M/s. VSE Stock Services Ltd., Baroda V. Asstt. Commissioner of Income Tax, Baroda

MA 158/AHD/2014

• Counselvise Citation: [2017] 124 COUNSELVISE.COM (IT) 5261 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 5 month(s) 23 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 15-03-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 22-09-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ROOP CHAND
• Assessee Lawyers: M J SHAH

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH BEFORE: SHR I S. S. GODARA , JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER M/S. VSE STOCK SERVICES LTD. BARODA PAN: AABCV4258K (APPELLANT) VS THE ACIT, CIRCLE - 4, BARDODA (RESPONDENT) REVENUE BY : S H RI ROOP CHAND , D . R. ASSESSEE BY: SHR I M.J. SHAH , A.R. DATE OF HEARING : 20 - 01 - 2 017 DATE OF PRONOUNCEMENT : 15 - 03 - 2 017 / ORDER P ER : AMARJIT SINGH, ACCOUNTANT MEMBER : - THIS MISCELLANEOUS APPLICATION IS FILED BY T HE ASS ESSEE AGAINST THE ORDER DATED 04 - 10 - 2013 IN RESPECT OF ITA NO. 22/AHD/2013 FOR A.Y. 2009 - 10 AS FOLLOWS: - M.A. NO. 158/AHD/2014 ( I T A NO . 22 / A HD/20 13 ) A SSESSMENT YEAR 200 9 - 10 M.A. NO. 158/AHD/2014 (IN I.T.A NO.22 / AHD/2013 ) A.Y. 2009 - 10 PAGE NO M/S. VSE STOCK SERVICES VS. ACIT 2 2. THE DEPARTMENT WAS IN APPEAL BEFORE THE HON'BLE INCOME TAX APPELLATE TRIBUNAL BY TAKING THE UNDER MENTIONED GROUNDS OF APPEAL. FOR SAKE OF CONVENIENCE, THEY ARE BEING REPRODUCED HEREIN BELOW FOR READY REFERENCE: '1 (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS.72,86,348/ - U/S.40(A)(IA) OF THE ACT, BEING TRANSACTION CHARGES PA ID TO BSE & NSE - WITHOUT APPRECIATING THE FACT THAT THE TRANSACTION CHARGES PAID BY THE ASSESSEE TO THE STOCK EXCHANGE CONSTITUTE FEES FOR TECHNICAL SERVICES U/S.194J READ WITH EXPLANATION 2 TO CLAUSE (VII) OF SECTION 9(1) OF THE ACT, THEREFORE, IT WAS OBL IGATOR)' ON THE PART OF THE ASSESSEE TO DEDUCT TAX AT SOURCE AT THE TIME OF MAKING PAYMENT TO THE STOCK EXCHANGE. (II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THE RATIO LAID DOWN IN THE DECISION OF T HE HON'BLE BOMBAY HIGH COURT IN THE CASE OF KOTAK SECURITIES LTD. [2012] 20 TAXMANN.COM 846 (BOM) WHEREIN IT WAS HELD THAT THE TRANSACTION CHARGES PAID BY THE ASSESSEE TO THE STOCK EXCHANGE CONSTITUTE 'FEES FOR T ECHNICAL SERVICES' COVERED U/S.1 94J OF THE A CT AND, THEREFORE, THE ASSESSEE VAS LIABLE TO DEDUCT TAX AT SOURCE WHILE CREDITING THE TRANSACTION CHARGES TO THE ACCOUNT OF THE STOCK EXCHANGE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) OUGHT TO HAVE, UPHELD THE ORDER OF T HE ASSESSING OFFICER. 3. THE APPLICANT CRAVES LEAVE TO ADD, AMEND OR ALTER THE ABOVE GROUNDS AS MAY BE DEEMED NECESSARY. RELIEF CLAIMED IN APPEAL IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE CIT(A) ON THE ISSUES RAISED IN THE AFORESAID GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. ' 3. AS CAN BE NOTICED FROM THE GROUNDS TAKEN BY THE DEPARTMENT REPRODUCED HEREIN ABOVE, THERE IS NO GROUND CHALLENGING THE APPLICATION OF SPECIAL BENCH DECISION OF THE TRIBUNAL IN THE CASE OF M.A. NO. 158/AHD/2014 (IN I.T.A NO.22 / AHD/2013 ) A.Y. 2009 - 10 PAGE NO M/S. VSE STOCK SERVICES VS. ACIT 3 MERILYN SHIPPING & TRANSPORTS VS. ACIT - 16 ITR (TRIB) 1 (VISHAKAHA)(SB) TAKEN BY THE DEPARTMENT. AS THE DEPARTMENT HAS NOT CHALLENGED THE SAID ISSUE BY TAKING ANY GROUND IN ITS APPEAL MEMO, A MISTAKE APPARENT ON RECORD HAS CREPT INTO THE ORDER OF THE HON'BLE TRI BUNAL, WHEREIN THE HON'BLE TRIBUNAL DECIDES THIS ISSUE AS IF A GROUND HAS BEEN TAKEN WHICH IS APPARENT FROM THE UNDER MENTIONED PARA 9 AND 10 OF THE HON'BLE ITAT ORDER. BOTH THESE PARAS ARE REPRODUCED HEREIN BELOW FOR READY REFERENCE: '9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FUND THAT THE HON. GUJARAT HIGH COURT IN THE CASE OF CIT VS. SIKANDER KHAN TUNVAR TAX APPEAL NO. 905 AND ORS OF 2012 ORDER DATED 2.05.2013 HAS HELD AS UNDER: - '38. IN THE RESULT, WE ARE OF THE OPINI ON THAT SECTION 40(A) (ID) WOULD COVER NOT ONLY TO THE AMOUNTS WHICH ARE PAYABLE AS ON 31 ST MARCH OF A PARTICULAR YEAR BUT ALSO WHICH ARE PAYABLE AT ANY TIME DURING THE YEAR OF COURSE AS LONG AS THE OTHER REQUIREMENTS OF THE SAID PROVISION EXIST. IN THAT C ONTEXT IN OUR OPINION THE DECISION OF SPECIAL BENCH OF TRIBUNAL IN THE CASE OF MERILYN SHIPPING AND TRANSPORT VS. \ ACIT (SUPRA), DOES NOT LAY DOWN CORRECT LOW. ' 10. CIT(A) WHILE GRANTING RELIEF HAD RELIED ON THE DECISION OF MERILYN SHIPPING BUT THE HON . GUJ. HIGH COURT HAS HELD THAT THE DECISION OF TRIBUNAL IN CASE OF MERILYN SHIPPING (SUPRA) DOES NOT LAY DOWN CORRECT LAW. IN VIEW OF THE AFORESAID FACTS, WE FIND THAT THE ASSESSING OFFICER, WAS JUSTIFIED A MAKING THE DISALLOWANCE AND WE THEREFORE UPHOLD THE ORDER OF ASSESSING OFFICER AND THUS THIS GROUND OF REVENUE IS ALLOWED. ' 4. NOW, IT CAN CLEARLY BE NOTICED THAT THE ONLY ISSUE DECIDED BY THE HON'BLE INCOME TAX APPELLATE TRIBUNAL IS THE ISSUE, WHICH IS COVERED BY THE DECISION OF HON'BLE GUJARAT HIG H COURT IN THE CASE OF SIKANDER KHAN TUNVER IN TAX APPEAL NO.905 OF 2012 DATED 02.05.2013, WHERE THE CONTROVERSY WAS WHETHER THE WORD 'PAYABLE' WOULD INCLUDE AMOUNTS PAYABLE AT ANY TIME DURING THE ACCOUNTING YEAR. (NOW REPORTED IN (2013) 357ITR31 (GUJ)). 5. THE GROUNDS OF APPEAL TAKEN BY THE DEPARTMENT ARE PERTAINING TO LIABILITY OF THE APPLICANT TO DEDUCT TDS U/S.194J ON PAYMENTS MADE TO BSE AND NSE AND WHETHER THE RATIO LAID DOWN IN M.A. NO. 158/AHD/2014 (IN I.T.A NO.22 / AHD/2013 ) A.Y. 2009 - 10 PAGE NO M/S. VSE STOCK SERVICES VS. ACIT 4 THE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF KOTAK SECURITI ES LTD. (2012) 20 \ TAXMANN.COM 846 (BOM) IS APPLICABLE AND WHETHER FOLLOWING THAT THE APPLICANT WAS LIABLE TO DEDUCT TAX AT SOURCE WHILE CREDITING THE TRANSACTION CHARGES TO THE ACCOUNT OF STOCK EXCHANGE OR NOT. 6. IT IS RESPECTFULLY SUBMITTED THAT THE APPEAL OF THE DEPARTMENT OUGHT TO HAVE BEEN DISMISSED AS THERE WAS NO GROUND PERTAINING TO CHALLENGE OF APPLICATION OF THE DECISION OF MERILYN SHIPPING & TRANSPORTS VS. ACIT (SUPRA) IN ITS MEMO OF APPEAL. THE TRIBUNAL DECIDED THE APPEAL AS IF THIS GROUND WAS TAKEN, WHICH IS A MISTAKE APPARENT FROM RECORD, AND HENCE, IT IS HUMBLY PRAYED THAT THE APPEAL MAY KINDLY BE RECALLED AND BE REFIXED TO THE LIMITED EXTENT OF DECIDING THE ISSUE WHICH WERE CONTESTED BY THE DEPARTMENT BY TAKING SPECIFIC GROUND IN ITS MEM O OF APPEAL. 7. IN THE PREMISES AFORESAID, THE APPLICANT MOST HUMBLY PRAYS THAT THIS MISCELLANEOUS APPLICATION BE CONSIDER FAVOURABLY AND THE PRAYER OF THE APPLICANT MAY BE GRANTED IN THE INTEREST OF JUSTICE. 2. DURING THE COURSE OF APPELLATE PROCEEDING S BEFORE US, THE LEARNED COUNSEL HAS CONTENDED THAT HON BLE SUPREME COURT IN THE CASE OF CIT VS. KOTAK SECURITY LTD. (2016) HAS OVER - RULED THE VIEW TAKEN BY DECISION OF HON BLE BOMBAY HIGH COURT THAT THE TRANSACTION CHARGES PAID TO BOMBAY STOCK EXCHANGE BY ITS MEMBER WERE FOR TECHNICAL SERVICES RENDERED. HE FURTHER CONTENDED THAT HON BLE APEX COURT HELD THAT SUCH CHARGES MADE ARE FOR THE FACILITIES PROVIDED BY THE STOCK EXCHANGE TO ITS MEMBERS FOR WHICH NO TDS IS DEDUCTIBLE U/S. 194J O F THE ACT. ON THE O THER HAND, L D. D. R. COULD NOT REBUT THE ARGUMENT. 3. WE HAVE HEARD BOTH THE SIDES AND GONE THROUGH THE MATERIALS ON RECORD AND FIND THAT THE HON BLE SUPREME COURT VIDE ABOVE CITED JUDICIAL PRONOUNCEMENT HAS OVER - RULED THE DECISION OF HON BLE M.A. NO. 158/AHD/2014 (IN I.T.A NO.22 / AHD/2013 ) A.Y. 2009 - 10 PAGE NO M/S. VSE STOCK SERVICES VS. ACIT 5 BOMBAY HIGH COURT IN THE CASE OF KOTAK SECURITIES LTD. (SUPRA) STATING THAT NO TDS TO BE DEDUCTED ON PAYMENT MADE TOWARDS TRANSACTION CHARGES TO THE STOCK EXCHANGE BY I T S MEMBERS. THE HON BLE APEX COURT HELD THAT SUCH SERVICES WOULD UNDOUBTEDLY BE APPROPRIATE TO BE TERMED AS FACILITIES PROVIDED BY THE STOCK EXCHANGE ON PAYMENT AND DOES NOT AMOUNT TO TECHNICAL SERVICES PROVIDED BY THE STOCK EXCHANGE. IN THIS CONNECTION, RELEVANT PART OF THE DECISION OF THE HON BLE SUPREME COURT AS STATED ABOVE IS REPRODUCED AS UNDER : - 8. A READING OF THE VERY ELABORATE ORDER OF THE ASSESSING OFFICER CONTAINING A LENGTHY DISCOURSE ON THE SERVICES MADE AVAILABLE BY THE STOCK EXCHANGE WOULD GO TO SHOW THAT APART FROM FACILITIES OF A FACELESS SCREEN BASED TRANSACTION, A CONSTANT UPGRADA TION OF THE SERVICES MADE AVAILABLE AND SURVEILLANCE OF THE ESSENTIAL PARAMETERS CONNECTED WITH THE TRADE INCLUDING THOSE OF A PARTICULAR/ SINGLE TRANSACTION THAT WOULD LEAD CREDENCE TO ITS AUTHENTICITY IS PROVIDED FOR BY THE STOCK EXCHANGE. ALL SUCH SERVI CES, FULLY AUTOMATED, ARE AVAILABLE TO ALL MEMBERS OF THE STOCK EXCHANGE IN RESPECT OF EVERY TRANSACTION THAT IS ENTERED INTO. THERE IS NOTHING SPECIAL, EXCLUSIVE OR CUSTOMISED SERVICE THAT IS RENDERED BY THE STOCK EXCHANGE. 'TECHNICAL SERVICES' LIKE 'MANA GERIAL AND CONSULTANCY SERVICE' WOULD DENOTE SEEKING OF SERVICES TO CATER TO THE SPECIAL NEEDS OF THE CONSUMER/USER AS MAY BE FELT NECESSARY AND THE MAKING OF THE SAME AVAILABLE BY THE SERVICE PROVIDER. IT IS THE ABOVE FEATURE THAT WOULD DISTINGUISH/IDENTI FY A SERVICE PROVIDED FROM A FACILITY OFFERED. WHILE THE FORMER IS SPECIAL AND EXCLUSIVE TO THE SEEKER OF THE SERVICE, THE LATTER, EVEN IF TERMED AS A SERVICE, IS AVAILABLE TO ALL AND WOULD THEREFORE STAND OUT IN DISTINCTION TO THE FORMER. THE SERVICE PROV IDED BY THE STOCK EXCHANGE FOR WHICH TRANSACTION CHARGES ARE PAID FAILS TO SATISFY THE AFORESAID TEST OF SPECIALIZED, EXCLUSIVE AND INDIVIDUAL REQUIREMENT OF THE USER OR CONSUMER WHO MAY APPROACH THE SERVICE PROVIDER FOR SUCH ASSISTANCE/SERVICE. IT IS ONLY SERVICE OF THE ABOVE KIND THAT, ACCORDING TO US, SHOULD COME WITHIN THE AMBIT OF THE EXPRESSION 'TECHNICAL SERVICES' APPEARING IN EXPLANATION 2 OF SECTION 9(1)(VII) OF THE ACT. IN THE ABSENCE OF THE ABOVE DISTINGUISHING FEATURE, SERVICE, THOUGH RENDERED, WOULD BE MERE IN THE NATURE OF A FACILITY OFFERED OR M.A. NO. 158/AHD/2014 (IN I.T.A NO.22 / AHD/2013 ) A.Y. 2009 - 10 PAGE NO M/S. VSE STOCK SERVICES VS. ACIT 6 AVAILABLE WHICH WOULD NOT BE COVERED BY THE AFORESAID PROVISION OF THE ACT. 9. THERE IS YET ANOTHER ASPECT OF THE MATTER WHICH, IN OUR CONSIDERED VIEW, WOULD REQUIRE A SPECIFIC NOTICE. THE SERVICE MADE AVAILABLE BY THE BOMBAY STOCK EXCHANGE [BSE ONLINE TRADING (BOLT) SYSTEM] FOR WHICH THE CHARGES IN QUESTION HAD BEEN PAID BY THE APPELLANT - ASSESSEE ARE COMMON SERVICES THAT EVERY MEMBER OF THE STOCK EXCHANGE IS NECESSARILY REQUIRED TO AVAIL OF TO CARRY O UT TRADING IN SECURITIES IN THE STOCK EXCHANGE. THE VIEW TAKEN BY THE HIGH COURT THAT A MEMBER OF THE STOCK EXCHANGE HAS AN OPTION OF TRADING THROUGH AN ALTERNATIVE MODE IS NOT CORRECT. A MEMBER WHO WANTS TO CONDUCT HIS DAILY BUSINESS IN THE STOCK EXCHANGE HAS NO OPTION BUT TO AVAIL OF SUCH SERVICES,. EACH AND EVERY TRANSACTION BY A MEMBER INVOLVES THE USE OF THE SERVICES PROVIDED BY THE STOCK EXCHANGE FOR WHICH A MEMBER IS COMPULSORILY REQUIRED TO PAY AN ADDITIONAL CHARGE (BASED ON THE TRANSACTION VALUE) O VER AND ABOVE THE CHARGES FOR THE MEMBERSHIP IN THE STOCK EXCHANGE. THE ABOVE FEATURES OF THE SERVICES PROVIDED BY THE STOCK EXCHANGE WOULD MAKE THE SAME A KIND OF A FACILITY PROVIDED BY THE STOCK EXCHANGE FOR TRANSACTING BUSINESS RATHER THAN A TECHNICAL S ERVICE PROVIDED TO ONE OR A SECTION OF THE MEMBERS OF THE STOCK EXCHANGE TO DEAL WITH SPECIAL SITUATIONS FACED BY SUCH A MEMBER(S) OR THE SPECIAL NEEDS OF SUCH MEMBER(S) IN THE CONDUCT OF BUSINESS IN THE STOCK EXCHANGE. IN OTHER WORDS, THERE IS NO EXCLUSIV ITY TO THE SERVICES RENDERED BY THE STOCK EXCHANGE AND EACH AND EVERY MEMBER HAS TO NECESSARILY AVAIL OF SUCH SERVICES IN THE NORMAL COURSE OF TRADING IN SECURITIES IN THE STOCK EXCHANGE. SUCH SERVICES, THEREFORE, WOULD UNDOUBTEDLY BE APPROPRIATE TO BE TER MED AS FACILITIES PROVIDED BY THE STOCK EXCHANGE ON PAYMENT AND DOES NOT AMOUNT TO 'TECHNICAL SERVICES' PROVIDED BY THE STOCK EXCHANGE, NOT BEING SERVICES SPECIFICALLY SOUGHT FOR BY THE USER OR THE CONSUMER. IT IS THE AFORESAID LATTER FEATURE OF A SERVICE RENDERED WHICH IS THE ESSENTIAL HALLMARK OF THE EXPRESSION 'TECHNICAL SERVICES' AS APPEARING IN EXPLANATION 2 TO SECTION 9(1)(VII) OF THE ACT. 10. FOR THE AFORESAID REASONS, WE HOLD THAT THE VIEW TAKEN BY THE BOMBAY HIGH COURT THAT THE TRANSACTION CHARGES PAID TO THE BOMBAY STOCK EXCHANGE BY ITS MEMBERS ARE FOR 'TECHNICAL SERVICES' RENDERED IS NOT AN APPROPRIATE VIEW. SUCH CHARGES, REALLY, ARE IN THE NATURE OF PAYMENTS MADE FOR FACILITIES PROVIDED BY THE STOCK EXCHANGE. NO M.A. NO. 158/AHD/2014 (IN I.T.A NO.22 / AHD/2013 ) A.Y. 2009 - 10 PAGE NO M/S. VSE STOCK SERVICES VS. ACIT 7 TDS ON SUCH PAYMENTS WOULD, THERE FORE, BE DEDUCTIBLE UNDER SECTION 194J OF THE ACT. 11. IN VIEW OF ABOVE CONCLUSIONS, IT WILL NOT BE NECESSARY FOR US TO EXAMINE THE CORRECTNESS OF THE VIEW TAKEN BY THE BOMBAY HIGH COURT WITH REGARD TO THE ISSUE OF THE DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT. ALL THE APPEALS, THEREFORE, SHALL STAND DISPOSED IN THE LIGHT OF OUR VIEWS AND R OBSERVATIONS AS INDICATED ABOVE. THEREFORE, AFTER CONSIDERING THE ABOVE FACTS AND LEGAL FINDINGS BY VIRTUE OF THE DECISION OF HON BLE SUPREME COURT AS SUPRA , WE R ECALL OUR ORIG INAL ORDER DATED 04/10/2013 AND REGISTRY IS DIRECTED RE - FIX THE APPEAL FOR HEARING AFTER INTIMATING BOTH PARTIES. 4. IN THE RESULT, THE MISCELLANEOUS APPLICATION OF THE ASSESSEE IS ALLOWED UP TO THE ABOVE TERMS . SD/ - SD/ - ( S.S. GODARA ) ( AMARJIT SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 15 /0 3 /2017 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,