ASST CIT 4(2), V. PUNEET SECURITIES P. LTD,

MA 167/MUM/2012

• Counselvise Citation: [2012] 123 COUNSELVISE.COM (IT) 9419 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 30 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 12-10-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 13-03-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Bonafide belief

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI C BENCH MUMBAI BENCHES, MUMBAI BEFORE SHRI P M JAGTAP, AM & SHRI VIJAY PAL RAO, J M MISCELLANEOUS APPLICATION NO. 167/MUM/2012 ARISING OUT OF ITA NO. 5429/MUM/2010 (ASST YEAR 2006-07) THE ASST. COMMR OF INCOME TAX 4(2), MUMBAI VS M/S PUNEET SECURITIES P LTD 105/5 GROUND FLOOR BOMBAY SAMACHAR MARG, FORT MUMBAI 23 (APPLICANT) (RESPONDENT) PAN NO. AAACP231C ASSESSEE BY NONE REVENUE BY SH K G KUTTY DT.OF HEARING 12 TH OCT 2012 DT OF PRONOUNCEMENT 12 TH OCT 2012 PER VIJAY PAL RAO, JM THIS MISCELLANEOUS APPLICATION FILED BY THE REVENU E IS DIRECTED AGAINST THE ORDER DATED 5 TH OCT 2011 OF THIS TRIBUNAL WHEREBY THE ISSUE OF DIS ALLOWANCE MADE U/S 40(A)(IA) IN RESPECT OF V-SAT CHARGES PAID TO STOC K EXCHANGE WAS DECIDED AGAINST THE REVENUE BY FOLLOWING THE DECISION OF THE TRIBUN AL IN THE CASE OF KOTAK SECURITIES LTD REPORTED IN 25 SOT 440. 2 WE HAVE HEARD THE OLD DR AND CONSIDERED THE RELEV ANT MATERIAL ON RECORD . NOBODY HAS APPEARED ON BEHALF OF THE RESPONDENT ASS ESSEE AND THE NOTICE SENT THROUGH RPAD HAS RECEIVED BACK WITH THE POSTAL REMA RKS THAT THE ASSESSEE LEFT THE ADDRESS. WE FURTHER NOTE THAT EVEN AT THE TIME OF HEARING OF THE APPEAL ALSO NONE APPEARED ON BEHALF OF THE ASSESSEE. IN THESE CIRCU MSTANCES, WE PROPOSE TO HEAR AND DISPOSE OFF THIS MISCELLANEOUS APPLICATION EXPA RTE. MA 167/M/2012 PUNEET SECURITIES 2 3 THE LD DR HAS SUBMITTED THAT THE DECISION OF THIS TRIBUNAL IN THE CASE OF KOTAK SECURITIES LTD HAS BEEN REVERSED BY THE HONBLE JUR ISDICTIONAL HIGH COURT. THEREFORE, THERE IS A MISTAKE APPARENT IN THE ORDER OF THIS TR IBUNAL, WHICH REQUIRES TO BE RECTIFIED IN VIEW OF THE DECISION OF THE HONBLE JURISDICTION AL HIGH COURT IN THE CASE OF CIT VS KOTAK SECURITIES LTD REPORTED IN 340 ITR 333. 4 THE ISSUE OF DISALLOWANCE U/S 40(A)(IA) FOR NON D EDUCTION OF TDS IN RESPECT OF V-SAT PAID TO STOCK EXCHANGE HAS BEEN DECIDED BY T HIS TRIBUNAL WHILE PASSING THE IMPUGNED ORDER BY FOLLOWING THE ORDER IN THE CASE O F KOTAK SECURITIES LTD (SUPRA), WHICH HAS BEEN NOW REVERSED BY THE HONBLE JURISDIC TIONAL HIGH COURT BY HOLDING THAT THE TRANSACTION CHARGES PAID TO THE STOCK EXCH ANGE HAS DIRECT LINKAGE BETWEEN THE MANAGERIAL SERVICES RENDERED BY THE STO CK EXCHANGE AND THEREFORE, THE SAME CONSTITUTES FEE FOR TECHNICAL SERVICES U/S 194J R.W. EXPLANATION 2 TO SEC. 9(1) (VII) OF THE ACT IN PARA 32 AS UNDER: 32 ACCORDINGLY, WE HOLD THAT THE TRANSACTION CHARGE S PAID BY THE ASSESSEE TO THE STOCK EXCHANGE CONSTITUTE 'FEES F OR TECHNICAL SERVICES' COVERED UNDER SECTION 194J OF THE ACT AND, THEREFO RE, THE ASSESSEE WAS LIABLE TO DEDUCT TAX AT SOURCE WHILE CREDITING TH E TRANSACTION CHARGES TO THE ACCOUNT OF THE STOCK EXCHANGE. HOWEVER, SINCE BOT H THE REVENUE AND THE ASSESSEE WERE UNDER THE BONA FIDE BELIEF FOR NEARL Y A DECADE THAT TAX WAS NOT DEDUCTIBLE AT SOURCE ON PAYMENT OF TRANSACTION CHARGES, NO FAULT CAN BE FOUND WITH THE ASSESSEE IN NOT DEDUCTING THE T AX AT SOURCE IN THE ASSESSMENT YEAR IN QUESTION AND CONSEQUENTLY DISALL OWANCE MADE BY THE ASSESSING OFFICER UNDER SECTION 40(A)(IA) OF THE AC T IN RESPECT OF THE TRANSACTION CHARGES CANNOT BE SUSTAINED. WE MAKE I T CLEAR THAT WE HAVE ARRIVED AT THE ABOVE CONCLUSION IN THE PECULIAR F ACTS OF THE PRESENT CASE, WHERE BOTH THE REVENUE AND THE ASSESSEE RIGHT FROM T HE INSERTION OF SECTION 194J IN THE YEAR 1995 TILL 2005 PROCEEDED ON THE FO OTING THAT THE ASSESSEE IS NOT LIABLE TO DEDUCT TAX AT SOURCE AND IN FACT IMM EDIATELY AFTER THE ASSESSMENT YEAR IN QUESTION, I.E., FROM THE ASSESS MENT YEAR 2006-07 THE ASSESSEE HAS BEEN DEDUCTING TAX AT SOURCE WHILE CRE DITING THE TRANSACTION CHARGES TO THE ACCOUNT OF THE STOCK EXCHANGE. MA 167/M/2012 PUNEET SECURITIES 3 4.1 NOW, IT IS CLEAR THAT THE ISSUE, ON PRINCIPLE, IS SETTLED AGAINST THE ASSESSEE. HOWEVER, AS OBSERVED BY THE HONBLE JURISDICTIONAL HIGH COURT THAT IF THE DISALLOWANCE IS FOR THE FIRST TIME AND PRIOR TO TH IS YEAR IF THE REVENUE HAS ALLOWED THE CLAIM OF THE ASSESSEE ON THE BONAFIDE BELIEF THAT T DS WAS NOT DEDUCTIBLE AT SOURCE ON PAYMENT OF TRANSACTION CHARGES, NO FAULT CAN BE FOUND WITH THE ASSESSEE IN NOT DEDUCTING THE TAX AT SOURCE IN THE ASSESSMENT YEAR UNDER CONSIDERATION. 4.2 SINCE IT IS NOT CLEAR FROM THE RECORDS WHETHER THE DISALLOWANCE HAS BEEN MADE FOR THE FIRST TIME BY THE ASSESSING OFFICER FO R THE YEAR UNDER CONSIDERATION OR IN THE EARLIER YEAR ALSO SUCH DISALLOWANCES WERE MADE; THEREFORE, WE DIRECT THE ASSESSING OFFICER TO VERIFY THIS ASPECT AND THEN DE CIDE THE ISSUE AS PER THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CAS E OF KOTAK SECURITIES LTD (SUPRA). THE IMPUGNED ORDER OF THIS TRIBUNAL IS ACCORDINGLY STANDS MODIFIED. 5 IN THE RESULT, THE MISCELLANEOUS APPLICATION FILE D BY THE REVENUE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 12 TH DAY OF OCT 2012. SD/ SD/- ( P M JAGTAP ) ACCOUNTANT MEMBER ( VIJAY PAL RAO ) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 12 TH , OCT 2012 RAJ* MA 167/M/2012 PUNEET SECURITIES 4 COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI