ITO 4(2)(3), MUMBAI V. PEL;F INVESTMENTS P.LTD, MUMBAI

ITA 854/MUM/2011

• Counselvise Citation: 85419914 RSA 2011
• Duration Of Justice: 2 year(s) 6 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2013
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 05-08-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 31-01-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE S/SHRI B.R.MITTAL,(JM) AND RAJENDRA (AM) . . , , ./I.T.A. NO.854/MUM/2011 ( / ASSESSMENT YEAR:2007-08) INCOME TAX OFFICER 4(2)(3), ROOM NO.647, 6 TH FLOOR, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI-400020 / VS. M/S HRIM FINANCE AND SECURITIES PVT.LTD., (FORMERLY KNOWN AS M/S PELF INVESTMENT PVT.LTD.) 177-179, LAXMI HOUSE, KALBADEVI ROAD, MUMBAI-400002 ( & / APPELLANT) .. ( ' & / RESPONDENT) ./ ./PAN/GIR NO. : AAACP6489M & / APPELLANT BY : MS . C. TRIPURA SUNDARY ' & * /RESPONDENT : SHRI RAKESH JOSHI * - / DATE OF HEARING : 14.8.2013 * - /DATE OF PRONOUNCEMENT : 14.8.2013 / O R D E R PER B.R.MITTAL, JM: THE DEPARTMENT HAS FILED THIS APPEAL FOR ASSESSMEN T YEAR 2007-08 AGAINST ORDER OF LD. CIT(A), MUMBAI DATED 12.11.2010 TAKIN G FOLLOWING GROUNDS OF APPEAL: 1. (I) 'ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE M ADE IN RESPECT OF VSAT OF RS.1,10,000/-, LEASELINE CHARGES OF RS.6 7,105/- AND TRANSACTION CHARGES OF RS.23,64,895/ - U/S 40(A)(IA), WITHOUT A PPRECIATING THE FACTS THAT THESE WERE COMPOSITE CHARGES FOR PROFESSIONAL AND T ECHNICAL SERVICES RENDERED BY THE STOCK EXCHANGE TO ITS MEMBERS AND THE ASSESS EE HAS FAILED TO DEDUCT TDS THEREON.' II. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW THE LD. CIT(A) ERRED IN IGNORING THE FACT THAT THESE SERVICES ARE ESSENTIAL IN NATURE AS THEY CAN ONLY BE AVAILED BY MEMBERS OF STOCK EXCHANGE.' III. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN IGNORING THE FACTS THAT USE OF TECHNOLOGY AND ALGORITHMIC BASED I.T.A. NO.854/MUM/2011 2 PROGRAMS HAVE CONVERTED AN ERSTWHILE PHYSICAL MARKE T 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 RENDER ED BY THE BROKERS ARE NOT STANDARD SERVICES BUT SERVICES THAT HAS BEEN DEVELO PED 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 HAVE IN SU BSEQUENT YEARS THEMSELVES STARTED DEDUCTING THE TDS ON SUCH PAYMENTS AND THAT THERE IS NO REASON TO GIVE A DIFFERENT TREATMENT IN THIS YEAR.' 2. WE HAVE HEARD LD. REPRESENTATIVES OF THE PARTIES AND HAVE PERUSED ORDERS OF AUTHORITIES BELOW. 3. AT THE VERY OUTSET, BOTH THE PARTIES AGREED THA T THE ISSUE INVOLVED IS PARTLY COVERED IN FAVOUR OF THE ASSESSEE AND PARTLY COVERE D IN FAVOUR OF THE REVENUE. THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF C IT VS KOTAK SECURITIES 340 ITR 333 HAS HELD THAT TRANSACTION CHARGES PAID BY THE ASSESSEE TO THE STOCK EXCHANGE FOR TRADING THROUGH BOLT SYSTEM CONSTITUTES FEES FOR TECHNICAL SERVICES COVERED U/S. 194-J AND THE ASSESSEE WAS LIABLE TO DEDUCT TAX AT SOURCE WHILE C REDITING THE TRANSACTION CHARGES TO THE ACCOUNT OF THE STOCK EXCHANGE. THEREFORE TO THE EXTENT OF THE PAYMENT OF TRANSACTION CHARGES OF RS.23,64,895/- IS CONCERNED, REVENUE SUCCEEDS AND ACCORDINGLY, THE ORDER OF LD. CIT(A) IS REVERSED BY CONFIRMING THE ACTION OF THE AO. 4. SO FAR AS PAYMENT OF LEASELINE AND VSAT CHARGES OF RS.67,105/- AND RS.1,10,000/- RESPECTIVELY PAID BY THE ASSESSEE TO THE STOCK EXCHANGE HAVE BEEN HELD BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CA SE OF INCOME TAX COMMISSIONER MUMBAI CITY-4 V/S ANGEL CAPITAL & DEBIT MARKET LTD . IN INCOME TAX APPEAL (L) NO.475 OF 2011 VIDE ORDER DATED 28 TH JULY, 2011 THAT THEY WERE MERELY REIMBURSEMENT OF THE CHARGES PAID/PAYABLE BY THE STOCK EXCHANGE TO THE D EPARTMENT OF TELECOMMUNICATION. THEREFORE VSAT AND LEASELINE CHARGES PAID BY THE A SSESSEE DO NOT HAVE ELEMENT OF INCOME, DEDUCTING TAX WHILE MAKING SUCH PAYMENTS D O NOT ARISE. HENCE, LD. CIT(A) HAS RIGHTLY HELD THAT NO TDS WAS REQUIRED TO BE DEDUCT ED ON THE AFORESAID CHARGES PAID BY THE ASSESSEE TOWARDS VSAT AND LEASELINE CHARGES AND ACCORDINGLY, WE UPHOLD THE ACTION OF THE LD. CIT(A) IN DELETING THE DISALLOWANCE MA DE BY THE AO. I.T.A. NO.854/MUM/2011 3 5. HENCE, GROUND TAKEN BY THE DEPARTMENT IS ALLOWED IN PART AS INDICATED ABOVE. 6. IN THE RESULT, THE APPEAL OF THE DEPARTMENT IS A LLOWED IN PART. ORDER PRONOUNCED IN THE OPEN COURT ON 14TH AUG, 201 3 * 1 2 14TH AUG, 2013 * SD SD ( /RAJENDRA ) ( . . /B.R.MITTAL) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; 2 DATED 14/ 08/2013 . . ./ SRL , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. & / THE APPELLANT 2. ' & / THE RESPONDENT. 3. 6 ( ) / THE CIT(A)- CONCERNED 4. 6 / CIT CONCERNED 5. 7 '9 , - 9 , / DR, ITAT, MUMBAI CONCERNED 6. / GUARD FILE. TRUE COPY / BY ORDER, (ASSTT. REGISTRAR) - 9 , /ITAT, MUMBAI