ADDL COIT RG 4(3), MUMBAI V. MEHTA VAKIL & CO, MUMBAI

ITA 8741/MUM/2011

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9373 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 01-07-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 26-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASGHAR ZAIN V P
• Assessee Lawyers: S ATISH CHANDAK
• Keywords: Bonafide belief
• Section: 115JB

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUM BAI BEFORE HONBLE S/SHRI B.R.BASKARAN (AM) AND SANJAY GARG (JM) . . , , ./I.T.A. NO.8741/MUM/2011 ( / ASSESSMENT YEAR : 2008-09) DY.COMMISSIONER OF INCOME TAX, 4(3), 6 TH FLOOR, ROOM NO.649, AAYAKAR BHAVAN, M K ROAD, MUMBAI-400020 / VS. M/S MEHTA VAKIL AND CO.,PVT.LTD., PG -11, GROUND FLOOR, ROTUNDA BLDG, MUMBAI SAMACHAR MARG, MUMBAI-400001 ( / APPELLANT) .. ( / RESPONDENT) ./ ./PAN/GIR NO. :AAACM3089L / APPELLANT BY SHRI ASGHAR ZAIN-VP / RESPONDENT BY SHRI SATISH CHANDAK ! ' #$ / DATE OF HEARING : 14.1.2015 %& #$ /DATE OF PRONOUNCEMENT :13.3.2015 / O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE APPEAL OF THE REVENUE IS DIRECTED AGAINST THE O RDER DATED 24.10.2011 PASSED BY LD CIT(A)-8, MUMBAI AND IT RE LATES TO THE ASSESSMENT YEAR 2008-09. THE REVENUE IS AGGRIEVED BY THE DECISION OF LD CIT(A) IN RESPECT OF THE FOLLOWING ISSUES:- (A) WHETHER THE TAX LIABILITY ARISING UNDER NORMAL PR OVISIONS OF THE ACT AND U/S 115JB SHOULD BE COMPARED BEFORE ALL OWING REBATE U/S 88E OF THE ACT OR AFTER ALLOWING THE REBATE. (B) WHETHER THE TRANSACTION CHARGES PAID TO BSE/NSE I S NOT LIABLE TO DISALLOWED US 40(A)(IA) OF THE ACT FOR NO N-DEDUCTION OF TAX AT SOURCE. ITA. NO.8741/MUM/2011 2 2. WE HAVE HEARD THE PARTIES AND PERUSED THE RECOR D. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF SHARE BROKING , TRADING AND INVESTMENT IN SHARES. WE SHALL FIRST TAKE UP THE I SSUE RELATING TO THE DISALLOWANCE MADE U/S 40(A)(IA) OF THE ACT. THE AS SESSEE HAD PAID TRANSACTION CHARGES OF RS.98,85,800/- AND VSAT CHAR GES/LEASE LINE CHARGES OF RS.4,35,363/- TO BSE/NSE WITHOUT DEDUCTING TAX A T SOURCE UNDER ANY OF THE PROVISIONS OF THE ACT. THE AO HELD THAT THE AB OVE SAID PAYMENTS ARE LIABLE FOR TAX DEDUCTION AT SOURCE U/S 194J OF THE ACT, AS THEY FALL IN THE CATEGORY OF FEE FOR TECHNICAL SERVICES. ACCORDIN GLY HE DISALLOWED BOTH THE AMOUNTS BY INVOKING THE PROVISIONS OF SEC. 40(A)(IA ) OF THE ACT, SINCE THE ASSESSEE HAD NOT DEDUCTED TAX AT SOURCE. IN THE AP PELLATE PROCEEDINGS, THE LD CIT(A) DELETED THE DISALLOWANCE BY FOLLOWING THE DECISIONS RENDERED BY THE CO-ORDINATE BENCHES IN THE FOLLOWING CASES:- (A) GSB SECURITIES PVT LTD (ITA NO.1825/MUM/2009 ) (B) KOTAK SECURITIES LTD (2009)(318 ITR (AT) 268 ) (C) SHRI VINOD K NEVATIA (ITA NO.6556/MUM/2009) (D) M/S ANGEL BROKING LTD (2010)(35 SOT 457)(MUM ). THE REVENUE IS AGGRIEVED BY THE DECISION OF LD CIT( A) IN RESPECT OF TRANSACTION CHARGES. 3. WE NOTICE THAT THE HONBLE JURISDICTIONAL BOM BAY HIGH COURT HAS HELD IN THE CASE OF CIT VS. KOTAK SECURITIES LTD (2012)( 340 ITR 333) THAT THE TRANSACTION CHARGES PAID BY THE ASSESSEE TO THE STO CK EXCHANGES CONSTITUTE FEE FOR TECHNICAL SERVICES AND THE SAME IS LIABLE FOR TAX DEDUCTION AT SOURCES U/S 194J OF THE ACT. HOWEVER, BEFORE THE H ONBLE HIGH COURT, THE ASSESSEE THEREIN PLEADED THAT IT WAS UNDER BONAFIDE BELIEF THAT NO TAX WAS DEDUCTIBLE AT SOURCE. THE HONBLE HIGH COURT ALSO N OTICED THAT THE ASSESSEE HAS BEEN PAYING THE TRANSACTION CHARGES FO R THE PAST SEVERAL YEARS WITHOUT SUBJECTING THE SAME TO TAX DEDUCTION AT SOURCE AND THE ITA. NO.8741/MUM/2011 3 DEPARTMENT HAS ALSO ALLOWED THE CLAIM. HENCE THE H ONBLE HIGH COURT, UNDER THESE PECULIAR FACTS, HELD AS UNDER:- HOWEVER, SINCE BOTH THE REVENUE AND ASSESSEE WERE UNDER THE BONA FIDE BELIEF FOR NEARLY A DECADE THAT TAX WAS NOT DE DUCTIBLE AT SOURCE ON PAYMENT OF TRANSACTION CHARGES, NO FAULT CAN BE FOU ND WITH THE ASSESSEE IN NOT DEDUCTING THE TAX AT SOURCE IN THE ASSESSMENT YEAR IN QUESTION CONSEQUENTLY DISALLOWANCE MADE BY THE ASSE SSING OFFICER UNDER SECTION 40(A)(IA) OF THE ACT IN RESPECT OF TH E TRANSACTION CHARGES CANNOT BE SUSTAINED. WE MADE IT CLEAR THAT WE HAVE ARRIVED AT THE ABOVE CONCLUSION IN THE PECULIAR FACTS OF THE PRESE NT CASE, WHERE BOTH THE REVENUE AND THE ASSESSEE RIGHT FROM THE INSERTI ON OF SECTION 194J IN THE YEAR 1995 TILL 2005 PROCEEDED ON THE FOOTING THAT THE ASSESSEE IS NOT LIABLE TO DEDUCT TAX AT SOURCE AND IN FACT IMME DIATELY AFTER THE ASSESSMENT YEAR IN QUESTION, I.E. FROM A.Y. 2006-07 THE ASSESSEE HAS BEEN DEDUCTING TAX AT SOURCE WHILE CREDITING THE TR ANSACTION CHARGES TO THE ACCOUNT OF STOCK EXCHANGE. 4. THE DECISION OF THE HONBLE BOMBAY HIGH COURT WA S RENDERED ON 21- 10-2011 AND THE PRESENT ASSESSMENT YEAR IS AY 2008- 09. WE HAVE ALREADY NOTICED THAT, PRIOR TO THE DECISION OF HONB LE BOMBAY HIGH COURT, THE VARIOUS BENCHES OF THE TRIBUNAL HAVE BEEN HOLDI NG THAT THE TAX WAS NOT DEDUCTIBLE AT SOURCE FROM THE TRANSACTION CHARG ES PAID TO THE STOCK EXCHANGES. HENCE, IT CAN BE SEEN THAT THE ASSESSEE BEFORE US ALSO, WAS UNDER BONA FIDE BELIEF IN THIS REGARD AND HENCE, WE ARE OF THE VIEW THAT THE BENEFIT OF DOUBT GIVEN TO THE ASSESSEE BY THE H ONBLE BOMBAY HIGH COURT IN THE CASE OF KOTAK SECURITIES LTD (SUPRA) S HOULD ALSO BE EXTENDED TO THE ASSESSEE. THE LD A.R SUBMITTED THAT THE ASS ESSEE HAS STARTED DEDUCTING TAX AT SOURCE FROM THE TRANSACTION CHARGE S SUBSEQUENT TO THE DECISION OF HONBLE BOMBAY HIGH COURT. THE LD A.R ALSO BROUGHT TO OUR NOTICE THE DECISION RENDERED BY THE CO-ORDINATE BEN CH OF MUMBAI TRIBUNAL IN THE CASE OF M/S MAPE SECURITIES PVT LTD (ITA NO. 842/MUM/2012 DATED 24.11.2014 RELATING TO AY 2008-09), WHEREIN ALSO TH E CO-ORDINATE BENCH HAS TAKEN IDENTICAL VIEW. HENCE, FOR THE FOREGOING REASONS, WE UPHOLD THE DECISION OF LD CIT(A) ON THIS ISSUE. ITA. NO.8741/MUM/2011 4 5. THE NEXT ISSUE RELATE TO THE COMPUTATION OF MAT TAX LIABILITY VIS--VIS THE REBATE U/S 88E OF THE ACT. THE AO TOOK THE VIE W THAT THE MAT TAX LIABILITY SHOULD BE COMPARED WITH THE TAX PAYABLE U NDER NORMAL PROVISIONS OF THE TAX AFTER DEDUCTING THE REBATE ALLOWABLE U/S 88E OF THE ACT. HOWEVER, THE ASSESSEE CONTENDED THAT THE TAX LIABIL ITY UNDER BOTH THE PROVISIONS SHOULD BE COMPARED BEFORE DEDUCTING REBA TE U/S 88E OF THE ACT. THE AO DID NOT AGREE WITH THE CONTENTIONS OF THE AS SESSEE AND HELD THAT, IF THE TAX PAYABLE AFTER ALLOWING REBATE U/S 88E WO RKS OUT TO LESS THAN 10% OF THE BOOK PROFIT, THE PROVISIONS OF SEC. 115JB SH ALL BE APPLICABLE. THE AO NOTICED THAT THE TAX PAYABLE UNDER THE NORMAL PR OVISIONS OF THE ACT AFTER GIVING REBATE U/S 88E OF THE ACT WAS RS.98,02 ,699/- AND THE SAME WORKED OUT TO LESS THAN 10% OF BOOK PROFIT COMPUTED U/S 115JB OF THE ACT. ACCORDINGLY, THE AO HELD THAT THE BOOK PROFIT SHALL BE DEEMED TO BE THE TOTAL INCOME AND HENCE THE TAX SHALL BE PAYABLE AT 10% OF BOOK PROFIT. HOWEVER, THE LD CIT(A) REVERSED THE DECISION OF THE AO AND HENCE THE REVENUE HAS FILED THIS APPEAL BEFORE US. 6. WE NOTICE THAT THE LD CIT(A) HAS FOLLOWED TH E DECISION RENDERED BY THE BANGALORE BENCH OF TRIBUNAL IN THE CASE OF M/S HORIZON CAPITAL LTD (ITA NO.592/BANGALORE/2010) AND ALSO THE DECISION R ENDERED BY THE DELHI BENCH OF TRIBUNAL IN THE CASE OF M/S MBL & CO. LTD (ITA NO.2478/DEL/2010), WHEREIN IT WAS HELD THAT THE REB ATE U//S 88A TO 88E SHALL ALSO APPLY TO THE TAX COMPUTED U/S 115JB OF T HE ACT. THE TRIBUNAL HAS ALSO NOTICED THAT THE RETURN OF INCOME (ITR-6) PRESCRIBED IN THE INCOME TAX RULES ALSO SUPPORTED THE VIEW TAKEN BY T HE ASSESSEES. ACCORDINGLY, THE LD CIT(A) REVERSED THE VIEW TAKEN BY THE AO. 7. WE NOTICE THAT THE DECISION RENDERED BY THE BANGALORE BENCH OF TRIBUNAL IN THE CASE OF M/S HORIZON CAPITAL LTD (SU PRA) HAS SINCE BEEN APPROVED BY THE HONBLE HIGH COURT OF KARNATAKA (20 11)(245 CTR 601; 64 DTR 306), WHEREIN IT WAS HELD THAT THE ASSESSEE IS ENTITLED TO DEDUCT THE REBATE U/S 88E OF THE ACT FROM THE TAX LIABILITY AR ISING U/S 115JB OF THE ACT. ITA. NO.8741/MUM/2011 5 THE CO-ORDINATE BENCH OF THE TRIBUNAL HAS ALSO TAKE N IDENTICAL VIEW IN THE CASE OF M/S AMBIT SECURITIES BROKING P LTD VS. ADDL . CIT (ITA NO.7856/M/2011 DATED 6.2.2013). ALL THESE DECISION S GO TO SHOW THAT THE TRIBUNAL/HIGH COURT HAS TAKEN A CONSISTENT VIEW THA T THE TAX LIABILITY ARISING UNDER NORMAL PROVISIONS OF THE ACT AND U/S 115JB OF THE ACT SHOULD BE COMPARED BEFORE ALLOWING REBATE U/S 88E OF THE ACT. CONSISTENT WITH THE VIEW TAKEN BY THE TRIBUNAL/HIGH COURT, WE ARE OF TH E VIEW THAT THERE IS NO INFIRMITY IN THE DECISION RENDERED BY LD. CIT(A) ON THIS ISSUE. 8. IN THE RESULT, THE APPEAL FILED BY THE REVENU E IS DISMISSED. PRONOUNCED ACCORDINGLY IN THE OPEN COURT ON 13TH MARCH, 2015 IN THE PRESENCE OF BOTH THE PARTIES. %& ! ' ( ) *13TH MARCH, 2015 & 0' 1 SD SD ( 00/ SANJAY GARG ) ( . . / B.R. BASKARAN) 3 / JUDICIAL MEMBER / ACCOUNTANT MEMBER ' ! ' MUMBAI: 13TH MARCH,2015. . . ./ SRL , SR. PS ! '#$%& '&($ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ! 4# ( ) / THE CIT(A)- CONCERNED 4. ! 4# / CIT CONCERNED 5. 560 #7 , $ 7 , ' ! ' / DR, ITAT, MUMBAI CONCERNED 6. 08 9' / GUARD FILE. : ! / BY ORDER, TRUE COPY ; (ASSTT. REGISTRAR) $ 7 , ' ! ' /ITAT, MUMBAI