ACIT CIR 4(2), MUMBAI V. TWENTY FIRST CENTURY SHARES AND SECURITIES LTD, MUMBAI

ITA 9078/MUM/2010

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3763 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-05-2013
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: E
• Assessment Year: 2007-2008
• Appeal Filed On: 28-12-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Bonafide belief
• Section: 12

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E, MUMBAI BEFORE SHRI R S SYAL, ACCOUNTANT MEMBER & SHRI SANJAY GARG, JUDICIAL MEMBER ITA NO.:9078/MUM/2010 ASSESSMENT YEAR: 2007-08 THE ACIT CIR. 4(2), VS. M/S. TWENTY FIRST CENTUR Y SHARES MUMBAI. & SECURITIES LTD., 604 DALAMAL CHAMBERS, 29, NEW MARINE LINES MUMBAI- 400 020 PAN :AAACT2452D (APPELLANT) (RESPONDENT) APPELLANT BY : MR.RAJARSHI DWIVEDY RESPONDENT BY : NONE DATE OF HEARING : 04.04.2013 DATE OF PRONOUNCEMENT : 15.05.2013 ORDER PER SANJAY GARG, JM : THIS APPEAL HAS BEEN PREFERRED BY THE REVENUE AGAIN ST THE ORDER OF THE CIT(A) DATED 28.10.2010 PERTAINING TO A.Y 2007-08, CHALLEN GING THE DELETION OF ADDITION MADE BY THE AO ON ACCOUNT OF DISALLOWANCE MADE U/S. 40(A)(IA) AT RS.8,71,372/- IN RESPECT OF VSAT, TRANSACTION AND LEASE LINE CHARGES PAID TO THE STOCK EXCHANGE. 2. NONE HAS PUT IN APPEARANCE ON BEHALF OF THE ASSE SSEE. SINCE THE MATTER SEEMS TO BE COVERED WITH EARLIER JUDGMENTS OF THIS TRIBUNAL, WE PROCEED TO DECIDE THE SAME. THE ASSESSEE COMPANY, ENGAGED IN THE BUSINESS OF SH ARE TRADING AND STOCK BROKING, CLAIMED/DEBITED TRANSACTION CHARGES, VSAT CHARGES AND LEASE LINE CHARGES ITA NO. 9078/MUM/2010 AY : 2007-08 2 TOTALING TO RS.8,71,372/-, WHICH WAS PAID BY IT TO THE STOCK EXCHANGE ON ACCOUNT OF TRANSACTIONS IN SECURITIES MADE BY THE ASSESSEE THR OUGH THE STOCK EXCHANGE. THE AO MADE THE DISALLOWANCE TREATING THE SAME AS PAYMENT FOR TECHNICAL SERVICES ON WHICH TAX WAS REQUIRED TO BE DEDUCTED AT SOURCE U/S. 194J OF THE ACT. THE LEARNED CIT(A) DELETED THE ADDITIONS SO MADE PLACING RELIANCE ON T HE AUTHORITY OF THE ITAT STYLED AS KOTAK SECURITIES LTD VS. ADDL. CIT, DATED 26.08.200 8 IN ITA NO.1955/MUM/2008 FOR A.Y. 2005-06 [124 TTJ 241] IT MAY BE OBSERVED THAT THE REVENUE HAD FILED AN AP PEAL BEFORE THE HONBLE BOMBAY HIGH COURT AGAINST THE ORDER OF THE ITAT IN THE CASE OF KOTAK SECURITIES [ CIT VS. KOTAK SECURITIES LTD. 203 TAXMAN 86]. BEFO RE THE HONBLE BOMBAY HIGH COURT, THE REVENUE DID NOT PRESS THE ISSUE RELATING TO DELETIONS MADE ON ACCOUNT OF VSAT CHARGES AND LEASE LINE CHARGES IN VIEW OF THE LAW LAID DOWN BY THE HONBLE APEX COURT IN THE CASE OF TECHNO SHARES & STOCKS LT D. V. CIT 327 ITR 323 / 193 TAXMAN 248 AND T.R.F. LTD. V. CIT 323 ITR 397 / 190 TAXMAN 39. HOWEVER, THE HONBLE HIGH COURT HELD THAT THE TRANSACTION CHARGE S PAID BY THE ASSESSEE TO STOCK EXCHANGE CONSTITUTE FEES FOR TECHNICAL SERVICES U/S . 194J OF THE ACT AND, THEREFORE, THE ASSESSEE WAS LIABLE TO DEDUCT TAX AT SOURCE WHI LE CREDITING THE TRANSACTION CHARGES TO THE ACCOUNT OF STOCK EXCHANGE. SIMILAR TYPE OF DISPUTE CAME UP FOR ADJUDICATION BE FORE THE TRIBUNAL IN THE CASE OF FIRST GLOBAL STOCKBROKING PVT. LTD. FOR A.Y . 2006-07, AND THE BENCH VIDE ITS ORDER DATED 28.09.2012 MADE THE FOLLOWING OBSERVATI ONS:- FURTHER, THERE IS NO BIFURCATION OF THE AMOUNTS OF VSAT, LEASE LINE AND TRANSACTION CHARGES. IN THE CASE OF CIT VS. ANGEL B ROKING LTD (SUPRA) IN ITA NO.475 OF 2011 DATED 28TH JULY, 2011, THE HON'BLE H IGH COURT HELD THAT VSAT AND LEASE LINE CHARGES PAID TO THE STOCK EXCHANGE A RE NOT PAID IN CONSIDERATION OF TECHNICAL SERVICES. THEREFORE, THE RE 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 DATED 14TH OCTOBER,2011 WHEREIN VSAT CHARGES, NSE L EASE LINE CHARGES AND TRANSACTION CHARGES WERE CONSIDERED AND HELD AGAINS T THE REVENUE FOLLOWING ITA NO. 9078/MUM/2010 AY : 2007-08 3 THE DECISION IN THE CASE OF DCIT VS. ANGEL BROKING LTD (SUPRA). THE SAME PRINCIPLES WERE REITERATED IN THE CASE OF CIT VS. K OTAK SECURITIES LTD 203 TAXMANN 86 (BOM). TO THE EXTENT OF VSAT, LEASE LINE CHARGES THE REVENUE DID NOT EVEN CONTEST. EVEN THOUGH THE HON'BLE COURT HELD THAT THE TRANSACTION CHARGES PAID TO THE STOCK EXCHANGE CONSTITUTE FEES FOR TECHNICAL SERVICES ON BONAFIDE BELIEF IT WAS CONSIDERED THAT THE DISALLOW ANCE CANNOT BE MADE IN THAT YEAR AS THE REVENUE DID NOT PROCEED ON THE FOO TING THAT ASSESSEE IS NOT LIABLE TO DEDUCT THE TAX AT SOURCE AFTER INTRODUCTI ON OF THE PROVISIONS. SINCE THE CIT (A) HAS ONLY GIVEN PARTIAL RELIEF OF RS.2,5 0,000/-, AFTER CONSIDERING THE ITAT ORDERS IN THE CASES OF KOTAK SECURITIES LTD 12 4 TTJ 241 AND ANGEL BROKING LTD 35 SOT 457 (MUM), WE ARE OF THE OPINION THAT THERE IS NO NEED TO DISTURB THE ORDER OF THE CIT (A). IN VIEW OF THIS, GROUNDS RAISED ARE DISMISSED. SO IT CAN BE SAFELY HELD THAT NO TAX AT SOURCE WAS REQUIRED TO BE DEDUCTED BY THE ASSESSEE WITH REGARD TO LEASE LINE CHARGES AND VSAT CHARGES. 3. SO FAR DISALLOWANCE RELATING TO TRANSACTION CHAR GES IS CONCERNED, THE CO- ORDINATE BENCH OF THIS TRIBUNAL IN ACIT VS. DICGC LTD., ITA NOS. 2361 & 2524/MUM/2011 (2012) 14 ITR (TRIB) 194 (MUMBAI), IN PARA 14 OF THE JUDGMENT HAS OBSERVED AS UNDER: THE SECOND PART OF THE ARGUMENT IS THAT THE HON'BL E BOMBAY HIGH COURT IN THE CASE OF CIT VS. KOTAK SECURITIES LTD. [SUPRA] H AS OBSERVED IN PARA-31 THAT BOTH THE PARTIES HAS PROCEEDED ON THE FOOTING THAT TAX WAS NOT DEDUCTIBLE U/S.194J FOR THE LAST 10 YEARS, THEREFORE, PROVISIO NS OF SEC.40[A][IA] COULD NOT BE INVOKED. IT WAS CONTENDED THAT IN THE LAST MANY YEARS IN THE CASE BEFORE US ALSO NO TAX WAS HELD TO BE DEDUCTIBLE, THEREFORE, A SSESSEE AND DEPARTMENT PROCEEDED ON THE FOOTING THAT NO TAX WAS DEDUCTIBLE . HOWEVER, ON QUERY BY THE BENCH LD. COUNSEL OF THE ASSESSEE ADMITTED THAT IN A.Y 2006-07 DISALLOWANCE U/S.40[A][IA] WAS MADE FOR THE FIRST T IME BUT THAT YEAR WAS NOT AVAILABLE BY THE TIME ASSESSMENT FOR A.Y 2007-08 WA S COMPLETED. HOWEVER, THIS DEFENSE IS NOT AVAILABLE IN A.Y 2008-09 BECAUS E BY THAT TIME REVENUE HAS ALREADY INVOKED THE PROVISIONS OF SEC.40[A][IA] AND THIS FACT WAS KNOWN TO THE ASSESSEE. THEREFORE, IN OUR OPINION, IN VIEW OF PAR A-31 OF THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF KOTAK SECU RITIES LTD., PROVISIONS OF SEC.40[A]IA] ARE NOT APPLICABLE FOR A.Y 2007-08 WHE REAS THE SAME ARE APPLICABLE IN A.Y 2008-09. CIT V. KOTAK SECURITIES LTD. VIDE ITA NO.3111/M/2009, RELIED. 4. IN VIEW OF THE OBSERVATIONS MADE BY THE LEARNED CO-ORDINATE BENCH OF THIS TRIBUNAL, WE REMAND BACK THIS CASE TO THE FILE OF T HE AO TO VERIFY WHETHER THE RETURN ITA NO. 9078/MUM/2010 AY : 2007-08 4 FOR THE AY 2007-08 WAS FILED BY THE ASSESSEE BEFORE THE COMPLETION OF ASSESSMENT PROCEEDINGS FOR THE AY 2006-07 AND WHETHER THE ASSE SSEE WAS IN BONA FIDE BELIEF IN VIEW OF ASSESSMENT MADE FOR THE EARLIER YEARS, THAT HE WAS NOT LIABLE TO DEDUCT TAX FOR TRANSACTION CHARGES U/S 194J AND IF FOUND SO, H E WILL ALLOW THE DEDUCTIONS FOR TRANSACTION CHARGES ACCORDINGLY. NEEDLESS TO SAY HE WILL PROVIDE PROPER OPPORTUNITY TO THE ASSESSEE TO PRESENT ITS CASE. THE FINDING OF LEANED CIT(A), IN RESPECT OF VSAT CHARGES AND LEASE LINE CHARGES IS HERE BY CONFIRMED . 5. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH MAY 2013. SD/- SD/- (R S SYAL) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DT : 15 TH MAY, 2013 SA COPY FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE C.I.T. CONCERNED MUMBAI 4. THE CIT (A) CONCERNED MUMBAI 5. THE DR, E - BENCH, ITAT, MUMBAI //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI