DCIT 4(1), MUMBAI v. CHIMANLAL MANEKLAL SECURITIES P. LTD, MUMBAI

ITA 3009/MUM/2009 | 2006-2007
Pronouncement Date: 14-01-2011 | Result: Dismissed

Appeal Details

RSA Number 300919914 RSA 2009
Bench Mumbai
Appeal Number ITA 3009/MUM/2009
Duration Of Justice 1 year(s) 8 month(s) 6 day(s)
Appellant DCIT 4(1), MUMBAI
Respondent CHIMANLAL MANEKLAL SECURITIES P. LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 14-01-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted C
Tribunal Order Date 14-01-2011
Date Of Final Hearing 11-01-2011
Next Hearing Date 11-01-2011
Assessment Year 2006-2007
Appeal Filed On 08-05-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C : MUMBAI BEFORE SHRI D.K. AGARWAL (JM) AND SHRI B. RAMAKO TAIAH (AM) ITA NO.3009/MUM/2009 ASSESSMENT YEAR : 2006-07 DY. COMMISSIONER OF INCOME TAX -4(1) 6 TH FLOOR ROOM NO.640 AAYAKAR BHAVAN MUMBAI 400 020. ..( APPELLANT ) VS. CHIMANLAL MANEKLAL SECURITIES PVT. LTD. 11 RAJA BAHADUR BLDG. 1ST FLOOR 45 M.P. SHETTY MARG FORT MUMBAI-400 023. ..( RESPONDENT ) P.A. NO: (AAACC 1892 P) APPELLANT BY : SH RI P.N. DEVDASAN RESPONDENT BY : SHRI PRADIP N. KAPASI O R D E R PER D.K. AGARWAL (JM). THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER DATED 27.2.2009 PASSED BY THE LD. CIT(A) FOR TH E ASSESSMENT YEAR 2006-07. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSESSEE COM PANY IS A MEMBER OF BOMBAY STOCK EXCHANGE (BSE) AND NATIONAL STOCK EXCHANGE (NSE) AND IS ENGAGED IN THE BUSINESS OF SHARE BROKING TRADING AND DEALING IN SHARES AND SECURITIES FILED RETU RN DECLARING TOTAL INCOME AT RS.87 94 353/-. DURING THE COURSE OF ASSESSMENT ITA NO.3009/M/09 A.Y:06-07 2 PROCEEDING IT WAS INTERALIA OBSERVED BY THE ASSESSING OFFICER THAT THE ASSESSEE COMPANY HAS MADE PAYMENT TO JOBBERS AMOUNTING TO RS.43 87 881/-. THE ASSESSEE WAS ASKED TO SUBMIT THE EXACT NATURE OF JOBBING ACTIVITY CARRIED OUT BY THEM AND ALSO SUBMI T DETAILS OF PAYMENTS MADE TO JOBBERS AND ALSO EXPLAIN WHETHER TAX HAS BEEN DEDUCTED UNDER THE PROVISIONS OF SEC. 194C OF THE INCOME TAX ACT 1961 (THE ACT). IN RESPONSE IT WAS INTERALIA SUBMITTED BY THE ASSESSEE THAT THE NATURE OF ACTIVITY DONE BY JOBBER/ARBI TRAGEUR IS OF BUSINESS WHERE TOTAL REVENUE GENERATED BY THEM IS SHARED WITH THEM ON THE TERMS AGREED. THE REVENUE GENERATED FROM SUCH JOBBING/ARBITRAGE PART OF WHICH IS SHARED WITH JOBBE RS/ARBITRAGEURS IS NOT COVERED WITHIN AMBIT OF DEFINITION OF CONTRACT FO R CARRYING OUT ANY WORK AND THEREFORE THE ASSESSEE IS NOT REQUIRED TO DE DUCT TAX AT SOURCE ON SHARING OF REVENUE FROM JOBBING/ARBITRAGE IN COME WITH JOBBERS/ARBITRAGEURS. HOWEVER THE ASSESSING OFFICER AFT ER CONSIDERING THE NATURE OF WORK DONE BY JOBBER/ARBITRA GEUR IN THE LIGHT OF THE PROVISIONS OF SEC.194C HELD THAT IT IS AMPLY CLEA R THAT THE COMPANY HAS ENGAGED THE SERVICE OF JOBBERS FOR CARRYING O UT THE WORK WHICH PRIMARILY BELONGS TO THE COMPANY. THE PAYMENTS MADE ARE IN LIEU OF SERVICES RENDERED FOR CARRYING OUT OF CERTAIN WO RK AND THE PAYMENTS MADE THEREIN FALL WITHIN THE PURVIEW OF SECTI ON 194C OF THE ACT. SINCE IT IS THE ASSESSEE WHO HAS TO CARRY ON THE WORK OF JOBBING THROUGH ONE SET OF JOBBERS OR ANOTHER YEAR AFTER YEAR THE WORK CAN ONLY BE SAID TO BE BELONGING TO THE ASSESSEE IN WHOS PRO PRIETARY ACCOUNT THIS WORK IS BEING CARRIED OUT AND WHO HAS HIRED THESE PERSONS IRRESPECTIVE OF THE TERMS OF CONTRACT AND COMPENSA TION PAID. THEREFORE THE ASSESSEE WAS BOUND TO DEDUCT TAX ON THE P AYMENTS MADE IN RESPECT OF THE SERVICES OFFERED BY THE JOBBERS. SINCE THE ASSESSEE HAS NOT DEDUCTED THE TAX THE ASSESSING OFFICER DISALLO WED THE ITA NO.3009/M/09 A.Y:06-07 3 PAYMENTS OF RS.43 87 881/- U/S.40(A)(IA) R.W.S. 194C O F THE ACT AND ADDED TO THE INCOME OF THE ASSESSEE. THE ASSESSING OFFICER AFTER MAKING SOME OTHER DISALLOWANCE COMPLETED THE ASSESSMENT AT AN INCOME OF RS.1 33 87 350/- VIDE ORDER DATED 27.5.2008 PASSED U/S.143(3) OF THE ACT. 3. ON APPEAL THE LD. CIT(A) FOLLOWING THE APPELLATE ORDER IN M/S. H.J. SECURITIES P. LTD. DATED 8.10.2008 WHEREIN IT HAS BEEN HELD BY HIM THAT THE RELATIONSHIP BETWEEN THE JOBBER AND THE APPELLANT COMPANY IS THAT OF CO-SHARER OF PROFIT/LOSS THEREFORE PROVISIONS OF SEC. 194C IS NOT ATTRACTED THE DISALLOWANCE U/S. 40(A)(IA ) IS HELD TO BE NOT PROPER DELETED THE ADDITION MADE BY THE ASSESSING OFFICER . 4. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A) T HE REVENUE IS IN APPEAL BEFORE US CHALLENGING IN ALL THE GROUNDS THE DE LETION OF ADDITION OF RS.43 87 881/- MADE BY THE ASSESSING OFFICER U/S.40(A )(IA) OF THE ACT. 5. AT THE TIME OF HEARING THE LD. DR SUPPORTS THE OR DER OF THE ASSESSING OFFICER. 6. ON THE OTHER HAND THE LD. COUNSEL FOR THE ASSESSEE A T THE OUTSET SUBMITS THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE TRIBUNAL IN DCIT VS. ASSET ALLIANCE SE CURITIES PVT. LTD. IN ITA NO.1488/MUM/2009 FOR ASSESSMENT YEAR 2006-07 DAT ED 16.7.2010 WHICH HAS ALSO BEEN FOLLOWED IN DCIT VS. PRA KASH K. SHAH SHARES & SECURITIES P. LTD. IN ITA NO.214 AND 5528/M UM/2009 FOR A.Y. 2005-06 AND 2006-07 DATED 30.11.2010. HE ALSO P LACED ON RECORD THE COPY OF THE SAID ORDERS OF THE TRIBUNAL. ITA NO.3009/M/09 A.Y:06-07 4 7. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RI VAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE FACTS ARE NOT IN DISPUTE. WE FURTHER FIND THAT THE ISSUE IS SQUARELY COVERED AGAINST THE REVENUE AND IN FAVOUR OF THE ASSESSEE BY TH E ORDER OF THE TRIBUNAL IN ASSET ALLIANCE SECURITIES PVT. LTD. SUPRA W HEREIN THE TRIBUNAL ON THE SIMILAR FACTS AND CIRCUMSTANCES OF THE C ASE HAS HELD VIDE PARA-9 OF ITS ORDER AS UNDER :- 9. .....THE FACTS SHOW THAT THERE WERE SEPARATE JOINT VENTURES ENTERED INTO BY THE ASSESSEE WITH SE VERAL JOBBERS/ARBITRAGERS AND PAYMENTS HAVE BEEN MADE TO THEM UNDER SUCH AGREEMENTS AND THE ASSESSEE'S SHARE IN THE PROFITS HAS BEEN TAKEN TO THE PROFIT AND LOSS A CCOUNT. IN THESE CIRCUMSTANCES THE PROVISIONS OF SEC.194C A RE NOT ATTRACTED BECAUSE IN ESSENCE AND SUBSTANCE THE AMOU NTS PAID TO THE JOBBERS OR ARBITRAGERS DID NOT IN REALI TY REPRESENT THE EXPENSE OF THE ASSESSEE COMPANY BUT REPRESENTED PAYMENT OF THE SHARE OF THE JOBBERS/ARBITRAGERS UNDER THE AGREEMENT ENTERED INT O WITH THEM. IN SUCH A CASE THE ASSESSEE IS RIGHT IN SAYING THAT THERE WAS NO QUESTION OF DEDUCTING ANY TAX AT SOURCE. THE ABOVE FACTS ALSO ESTABLISH THAT THE RELATIONSHIP BETWEEN THE ASSESSEE AND THE JOBBERS/ARBITRAGERS WAS NOT OF PRINCIPLE AND AGENT BUT WAS THAT OF PRINCIPLE TO PRINCIPLE. BOTH HAD AGREE D TO EMBARK UPON A JOINT VENTURE TO TRADE IN SHARES AND SECURITIES IN THE STOCK EXCHANGE AND TO SHARE THE PROFIT/LOSS EQUALLY. WE DO NOT SEE HOW SUCH PAYMEN TS CAN BE TERMED AS PAYMENTS TO CONTRACTORS FOR ANY WO RK TO BE CARRIED OUT BY THEM. WE THEREFORE UPHOLD THE FINDING OF THE CIT(A) THAT THESE PAYMENTS DO NOT AT TRACT SECTION 194C AND THE ASSESSEE WAS NOT LIABLE TO DED UCT TAX THEREFROM. ACCORDINGLY SECTION 40(A)(IA) IS AL SO NOT APPLICABLE. THE PAYMENTS IN OUR VIEW WERE RIGHT LY ALLOWED AS DEDUCTION BY THE CIT(A)........ THE ABOVE ORDER HAS ALSO BEEN FOLLOWED IN THE CASE OF D CIT VS. GANDHI SECURITIES & INVESTMENT PVT. LTD. IN ITA NO.734/MUM/20 09 FOR ASSESSMENT YEAR 2006-07 DATED 22.9.2010 IN WHICH ONE OF US (JM) WAS PARTY WHEREIN IT HAS BEEN HELD THAT THESE PAYMENT S ARE PRINCIPLE TO PRINCIPLE WHICH DO NOT ATTRACT SECTION 194C HENCE THE ASSESSEE ITA NO.3009/M/09 A.Y:06-07 5 WAS NOT LIABLE TO DEDUCT TAX THEREFROM AND HENCE THE PROVISION OF SECTION 40(A)(IA) IS NOT APPLICABLE. IN THE ABSENCE OF AN Y DISTINGUISHING FEATURE BROUGHT ON RECORD BY THE LD. DR WE RESPECTFULL Y FOLLOWING THE CONSISTENT VIEW OF THE TRIBUNAL HOLD THAT THESE PAYMENT S ARE PRINCIPLE TO PRINCIPLE WHICH DO NOT ATTRACT THE APPLICABILITY O F SECTION 194C AND HENCE THE PROVISIONS OF SECTION 40(A)(IA) ARE NOT APPLI CABLE AND ACCORDINGLY WE ARE INCLINED TO UPHOLD THE FINDING OF T HE LD. CIT(A) IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER. TH E GROUNDS TAKEN BY THE REVENUE ARE THEREFORE REJECTED. 8. IN THE RESULT REVENUES APPEAL STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 14.1.2011. SD/- SD/- (B. RAMAKOTAIAH) ( D.K. AGARWAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED: 14.1.2011. JV. COPY TO: THE APPELLANT THE RESPONDENT THE CIT CONCERNED MUMBAI THE CIT(A) CONCERNED MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR ITAT MUMBAI.