M.B.D SECURITIES P. LTD, MUMBAI V. ITO 4(3)(3), MUMBAI

ITA 907/MUM/2011

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71099 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 7 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-09-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 12-09-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 01-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL

Judgement Text

M.B.D SECURITIES PVT. LTD. . - 1 - VK;DJ VIHYH; VF/KDJ.K TH U;K;IHB EQACBZ ESAA IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUM BAI JH JKTSUNZ FLAG YS[KK LNL; ,OA JH FOT; IKY JKO] YS[ KK LNL; DS LE{K BEFORE SHRI RAJENDRA SINGH ACCOUNTANT MEMBER AND SH RI VIJAY PAL RAO JUDICIAL MEMBER VK;DJ VIHY LA[;K /ITA NO. 907/MUM/2011 FU/KKZJ.K O'KZ @ ASSESSMENT YEAR: - 2006-07 M.B.D SECURITIES PVT. LTD. PS 20/21, 2 ND FLOOR, ROTUNDA BLDG, DALAL STREET, FORT, MUMBAI 400 023. VS./ CUKE ITO, 4(3)(3), ROOM NO. 637, 6 TH FLOOR, AAYKAR BHAVAN, M.K. ROAD, MUMBAI 400 020. PAN:- AAACM8221G VIHYKFKHZ @ APPELLANT IZR;FKHZ @ RESPONDENT VIHYKFKHZ DH VKSJ LS @ APPELLANT BY SHRI NEELKANTH KHANDELWAL IZR;FKHZ DH VKSJ LS @ RESPONDENT BY MS. DIVYA BAJPAI VKNS'K@ VKNS'K@ VKNS'K@ VKNS'K@ ORDER PER RAJENDRA SINGH, AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 4.1.2011 OF CIT(A) FOR THE ASSESSMENT YEAR 2006-07. THE ONLY DI SPUTE RAISED BY THE ASSESSEE IN THIS APPEAL IS REGARDING DISALLOWANCE OF SECURITY T RANSACTION TAX (STT). 2. THE FACTS IN BRIEF ARE THAT THE ASSESSEE WHO IS A BROKER HAD DECLARED BROKERAGE INCOME OF RS. 27,23,987/- IN THE P&L ACCOUNT. AO NO TED THAT THE BROKERAGE INCOME DECLARED AS PER THE SERVICE TAX RETURN WAS RS. 34,9 5,148/-. WHEN ASKED TO EXPLAIN THE DISCREPANCY THE ASSESSEE SUBMITTED THAT AN AMOUNT O F RS. 4,35,512/- WAS PAID ON LQUOKBZ DH RKJH[K @ DATE OF HEARING 12-09-2013 ?KKS'K.KK DH RKJH[K @ DATE OF PRONOUNCEMENT 12-09-2013 M.B.D SECURITIES PVT. LTD. . - 2 - ACCOUNT OF STT HAS NOT BEEN DEBITED TO THE P&L ACCO UNT. IT WAS ALSO SUBMITTED THAT THE STT HAD BEEN PAID ON BEHALF OF THE CLIENTS WHIC H HAD BEEN REIMBURSED BY THEM. AO HOWEVER OBSERVED THAT STT COULD NOT BE ALLOWED A S DEDUCTION IN VIEW OF THE SPECIFIC PROVISIONS OF SECTION 40A(IB). THE STT CAN ALSO NOT BE ALLOWED WHILE COMPUTING THE CAPITAL GAIN U/S 48 OF THE INCOME TAX ACT. THE AO FURTHER OBSERVED THAT SEPARATE DEDUCTION IN RESPECT OF STT WAS PROVIDED U/S 88E OF THE INCOME TAX ACT. AO, THEREFORE, DISALLOWED THE CLAIM OF STT AND ADDED AN AMOUNT OF RS. 4,35,512/- TO THE TOTAL INCOME. IN APPEAL CIT(A) CONFIRMED THE ORDER OF AO, AGGRIEVED BY WHICH THE ASSESSEE IS IN APPEAL BEFORE TRIBUNAL. 3. BEFORE US THE LEARNED AR FOR THE ASSESSEE REITER ATED THE SUBMISSIONS MADE BEFORE LOWER AUTHORITIES AND POINTED OUT THAT THE S AME ISSUE HAD ALREADY BEEN DECIDED BY THE MUMBAI BENCH OF TRIBUNAL IN CASE OF HSBC SEC URITIES AND CAPITAL MARKETS (INDIA) PRIVATE LIMITED. IN ITA NO. 6979/MUM/2008 VIDE ORDE R DATED 29.6.2012. THE ISSUE WAS THUS COVERED IN FAVOUR OF THE ASSESSEE AND THE CLAI M OF THE ASSESSEE HAS TO BE ALLOWED. THE LEARNED DR PLACED RELIANCE ON THE ORDERS OF AUT HORITIES BELOW. 4. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE M ATTER CAREFULLY. THE DISPUTE IS REGARDING ALLOWABILITY OF DEDUCTION ON ACCOUNT OF S TT IN CASE OF THE BROKER WHO ONLY EXECUTED TRANSACTION ON BEHALF OF THE CLIENTS AND E ARNED BROKERAGE INCOME. STT IS PAYABLE BY BUYER AND SELLER OF SHARES AND NOT BY TH E BROKER. THEREFORE, THOUGH THE SECTION 40A(IB) DOES NOT PROVIDE DEDUCTION ON ACCOU NT OF STT THE SAME IS NOT APPLICABLE IN CASE OF THE BROKER. WE ALSO FIND THAT THE SAME ISSUE HAS ALREADY BEEN CONSIDERED BY THE TRIBUNAL IN CASE OF HSBC SECURITI ES PVT. LTD. (SUPRA) IN WHICH THE TRIBUNAL ALLOWED THE CLAIM OF THE ASSESSEE. THE REL EVANT PORTION OF THE ORDER OF TRIBUNAL IS REPRODUCE BELOW;- WE HAVE PERUSED THE RECORDS AND CONSIDERED THE R IVAL CONTENTIONS CAREFULLY. THE DISPUTE IS REGARDING ALLOWABILITY OF DEDUCTION ON ACCOUNT OF STT PAYMENT IN CASE O BROKER WHILE COMPUTING TOTAL INCO ME. THE AUTHORITIES BELOW HAVE NOT ALLOWED THE CLAIM OF DEDUCTION IN VIEW OF PROVISIONS OF SECTION 40(A)(IB) AS PER WHICH DEDUCTION ON ACCOUNT OF STT IS NOT ALL OWABLE. HOWEVER, THE CASE OF M.B.D SECURITIES PVT. LTD. . - 3 - THE ASSESSEE IS THAT STT IS NOT REQUIRED TO BE COLL ECTED OR PAID BY A BROKER. IT IS THE BUYER OR SELLER OF SHARES WHO IS REQUIRED TO PA Y STT UNDER SECTION 98 OF THE STT ACT. THE COLLECTION AND RECOVERY OF STT IS THE RESPONSIBILITY OF STOCK EXCHANGES UNDER SECTION 100 OF STT ACT. THE ASSESSE E HAD ONLY COLLECTED STT ON BEHALF OF STOCK EXCHANGES FROM THE CLIENTS AND THE SAME WAS INCLUDED IN THE BROKERAGE INCOME AND, THEREFORE, WHILE COMPUTING TH E TOTAL INCOME, THE STT IS REQUIRED TO BE EXCLUDED. WE FIND MERIT IN THE ARGUM ENT ADVANCED ON BEHALF OF THE ASSESSEE. THE LIABILITY ON ACCOUNT OF STT IS THE LI ABILITY OF THE CLIENTS OF THE ASSESSEE WHO ARE BUYING AND SELLING SHARES AND, THE REFORE, THE PROVISIONS OF SECTION 40(A)(IB) WILL BE APPLICABLE IN THOSE CASES AND IT IS BECAUSE OF THIS REASON, THE REBATE UNDER SECTION 88E IS ALSO ALLOWABLE IN C ASE OF BUYER/SELLER OF SHARES UNDER SECTION 88E OF THE ACT. THE ASSESSEE IS ONLY A BROKER WHO HAS COLLECTED STT ON BEHALF OF THE STOCK EXCHANGES AND HAS PAID THE S AME TO THE LATTER. IN OUR VIEW, STT IS REQUIRED TO BE EXCLUDED WHILE COMPUTING THE INCOME OF THE ASSESSEE FROM BROKERAGE. THEREFORE, IN OUR VIEW, THE AUTHORITIES BELOW ARE NOT JUSTIFIED IN DISALLOWING THE CLAIM OF DEDUCTION ON ACCOUNT OF ST T IN CASE OF THE ASSESSEE. WE ACCORDINGLY SET ASIDE THE ORDER AND DELETE THE ADDI TION MADE. 5. THE CASE OF THE ASSESSEE IS IDENTICAL TO THE CAS E CITED ABOVE. THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF TRIBUNAL (SU PRA), WE SET ASIDE THE ORDER OF CIT(A) AND ALLOW THE CLAIM OF THE ASSESSEE 6. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 12 -9-2013 SD/- SD/- (VIJAY PAL RAO) (RAJENDRA SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER SKS SR. P.S, MUMBAI DATED 12.9.2013 M.B.D SECURITIES PVT. LTD. . - 4 - COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, G BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI