ITO 4(1)(2), MUMBAI V. INDSEC SECURITIES AND FINANCE LTD, MUMBAI

ITA 916/MUM/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3711 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-05-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Assessment Year: 2007-2008
• Appeal Filed On: 01-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D K SINHA
• Keywords: Bonafide belief

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUMBAI . . ,, !'#$ , % & BEFORE SHRI B.R. MITTAL JM AND SHRI N.K. BILLAIYA, AM ./I.T.A. NO.916/MUM/2011 ( ' ' ' ' / ASSESSMENT YEAR : 2007-08 THE ITO 4(1)(2), AAYAKAR BHAVAN, MUMBAI-400 020 / VS. M/S. INDSEC SECURITIES & FINANCE LTD., 116 FREE PRESS HOUSE, 215, FREE PRESS JOURNAL MARG, NARIMAN POINT, MUMBAI-400 021 ( % ./ )* ./PAN/GIR NO. : AAACI 1958G ( (+ /APPELLANT ) .. ( ,-(+ / RESPONDENT ) (+ . / APPELLANT BY: SHRI D.K. SINHA ,-(+ / . / RESPONDENT BY : SHRI VIJAY MEHTA / 01% / DATE OF HEARING : 08.05.2013 23' / 01% / DATE OF PRONOUNCEMENT : 08.05.2013 4 / O R D E R PER N.K. BILLAIYA, AM: THIS APPEAL BY THE REVENUE IS PREFERRED AGAINST THE ORDER OF THE LD. CIT(A)-10, MUMBAI DT.2.11.2010 PERTAINING TO A.Y. 2007-08. 2. THE SUM AND SUBSTANCE OF THE GRIEVANCE OF THE RE VENUE IS THAT THE ASSESSEE OUGHT TO HAVE DEDUCTED TAX AT SOURCE ON PA YMENT OF VSAT CHARGES RS. 2,19,459/-, LEASLINE CHARGES RS. 4,88,7 18/- AND TRANSACTION CHARGES RS. 14,48,469/- PAID TO STOCK EXCHANGE AND THE LD. CIT(A) OUGHT NOT TO HAVE DELETED THE ADDITIONS MADE BY THE AO INVOKING THE PROVISIONS OF SEC. 40A(IA) OF THE ACT. ITA NO. 916/M/2011 2 3. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PRO CEEDINGS, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS PA ID RS. 14,48,469/- ON ACCOUNT OF VSAT, LEASELINE CHARGES AND TRANSACTION CHARGES PAYABLE TO STOCK EXCHANGE ON ACCOUNT OF SERVICES PROVIDED BY IT WITH REGARD TO TRANSACTIONS IN SECURITIES THROUGH THE EXCHANGE. TH E AO WAS OF THE FIRM BELIEF THAT THE ASSESSEE OUGHT TO HAVE DEDUCTED TAX AT SOURCE FAILING WHICH PROVISIONS OF SEC. 40A(IA) ARE CLEARLY APPLICABLE. THE AO SOUGHT EXPLANATION FROM THE ASSESSEE. HOWEVER, THE SUBMIS SIONS OF THE ASSESSEE WERE NOT ACCEPTED BY THE AO WHO WAS OF THE FIRM BEL IEF THAT PROVISIONS OF SEC. 194J CLEARLY APPLIED AND SINCE NO TAX HAS B EEN DEDUCTED AT SOURCE, THE CHARGES PAID TO THE STOCK EXCHANGE WERE DISALLO WED U/S. 40A(IA) OF THE ACT. 4. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. C IT(A). IT WAS CONTENDED BEFORE THE LD. CIT(A) THAT SO FAR AS PAYM ENT ON ACCOUNT OF VSAT CHARGES AND LEASELINE CHARGES ARE CONCERNED, T HE ISSUE IS COVERED BY THE DECISION IN THE CASE OF DCIT VS ANGEL BROKIN G LTD. (2010) 35 SOT 457 (MUM) AND SO FAR AS TRANSACTION CHARGES ARE CONCERNED, THE ASSESSEE RELIED IN THE CASE OF KOTAK SECURITIES VS ACIT 25 SOT 440 (MUM). THE LD. CIT(A) CONSIDERED THE JUDICIAL DECI SIONS RELIED UPON BY THE ASSESSEE AND WAS CONVINCED THAT NO LIABILITY F OR TDS IS ATTRACTED ON THESE PAYMENTS AND THEREFORE NO DISALLOWANCE U/S. 4 0A(IA) OF THE ACT COULD BE MADE AND ACCORDINGLY ALLOWED THE APPEAL OF THE ASSESSEE. 5. BEFORE US, THE LD. DEPARTMENTAL REPRESENTATIVE R ELIED UPON THE FINDINGS OF THE AO. THE LD. COUNSEL FOR THE ASSESS EE RELIED UPON THE DECISIONS OF ANGEL BROKING LTD. (SUPRA) AND KOTAK S ECURITIES (SUPRA). ITA NO. 916/M/2011 3 6. WE HAVE CONSIDERED THE SUBMISSIONS AND PERUSED T HE ORDERS OF THE LOWER AUTHORITIES AND HAVE ALSO THE BENEFIT OF GOIN G THROUGH THE JUDICIAL DECISIONS. WE FIND THAT THE HONBLE JURISDICTIONA L HIGH COURT OF BOMBAY IN ITA(L) 475 OF 2011 IN THE CASE OF ITO VS ANGEL CAPITAL & DEBIT MARKET LTD HAD THE OCCASION TO ANSWER THREE Q UESTIONS OF LAW RAISED BY THE REVENUE IN THAT APPEAL. HOWEVER, WE ARE CONCERNED WITH ONLY ISSUES RAISED IN QUESTION NO. 1 & 2 WHICH ARE AS UNDER: (A) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE HONBLE TRIBUNAL WAS JUSTIFIED IN HOLDING THAT VSAT AND LEASE LINE CHARGES PAID TO THE STOCK EXCHA NGE BY THE ASSESSEE COMPANY WERE ALLOWABLE AS A DEDUCTION FROM TAXABLE INCOME EVEN THOUGH THE ASSESSEE COMPANY HAD FAILED TO DEDUCT TDS THEREON? (B) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW THE HONBLE TRIBUNAL WAS JUSTIFIED IN HOLDING THAT VSAT AND LEASELINE CHARGES PAID TO THE STOCK EXCHAN GE BY THE ASSESSEE COMPANY WERE NOT PAID IN CONSIDERATION OF TECHNICAL SERVICES RENDERED BY THE STOCK EXCHANGE WITHIN THE MEANING OF SECTION 194J R.W. EXPLANATION 2 TO SECTION 9(1)(VII ) OF THE INCOME TAX ACT.? 7. WE FIND THAT THE HONBLE HIGH COURT ANSWERED QUE STION NO. 1 &2 AS FOLLOWS: AS REGARDS FIRST TWO QUESTIONS ARE CONCERNED, THE FINDINGS OF FACT RECORDED BY THE ITAT IS THAT VSAT AND LEASELIN E CHARGES PAID BY THE ASSESSEE TO STOCK EXCHANGE WERE MERELY REIMBURSEMENT OF THE CHARGES PAID/PAYABLE BY THE ST OCK EXCHANGE TO THE DEPARTMENT OF TELECOMMUNICATION. S INCE THE VSAT AND LEASELINE CHARGES PAID BY THE ASSESSEE DO NOT HAVE ANY ELEMENT OF INCOME, DEDUCTING TAX WHILE MAKING S UCH PAYMENTS DO NOT ARISE. HENCE QUESTION NOS. (A) AND (B) CANNOT BE ENTERTAINED. 8. FACTS BEING IDENTICAL, RESPECTFULLY FOLLOWING TH E DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT, WE CONFIRM THE FINDINGS OF THE LD. CIT(A) ON ACCOUNT OF VSAT AND LEASELINE CHARGES. ITA NO. 916/M/2011 4 9. SO FAR AS TRANSACTION CHARGES ARE CONCERNED, HON BLE JRISDICTIONAL HIGH COURT OF BOMBAY IN THE CASE OF KOTAK SECURITIES 340 ITR 333 (SINCE BOTH PARTIES (ASSESSEE AND REVENUE) HAD PROCEEDED ON THE FOOTING THAT TAX WAS NOT DEDUCTIBE FOR THE LAST SEVERAL YEARS AND THEREF ORE IN THE FIRST YEAR WHEN THE PROVISIONS WERE INVOKED BY THE DEPARTMENT, ADD ITION COULD NOT BE SUSTAINED. THE PROVISION BECOMES APPLICABLE FROM A .Y 2005-06, HOWEVER IN ASSESSEES OWN CASE TILL A.Y. 2005-06 NO ADDITIONS WERE MADE. THE ADDITIONS WERE MADE FOR THE FIRST TIME FOR A.Y. 2006-07. THE ADDITIONS WERE DELETED BY THE LD. CIT(A) AND THE ORDER OF THE LD. CIT(A) WAS CONFIRMED BY THE TRIBUNAL IN ITA NO. 4675/M/09 DT. 30.6.2010. HOWEVER, THE R ETURN FOR THE A.Y. 2007- 08 WAS ALREADY FILED ON 4.10.2007 AND SINCE NO LIAB ILITY FOR TDS HAS BEEN FIXED SO FAR, THE ASSESSEE WAS UNDER BONAFIDE BELIE F THAT IT IS NOT LIABLE TO TAX ON TRANSACTION CHARGES. IT IS SEEN THAT FROM A.Y. 2 008-09, THE ASSESSEE HAS STARTED DEDUCTING TAX ON TRANSACTION CHARGES PAID T O STOCK EXCHANGE. SINCE THE ASSESSEE WAS UNDER BONAFIDE BELIEF ON THE DATE OF THE FILING OF THE RETURN FOR THE YEAR UNDER CONSIDERATION THAT THERE IS NO L IABILITY OF TDS ON TRANSACTION CHARGES. WE DO NOT FIND ANY REASON TO CONFIRM THE DISALLOWANCE MADE BY THE AO ACCEPTING THE BONAFIDE ON THE PECULIAR FACTS OF THE CASE. FINDINGS OF THE LD. CIT(A) ARE CONFIRMED. 10. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. 5 06 ) / 7 %5) / )0 8# ORDER PRONOUNCED IN THE OPEN COURT ON 8.5.2013 . 4 / 3' % 7 96 8.5.2013 3 / : SD/- SD/- (B.R. MITTAL ) (N. K. BILLAIYA ) /JUDICIAL MEMBER % / ACCOUNTANT MEMBER MUMBAI; 9 DATED 8.5.2013 . . ./ RJ , SR. PS ITA NO. 916/M/2011 5 4 4 4 4 / // / ,0! ,0! ,0! ,0! ;!'0 ;!'0 ;!'0 ;!'0 / COPY OF THE ORDER FORWARDED TO : 1. (+ / THE APPELLANT 2. ,-(+ / THE RESPONDENT. 3. < ( ) / THE CIT(A)- 4. < / CIT 5. !=: ,0 , , / DR, ITAT, MUMBAI 6. :> ? / GUARD FILE. 4 4 4 4 / BY ORDER, -!0 ,0 //TRUE COPY// @ @@ @ / 8 8 8 8 ) ) ) ) (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI