DCIT4(1), MUMBAI v. ARCADIA SHARE & STOCK BROKERS P. LTD, MUMBAI

ITA 1103/MUM/2010 | 2006-2007
Pronouncement Date: 31-12-2010 | Result: Dismissed

Appeal Details

RSA Number 110319914 RSA 2010
Assessee PAN AAACA4562G
Bench Mumbai
Appeal Number ITA 1103/MUM/2010
Duration Of Justice 10 month(s) 19 day(s)
Appellant DCIT4(1), MUMBAI
Respondent ARCADIA SHARE & STOCK BROKERS P. LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 31-12-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted G
Tribunal Order Date 31-12-2010
Date Of Final Hearing 23-12-2010
Next Hearing Date 23-12-2010
Assessment Year 2006-2007
Appeal Filed On 10-02-2010
Judgment Text
1 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G MUMBAI BEFORE SHRI J. SUDHAKAR REDDY ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO JUDICIAL MEMBER. I.T.A. NO. 1103/MUM/2010. ASSESSMENT YEAR : 2006-07. DY. COMMISSIONER OF INCOME-TAX M/S ARCAD IA SHARE & STOCK 4(1) MUMBAI. VS. BROKERS P. LTD. 328 NINAD 1 ST FLOOR BLDG.NO.7 SERVICE ROAD NEAR BHAVISHYA NIDHI BHAVAN BANDRA (E) MUMBAI 400051. PAN AAACA4562G APPELLANT. RESPONDENT. APPELLANT BY : SHRI C.P. PATHAK. RESPONDENT BY : SHRI AJIT SHETTY. . O R D E R PER J. SUDHAKAR REDDY A.M. : THIS IS AN APPEAL FILED BY THE REVENUE DIRECTED AGA INST THE ORDER OF THE CIT(APPEALS)-8 MUMBAI DATED 23-11-2009 ON THE FOLL OWING GROUNDS : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LD. CIT(A) ERRED IN ALLOWING RELIEF ON ACCOUNT OF VSAT AND LEASELINE CHARGES AMOUNTING TO RS.45 58 942/- WITHOUT REALIZI NG THE FACT THAT THESE WERE COMPOSITE CHARGES ALONGWITH TRANSACTION CHARGES FOR PROFESSIONAL AND TECHNICAL SERVICES RENDERED BY THE EXCHANGE TO ITS MEMBER AND THE ASSESSEE HAD FAILED TO DEDUCT TDS TH EREON. 2 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LD. CIT(A) ERRED IN ALLOWING RELIEF ON ACCOUNT OF VSAT AND LEASELINE CHARGES WITHOUT APPRECIATING THE FACT THAT VSAT & L EASELINE SERVICES ARE TECHNICAL SERVICES AND PROVISIONS OF S ECTION 194J ARE CLEARLY ATTRACTED. 2. AFTER HEARING RIVAL CONTENTIONS WE FIND THAT TH E ISSUE AS TO WHETHER PAYMENTS MADE ON ACCOUNT OF VSAT AND LEASELINE CHAR GES ARE CHARGES ARE FOR PROFESSIONAL AND TECHNICAL SERVICES REQUIRING DEDU CTION OF TAX AT SOURCE IS COVERED AGAINST THE REVENUE AND IN FAVOUR OF THE AS SESSEE BY THE DECISION OF ITAT MUMBAI IN THE CASE OF DCIT VS. ANGEL BROKING LTD. REPORTED IN (2010) 35 SOT 457 (MUM.) WHEREIN IT IS HELD AS FOLLOWS : AS PER THE EXPLANATION 2 TO SECTION 9(1)(VII) THE FEE FOR TECHNICAL SERVICES MEANS ANY CONSIDERATION FOR RENDERING ANY TECHNICAL SERVICE. THE EXPLANATION DOES NOT BY ITSELF THROW ANY LIGHT ON WHAT IS A TECHNICAL SERVICE. TWO THINGS ARE HOWEVER CLEAR F ROM THE LANGUAGE OF SECTION 9(1)(VII) READ WITH EXPLANATION 2 VIZ. (I ) THERE SHOULD BE AN AGREEMENT TO ENGAGE/UTILIZE TECHNICAL SERVICES AND A PERSON OR UNDERTAKING TO RENDER THEM; (II) IF THERE IS A CONT RACT OF EMPLOYMENT AND THE EXPLOYEE RENDERS TECHNICAL SERVICE UNDER A CONT RACT OF EMPLOYMENT THEN THE PAYMENT OF REMUNERATION FOR SUCH SERVICES IS OUTSIDE THE PURVIEW OF FEES TECHNICAL SERVICES. [PARA 8] STOCK EXCHANGES AS MEASURE OF PROVIDING INFRASTRUCT URE TO THEIR MEMBERS INSTALL VSAT AND LEASED LINE SYSTEM. FEE CO LLECTED IN THAT REGARD IS NOTHING BUT FEE PAID FOR USE OF FACILITIE S PROVIDED BY THE STOCK EXCHANGE. SUCH FACILITIES ARE AVAILABLE FOR USE BY ANY MEMBER. SATELLITE BASED TRADING ENABLES TRADING MEMBERS TO TRADE ON E XCHANGE FROM THEIR PLACE OF WORK ACROSS THE COUNTRY. STOCK EXCHANGE HA S TO GET PERMISSION FROM THE DEPARTMENT OF TELECOMMUNICATION FOR INSTAL LING AND SETTING UP VSAT OR LEASED LINE SYSTEM. CHARGES LEVIED BY TH E STOCK EXCHANGE 3 ON ITS MEMBERS ARE FOR THE PURPOSE OF RECOVERY OF I TS COST IN PROVIDING THESE FACILITIES TO THE MEMBERS. STOCK EXCHANGES DO NOT PROVIDE ANY TECHNICAL SERVICES BY INSTALLING VSAT NETWORK. THEY MERELY PROVIDE FACILITIES FOR MEMBERS TO PURCHASE AND SELL SHARES WITHIN FRAME WORK OF ITS BY-LAWS. THEY ALSO PROVIDE FOR A MECHANISM FOR SETTLEMENT OF DISPUTE BETWEEN THE BROKERS AND CUSTOMERS. STOCK EX CHANGES DO NOT INVOLVE THEM IN PROVIDING ANY TECHNICAL SERVICES TO ANY OF ITS MEMBERS. THE ASSESSING OFFICER IN COMING TO THE CONCLUSION T HAT THE PAYMENT WAS FOR FEE FOR TECHNICAL SERVICES HAD RELIED UPON THE FACT THAT THE SCREEN BASED TRADING WAS SOPHISTICATED METHOD OF TRADING. THAT BY ITSELF WOULD NOT BE SUFFICIENT TO HOLD TECHNICAL SERVICES BEING RENDERED. THE ASSESSING OFFICER HAD ALSO HELD THAT SERVICES WERE NOT AVAILABLE TO THE PUBLIC AT LARGE BUT ONLY TO REGISTERED MEMBERS AGA IN THAT BY ITSELF WOULD NOT MAKE THE SERVICES IN QUESTION AS TECHNICA L SERVICES. ANOTHER REASON GIVEN BY THE ASSESSING OFFICER WAS THAT SPEE D AT WHICH TRANSACTIONS WERE COMPLETED AND THE EASE WITH WHICH TRANSACTIONS WERE DONE IN SCREEN BASED TRADING WHICH AGAIN WAS NOT R ELEVANT CRITERIA FOR HOLDING THE SERVICES RENDERED AS TECHNICAL SERVICES . FACT THAT THE DATA PROVIDED ON SCREEN WOULD PROVIDE BETTER DATA FOR CA RRYING OUT TRANSACTION WOULD NOT AGAIN BE SUFFICIENT TO HOLD T HAT TECHNICAL SERVICES WERE BEING RENDERED. ALL THE ABOVE FEATURES PRESENT IN SCREEN BASED TRADING SAVE TIME. THIS IS THE RESULT OF IMPROVED T ECHNOLOGY. THAT DOES NOT MEAN THAT STOCK EXCHANGE IS PROVIDING TECHNICAL SERVICES. MEMBERS OF THE STOCK EXCHANGE AND THE PUBLIC AT LARGE ARE B ENEFICIARIES OF THESE TECHNICAL IMPROVEMENTS. STOCK EXCHANGES ARE NOT THE OWNER OF THIS TECHNOLOGY TO PROVIDE IT FOR A FEE FOR PROSPECTIVE USE. THEY ARE THEMSELVES CONSUMERS OF THE TECHNOLOGY. THEREFORE THE PAYMENT IN QUESTION COULD NOT BE CON SIDERED AS FEE FOR TECHNICAL SERVICES RENDERED. THE ORDER OF THE COMMI SSIONER (APPEALS) WAS TO BE CONFIRMED. 4 SIMILARLY THE DELHI F-BENCH OF THE TRIBUNAL IN THE CASE OF EXPEDITORS INTERNATIONAL (INDIA) (P) LTD. VS. ADDITIONAL C.I.T . 118 TTJ 652 HELD AS FOLLOWS: VSAT UPLINKING CHARGES PAID BY THE ASSESSEE COMPAN Y TO ITS PARENT COMPANY WERE NOT IN THE NATURE OF FEES FOR TECHNICA L SERVICES AND THE SAME BEING NOT LIABLE FOR DEDUCTION OF TAX AT SOURC E THE DISALLOWANCE MADE BY THE AO BY INVOKING THE PROVISIONS OF S. 40( A)(I) WAS NOT SUSTAINABLE. 4. RESPECTFULLY FOLLOWING THE SAME WE UPHOLD THE O RDER OF THE CIT(APPEALS) AND DISMISS THE APPEAL OF THE REVENUE. 5. IN THE RESULT THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST DEC. 2010. SD/- SD/- (VIJAY PAL RAO) (J. SU DHAKAR REDDY) JUDICIAL MEMBER. ACCOUNTANT MEMBER MUMBAI DATED: 31 ST DEC. 2010. WAKODE 5 COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR G-BENCH (TRUE COPY) BY ORDER ASSTT. REGIST RAR ITAT MUMBAI BENCHE S MUMBAI.