN CONTEST IN THAT CA SE. NOW THE TWO ORDERS OF ITAT, WHICH WERE RELIED BY LD. CIT(A), WE RE UPHELD BY THE HONBLE BOMBAY HIGH COURT, THERE IS NO NEED TO DIFF ER FROM THE FINDINGS OF THE LD. CIT(A). ACCORDINGLY, THE GROUND IS DISM ISSED. ITA NO : 8259/MUM/2010 M/S. SANAT M. DALAL SECURITIES PRIVATE LTD. 4 5. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED ON THIS 21 ST DAY OF NOVEMBER, 2012. SD/- - SD/- ( D. MANMOHAN ) ( B. RAMAKOTAIAH ) VICE PRESIDENT ACCOUNTANT MEMBER MUMBAI, DT: 21 ST NOVEMBER 2012 COPY FORWARDED TO : 1. THE APPELLANT, 2. THE RESPONDENT, 3. THE C.I.T. 4. CIT (A) 5. THE DR, - BENCH, ITAT, MUMBAI //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI ROSHANI