ITO 4(2)(3), V. HRIM FINANCE AND SERVICES LTD,

MA 554/MUM/2011

• Counselvise Citation: [2012] 123 COUNSELVISE.COM (IT) 8814 (ITAT-MUMBAI)
• Duration Of Justice: 7 month(s) 3 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 29-06-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 25-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C G K NAIR
• Keywords: Bonafide belief

Judgement Text

MA NO.554 OF 2011 HRIM FINANCE & SECURITIES P LTD MU MBAI-C BENCH PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL 'C' BENCH, MUMBAI BEFORE SHRI D.K.AGARWAL, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER MA NO.554/MUM/2011 (ARISING OUT OF ITA NO.5499/MUM/2009) (ASSESSMENT YEAR: 2006-07) INCOME TAX OFFICER 4(2)3 ROOM NO.647, 6 TH FLOOR, AAYAKAR BHAVAN, M.K.RAOD MUMBAI 400020 (APPELLANT) VS. M/S HRIM FINANCE & SECURITIES (P) LTD (FORMERLY KNOWN AS PELF INVESTMENT (P) LTD) 177-179 LAXMI HOUSE, KALBADEVI ROAD, MUMBAI 400002 PAN NO.AAACP 6489 M (RESPONDENT) DEPARTMENT BY: SHRI C.G.K. NAIR, DR ASSESSEE BY: MS. VINITA SHAH DATE OF HEARING: 22/06/2012 DATE OF PRONOUNCEMENT: 29/06/2012 O R D E R PER B. RAMAKOTAIAH, A.M. THIS IS A MISCELLANEOUS APPLICATION FILED BY THE IN COME TAX OFFICER 4(2)(3) MUMBAI AGAINST THE ITAT ORDER IN IT A NO.5499/MUM/2009 DATED 12.8.2011. IN THIS APPLICAT ION AO IS SEEKING REVIEW OF THE ORDER OF THE BENCH ON THE REA SON THAT THE HON'BLE BOMBAY HIGH COURT DECIDED THE ISSUE OF NON- DEDUCTION OF TDS ON TRANSACTION CHARGES IN FAVOUR OF THE DEPARTM ENT IN THE CASE OF KOTAK SECURITIES LTD VIDE ITA NO.3111 OF 2009 DA TED 21.10.2011. RELYING ON THE ABOVE, AO IS NOW SEEKING RECTIFICATI ON OF THE ORDER. 2. BRIEFLY STATED AO MADE AN ADDITION OF ` .17,70,604/- UNDER SECTION 40(A)(IA) OF THE INCOME TAX ACT, 1961 FOR A SSESSMENT YEAR 2006-07 ON ACCOUNT OF NON DEDUCTION OF TDS BY ASSES SEE ON THE MA NO.554 OF 2011 HRIM FINANCE & SECURITIES P LTD MU MBAI-C BENCH PAGE 2 OF 4 AMOUNT PAID TO STOCK EXCHANGE IN RESPECT OF V-SAT C HARGES OF ` .1,51,235/-; LEASE LINE CHARGES OF ` .78,211/- AND TRANSACTION CHARGES OF ` .15,41,158/-. THE CIT (A) RELYING ON THE DECISION O F MUMBAI BENCH OF ITAT IN THE CASE OF KOTAK SECURITIE S LTD, 25 SOT 440 HELD THAT THE SAID AMOUNTS ARE NOT ATTRACTED BY THE PROVISIONS OF SECTION 194J AND HENCE DISALLOWANCE UNDER SECTIO N 40(A)(IA) DOES NOT ARISE. IN THE REVENUE APPEAL, THE ITAT C BENC H MUMBAI UPHELD THE ORDER OF THE CIT (A) SINCE HE FOLLOWED T HE COORDINATE BENCH DECISION. NOW THE REVENUE SEEKS REVIEW OF THE ABOVE IN VIEW OF THE DECISION OF THE HON'BLE BOMBAY HIGH COURT, I N WHICH THE ISSUE OF TRANSACTION CHARGES WERE CONSIDERED AND HE LD AS UNDER:- 32. ACCORDINGLY, WE HOLD THAT THE TRANSACTION CHAR GES PAID BY ASSESSEE TO THE STOCK EXCHANGE CONSTITUTE FEES FOR TECHNICAL SERVICES COVERED UNDER SECTION 194J OF THE ACT AND THEREFORE, ASSESSEE WAS LIABLE TO DEDUCT TA X AT SOURCE WHILE CREDITING THE TRANSACTION CHARGES TO T HE ACCOUNT OF THE STOCK EXCHANGE. HOWEVER, SINCE BOTH THE REVENUE AND ASSESSEE WERE UNDER THE BONAFIDE BELIEF FOR NEARLY A DECADE THAT TAX WAS NOT DEDUCTIBLE AT SOURCE ON PAYMENT OF TRANSACTION CHARGES, NO FAULT CAN BE FOUND WITH ASSESSEE IN NOT DEDUCTING THE TAX AT SOURCE IN THE ASSESSMENT YEAR IN QUESTION AND CONSEQUENTLY DISALLOWANCE MADE BY AO UNDER SECTION 40(A)(IA) OF THE ACT IN RESPECT OF THE TRANSACTION CHARGES CANNOT BE SUSTAINED. WE MAKE IT CLEAR THAT WE HAVE ARRIVED AT THE ABOVE CONCLUSION IN THE PECULIAR FAC TS OF THE PRESENT CASE, WHERE BOTH THE REVENUE AND ASSESS EE RIGHT FROM THE INSERTION OF SECTION 194J IN THE YEA R 1995 TILL 2005 PROCEEDED ON THE FOOTING THAT ASSESSEE IS NOT LIABLE TO DEDUCT TAX AT SOURCE AND IN FACT IMMEDIAT ELY AFTER THE ASSESSMENT YEAR IN QUESTION I.E. FROM THE ASSESSMENT YEAR 2006-07 ASSESSEE HAS BEEN DEDUCTING TAX AT SOURCE WHILE CREDITING THE TRANSACTION CHARG ES TO THE ACCOUNT OF THE STOCK EXCHANGE. 3. THE REVENUE IS SEEKING THE REVIEW OF THE ITAT ORDER ON THE STRENGTH OF THE ABOVE JUDGMENT. THE LEARNED COUNSEL IN REPLY SUBMITTED THAT THE REVENUE HAS RAISED THE GROUND ON LY WITH REFERENCE TO THE LEASE LINE CHARGES UNDER SECTION 4 0(A)(IA) AND DID NOT CONTEST THE TRANSACTION CHARGES. SHE REFERRED T O THE GROUND NO.1 MADE IN THIS REGARD TO SUBMIT THAT THE ISSUE O F TRANSACTION MA NO.554 OF 2011 HRIM FINANCE & SECURITIES P LTD MU MBAI-C BENCH PAGE 3 OF 4 CHARGES WAS NOT CONTESTED BY THE REVENUE AT ALL. TH EREFORE, APPLYING THE PRINCIPLES LAID DOWN BY THE HON'BLE BO MBAY HIGH COURT DOES NOT ARISE. NOT ONLY THAT IT WAS ALSO THE SUBMISSION THAT EVEN IF THE JUDGMENT WAS TO BE APPLIED, THE PRINCIP LES LAID DOWN BY THE BOMBAY HIGH COURT ARE EQUALLY APPLICABLE, AS AS SESSEE HAS ALREADY FILED RETURN FOR ASSESSMENT YEAR 2006-07, B Y THE TIME THE ISSUE WAS TAKEN BY AO IN ASSESSMENT YEAR 2005-06. T HEREFORE, FOLLOWING THE SAME PRINCIPLES AS LAID DOWN BY THE B OMBAY HIGH COURT, IT IS TO BE CONSIDERED THAT THERE IS REASONA BLE CAUSE FOR NOT DEDUCTING THE TAX TILL THE ASSESSMENT YEAR AND THER EFORE, THERE IS NO NEED FOR REVIEW OF THE ORDER. 4. WE HAVE CONSIDERED THE ISSUE AND EXAMINED THE RECOR D. AS FAR AS THE REVENUE CONTENTION IS CONSIDERED, AO DISALLO WED THREE ITEMS UNDER SECTION 40(A)(IA); V-SAT CHARGES, LEASE-LINE CHARGES AND TRANSACTION CHARGES. ALL THESE THREE CHARGES ARE CO NSIDERED BY THE COORDINATE BENCH IN THE CASE OF KOTAK SECURITIES LT D, 25 SOT 440. THE REVENUE, HOWEVER, IN ITS APPEAL HAS RAISED THE GROUND ONLY ON THE ISSUE OF LEASE LINE CHARGES WITHOUT RAISING THE ISSUE OF TRANSACTION CHARGES. THEREFORE, THE LEARNED COUNSEL S OBJECTION THAT THE REVENUE CANNOT SEEK THE REVIEW OF THE ORDER ON THE ISSUE OF TRANSACTION CHARGES WHICH WERE NOT CONTESTED BY THE M IS CORRECT. 5. EVEN OTHERWISE, THE HON'BLE BOMBAY HIGH COURT JUDGM ENT IS ONLY WITH REFERENCE TO THE TRANSACTION CHARGES PAID TO THE STOCK EXCHANGE. IN THAT APPEAL THE REVENUE DID NOT CONTES T THE V-SAT AND LEASE-LINE CHARGES, WHICH WERE ALSO CONSIDERED BY THE COORDINATE BENCH IN THE CASE OF KOTAK SECURITIES (S UPRA). THIS INDICATES THAT THE REVENUE HAS ACCEPTED THE ORDER O F THE COORDINATE BENCH TO THE EXTENT THESE TWO AMOUNTS ARE CONCERNED . THEREFORE, THERE IS NO NEED FOR REVIEW OF THE ITAT ORDER IN TH E PRESENT CASE. 6. MOREOVER, THE HON'BLE JURISDICTIONAL HIGH COURT HAS WHILE ACCEPTING THAT THE TRANSACTION CHARGES PAID BY ASSE SSEE CONSTITUTE FEES FOR TECHNICAL SERVICES COVERED UNDER SECTION 1 94J HOWEVER, DID MA NO.554 OF 2011 HRIM FINANCE & SECURITIES P LTD MU MBAI-C BENCH PAGE 4 OF 4 NOT CONFIRM THE DISALLOWANCE ON THE REASON THAT THE REVENUE ITSELF HAS PROCEEDED ON THE FOOTING THAT ASSESSEE IS NOT L IABLE TO DEDUCT TAX. THESE FACTS ARE ALSO APPLICABLE TO THE PRESENT CASE AS THE ISSUE WAS FOR THE FIRST TIME RAISED IN ASSESSMENT YEAR 20 05-06 BY AO, BY WHICH TIME ASSESSEE HAS ALREADY FILED THE RETURN FO R THE ASSESSMENT YEAR 2006-07. BE THAT AS IT MAY, SINCE THE REVENUE HAS NOT CONTESTED THE ISSUE OF TRANSACTION CHARGES, THERE I S NO NEED FOR REVIEW OF THE ORDER AT PRESENT. FOR THESE REASONS, WE DISMISS THE REVENUE APPEAL. 7. IN THE RESULT THE MISCELLANEOUS APPLICATION FILED B Y THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH JUNE, 2012. SD/- SD/- (D.K.AGARWAL) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED 29 TH JUNE, 2012. VNODAN/SPS COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, C BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI