ITO 4(2)(1), MUMBAI V. PARAG PARIKH FINANCIAL ADVISORY SERVICES P. LTD, MUMBAI

ITA 925/MUM/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3765 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-05-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2007-2008
• Appeal Filed On: 01-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P MEENA
• Assessee Lawyers: KISHOR CHOUDHARY
• Keywords: Bonafide belief

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI !'# , $ % BEFORE SHRI VIJAY PAL RAO, JM AND SHRI N.K. BILLAI YA, AM ./I.T.A. NO. 925/MUM/2011 ( & & & & / ASSESSMENT YEAR : 2007-08 THE ACIT, CIR.4(2), AAYAKAR BHAVAN, MUMBAI-400 020 / VS. M/S. PARAG PARIKH FINANCIAL ADVISORY SERVICES PVT. LTD., 1 ST FLOOR, GREAT WESTERN BUILDING, FORT, MUMBAI-400 001 ' $ ./ () ./PAN/GIR NO. : AABCP 9117F ( '* /APPELLANT ) .. ( +,'* / RESPONDENT ) '* - / APPELLANT BY: SHRI O.P. MEENA +,'* . - / RESPONDENT BY : SHRI KISHOR CHOUDHARY . /0$ / DATE OF HEARING : 15.5.2013 12& . /0$ / DATE OF PRONOUNCEMENT : 15.5.2013 3 / O R D E R PER N.K. BILLAIYA, AM: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)-11, MUMBAI DT.11.11.2010 PERTAINING TO A.Y. 2007-08. 2. THE SUM AND SUBSTANCE OF THE GRIEVANCE OF THE RE VENUE IS THAT THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE MADE IN RESPECT OF VSAT CHARGES OF RS. 83,551/-, LEASELINE CHARGES OF RS. 1 ,13,011/- AND TRANSACTION CHARGES OF RS. 6,70,920/- U/S. 40(A)(IA ). 3. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PRO CEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS DEB ITED THE FOLLOWING EXPENSES TO THE P&L ACCOUNT. ITA NO. 925/M/2011 2 1) VSAT CHARGES - RS. 83,551/- 2) LEASE LINE CHARGES - RS. 1,13,011/- 3) TRANSACTION CHARGES - RS. 6,70,920/- 4. THE AO WAS OF THE FIRM BELIEF THAT ALL THESE CHA RGES ARE IN THE NATURE OF TECHNICAL SERVICES THEREFORE THE ASSESSEE OUGHT TO HAVE DEDUCT TAX AT SOURCE. ACCORDINGLY THE ASSESSEE WAS ASKED TO EXPLAIN WHY NO TAX HAS BEEN DEDUCTED AT SOURCE AND WHY THE ABOVE EXPE NSES SHOULD NOT BE DISALLOWED U/S. 40A(IA) OF THE ACT. ON RECEIVING N O EXPLANATION FROM THE ASSESSEE, THE AO WAS OF THE FIRM BELIEF THAT THESE PAYMENTS COME WITHIN THE PURVIEW OF TECHNICAL SERVICES AND TDS OUGHT TO HAVE BEEN MADE AND ACCORDINGLY DISALLOWED THESE CHARGES U/S. 40A(IA) O F THE ACT. 5. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. C IT(A). IT WAS CLAIMED BEFORE THE LD. CIT(A) THAT THE ISSUE IS COV ERED BY THE DECISION OF THE TRIBUNAL IN THE CASE OF KOTAK SECURITIES VS ACI T IN ITA NO. 1955/M/08 AND THE DECISION IN THE CASE OF DCIT VS A NGEL BROKING LTD 35 SOT (MUM). AFTER CONSIDERING THE DECISIONS RELI ED UPON BY THE ASSESSEE, THE LD. CIT(A) WAS CONVINCED THAT THE ISS UE IS COVERED IN FAVOUR OF THE ASSESSEE AND ACCORDINGLY DIRECTED THE AO T O DELETE THE ADDITIONS MADE IN RESPECT OF THESE THREE CHARGES. 6. AGGRIEVED BY THIS FINDING OF THE LD. CIT(A), REV ENUE IS BEFORE US. 7. THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY SUP PORTED THE FINDINGS OF THE AO. 8. PER CONTRA, THE LD. COUNSEL FOR THE ASSESSEE REL IED UPON THE DECISION IN THE CASE OF ITO VS ANGEL CAPITAL & DEB IT MARKET LTD AND THE DECISION OF KOTAK SECURITIES LTD. ITA NO. 925/M/2011 3 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE ORDERS OF THE LOWER AUTHORITIES. IT IS NOW WELL SETTLED T HAT NO TDS LIABILITY IS ATTRACTED SO FAR AS VSAT CHARGES, LEASELINE CHARGES AND OTHER CHARGES PAID TO BSE OR NSE. THIS ISSUE HAS BEEN SETTLED BY THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT OF BOMBAY IN ITA (L) 475 OF 2011 IN THE CASE OF ITO VS ANGEL CAPITAL & DEBIT MARKET LTD ., WHEREIN THREE QUESTIONS OF LAW WERE RAISED BY THE REVENUE IN THAT APPEAL. HOWEVER, WE ARE CONCERNED WITH ONLY ISSUES RAISED IN QUESTION N O. 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.? 8. 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. ITA NO. 925/M/2011 4 9. FACTS BEING IDENTICAL, RESPECTFULLY FOLLOWING TH E DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT, WE DIRECT THE AO TO DELE TE THE ADDITIONS MADE ON ACCOUNT OF VSAT, LEASELINE AND NSE CHARGES. 10. SO FAR AS TRANSACTION CHARGES OF RS. 6,70,920/- ARE CONCERNED, HONBLE HIGH COURT OF BOMBAY IN THE CASE OF KOTAK SECURITIE S LTD 340 ITR 333 HAS HELD THAT SINCE BOTH PARTIES (ASSESSEE AND REVENU E) HAD PROCEEDED ON THE FOOTING THAT TAX WAS NOT DEDUCTIBLE FOR THE LAST S EVERAL YEARS AND THEREFORE IN THE FIRST YEAR WHEN THE PROVISIONS WERE INVOKED BY THE DEPARTMENT, ADDITION COULD NOT BE SUSTAINED. WE FIND THAT THE HONBLE JURISDICTIONAL HIGH COURT DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE ON THE GROUND THAT IT WAS UNDER BONAFIDE BELIEF FOR NEARLY A DECADE THAT TAX WAS NO T DEDUCTIBLE AT SOURCE ON PAYMENT OF TRANSACTION CHARGES. WE FIND THAT IN TH E PRESENT CASE ALSO THE ASSESSEE HAS NOT DEDUCTED TAX AT SOURCE ON TRANSACT ION CHARGES BASED ON THE FINDING OF THE TRIBUNAL IN THE IMMEDIATELY PRECEDIN G ASSESSMENT YEAR. CONSIDERING PECULIAR CIRCUMSTANCES OF THE CASE, WE HAVE NO HESITATION TO HOLD THAT NO ADDITION ON ACCOUNT OF NON DEDUCTION OF TAX AT SOURCE ON TRANSACTION CHARGES OF RS. 6,70,920/- CAN BE SUSTAINED. WE ACCORDINGLY CONFIRM THE FINDINGS OF THE LD. CIT(A). 11. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. 4 /5 ( . 6 $4( . (/ 7' ORDER PRONOUNCED IN THE OPEN COURT ON 15.5.2013 3 . 2& $ 6 85 15.5.2013 2 . 9 SD/- SD/- (VIJAY PAL RAO ) ( N.K. BILLAIYA ) /JUDICIAL MEMBER $ / ACCOUNTANT MEMBER MUMBAI; 8 DATED 15/05 /2013 . . ./ RJ , SR. PS ITA NO. 925/M/2011 5 3 3 3 3 . .. . +/ +/ +/ +/ : &/ : &/ : &/ : &/ / COPY OF THE ORDER FORWARDED TO : 1. '* / THE APPELLANT 2. +,'* / THE RESPONDENT. 3. ; ( ) / THE CIT(A)- 4. ; / CIT 5. <9 +/ , , / DR, ITAT, MUMBAI 6. 9= > / GUARD FILE. 3 3 3 3 / BY ORDER, , / +/ //TRUE COPY// ? ?? ? / 7 7 7 7 ( ( ( ( (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI