ACIT 4(2), MUMBAI v. PASHUPATI CAPITAL SERVICES P. LTD, MUMBAI

ITA 3854/MUM/2009 | 2005-2006
Pronouncement Date: 15-07-2010 | Result: Dismissed

Appeal Details

RSA Number 385419914 RSA 2009
Assessee PAN AACCP0795J
Bench Mumbai
Appeal Number ITA 3854/MUM/2009
Duration Of Justice 1 year(s) 1 month(s) 3 day(s)
Appellant ACIT 4(2), MUMBAI
Respondent PASHUPATI CAPITAL SERVICES P. LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 15-07-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted C
Tribunal Order Date 15-07-2010
Assessment Year 2005-2006
Appeal Filed On 12-06-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C: MUMBAI BEFORE SHRI D MANMOHAN VICE PRESIDENT AND SHRI RAJENDRA SINGH ACCOUNTANT MEMBER ITA NO 3854/MUM/2009 ASSESSMENT YEARS 2005-06 ACIT-4(2) ROOM NO 642 6TH FLOOR AAYAKAR BHAVAN M K ROAD MUMBAI -400 020 VS M/S PASHUPATI CAPITAL SERVICES P LTD GALA NO 122 N32 SONAL INDUSTRIAL ESTATE BUILDING NO 2 MARVE LINK ROAD MALAD (WEST) MUMBAI -400 064 PAN AACCP 0795 J (APPELLANT) (RESPONDENT) FOR APPELLANT : SMT M KHARE FOR RESPONDENT : SHRI S L JAIN ORDER PER RAJENDRA SINGH AM 1. THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 18.03.2009 FOR THE ASSESSMENT YEAR 2005-06. THE ONLY DISPUTE RAISED IN THIS APPEAL IS REGARDING DISALLOWANCE OF RS 13. 47 LAKHS ON ACCOUNT V-SAT AND TRANSACTION CHARGES ON THE GROUND OF NO N- DEDUCTION OF TAX AT SOURCE. 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE A SSESSEE IN THE COMPUTATION OF INCOME HAD CLAIMED DEDUCTION OF R S 96 000/- ON ACCOUNT OF V-SAT CHARGES AND RS 12 51 776/- ON ACCOUNT OF TRANSACTION CHARGES. THE ASSESSING OFFICER IN THE ASSESSMENT ORDER ITA 3854/M/2009 M/S PASHUPATI CAPITAL SERVICES P LTD 2 OBSERVED THAT IN VIEW OF PROVISIONS OF SECTION 40(A)(IA) NO DEDUCTION IS REQUIRED TO BE ALLOWED IN RESPECT OF ANY INTEREST CO MMISSION OR BROKERAGE RENT OR ROYALTY FEES FOR PROFESSIONAL SERVI CES OR FEES FOR TECHNICAL SERVICES PAYABLE TO ANY RESIDENT OR AMOUNTS PAY ABLE TO A CONTRACTOR OR SUB-CONTRACTOR BEING RESIDENT FOR CARRYI NG OUT ANY WORK UNLESS TAX HAD BEEN DEDUCTED AT SOURCE OR AFTER DEDUCTIO N HAD BEEN PAID DURING THE PREVIOUS YEAR OR ANY SUBSEQUENT YEAR. ASSESSING OFFICER ALSO OBSERVED THAT FEES FOR TECHNICAL SERVICES MEA NS ANY LUMP SUM CONSIDERATION PAID FOR RENDERING OF ANY MANAGERIAL TECHNICAL OR CONSULTANCY SERVICES BUT DOES NOT INCLUDE FOR ANY CONSTRUCTIO N ASSEMBLY MINING OR LIKE PROJECT UNDERTAKEN BY THE RECI PIENT OR CONSIDERATION WHICH WOULD BE INCOME OF THE RECIPIENT CH ARGEABLE UNDER THE HEAD SALARY. THE ASSESSING OFFICER HELD TH AT V-SAT CHARGES AND TRANSACTION CHARGES WERE PAYMENTS MADE BY THE ASSESSEE FOR TECHNICAL SERVICES AVAILED FROM STOCK EXCHANGES WHICH WE RE LIABLE FOR DEDUCTION OF TAX AT SOURCE. SINCE THE ASSESSEE HAD NOT DEDUCTED TAX AT SOURCE THE ASSESSING OFFICER DISALLOWED THE CLAIM OF DEDUCTION AMOUNTING TO RS 13 47 776/-. 3. IN APPEAL CIT (A) OBSERVED THAT DOT HAD GRANTED LICENSE TO THE STOCK EXCHANGES FOR INSTALLATION AND SETTING-UP OF A CLOSE USER GROUP TELECOMMUNICATIONS NETWORK BASED ON V-SAT AND LE ASED LINES. THE STOCK EXCHANGES COLLECTED THE FEES AS LEASE LINE CHARGE S FROM THE MEMBERS AND PASSED IT ON TO SERVICE PROVIDER. THE V-SA T AND LEASE- LINE CHARGES WERE THEREFORE REIMBURSEMENT CHARGES PAID BY THE MEMBERS IN LIEU OF INFRASTRUCTURE AND TRADING FACILIT IES PROVIDED BY THE STOCK EXCHANGES AND THESE WERE NOT PAYMENTS FOR ANY TECHN ICAL SERVICES. NO TAX WAS THEREFORE REQUIRED TO BE DEDUCTE D. AS REGARDS THE TRANSACTION CHARGES THESE WERE ALSO NOT FOR ANY TECHN ICAL SERVICES OR MANAGERIAL SERVICES AS HELD BY THE MUMBAI BENCH OF TH E TRIBUNAL IN THE CASE OF KOTAK SECURITIES LTD VS ADDL CIT RANGE 4(3) (25 SOT 440). CIT (A) THEREFORE HELD THAT NO TAX WAS REQUIRED TO BE DEDUCTED AT ITA 3854/M/2009 M/S PASHUPATI CAPITAL SERVICES P LTD 3 SOURCE AND ACCORDINGLY DELETED THE ADDITION MADE BY THE ASSESSING OFFICER AGGRIEVED BY WHICH THE REVENUE IS IN APPEAL B EFORE THE TRIBUNAL. 4. WE HAVE HEARD BOTH THE PARTIES PERUSED THE RECORD S AND CONSIDERED THE MATTER CAREFULLY. THE ISSUE IS AS TO WHETH ER THE V-SAT CHARGES AND TRANSACTION FEES PAID BY THE MEMBERS TO THE STOCK- EXCHANGE CAN BE CONSIDERED AS PAYMENT FOR MANAGERIAL SER VICES OR TECHNICAL SERVICES AND THUS LIABLE FOR DEDUCTION OF TAX AT SOURCE. IN CASE THESE PAYMENTS ARE FOR ANY TECHNICAL SERVICES THESE W ILL BE LIABLE FOR DEDUCTION OF TAX AT SOURCE AND IN CASE OF DEF AULT THE SAME CANNOT BE ALLOWED AS DEDUCTION U/S 40(A)(IA). THE ISSUE IS HOWEVER COVERED BY THE DECISION OF MUMBAI BENCH OF THE TRIBUNAL IN CASE OF KOTAK SECURITIES LTD (SUPRA) AND BY THE DELHI BENCH OF TRIBUNAL IN CASE OF EXPEDITORS INTERNATIONAL (INDIA) (P) LTD VS ADDL. CIT (118 TTJ (DEL) 652) IN WHICH IT HAS HELD THAT THE V-SAT UPLINKING CHA RGES WERE NOT PAID FOR ANY TECHNICAL SERVICES BUT WERE THE PAYMENTS MAD E FOR AVAILING COMMUNICATION FACILITY FOR TRANSMITTING DATA. THESE WERE THEREFORE NOT LIABLE FOR DEDUCTION OF TAX AT SOURCE. SIMILARLY THE MUMBAI BENCH OF THE TRIBUNAL IN CASE OF KOTAK SECURITIE S LTD (SUPRA) HAVE HELD THAT TRANSACTION FEE PAID BY THE BROKER ON THE BASIS OF VOLUME OF TRANSACTION EFFECTED BY A MEMBER IS ONLY FOR USE OF FACILITIES PROVIDED BY STOCK EXCHANGES AND SUCH PAYMENTS ARE NOT FOR RENDERING ANY TECHNICAL SERVICES TO THE ASSESSEE AND THEREFORE THESE ARE NOT LIABLE FOR DEDUCTION OF TAX AT SOURCE. IN VIEW OF THE DECISIONS OF THE TRIBUNAL (SUPRA) WE SEE NO INFIRMITY IN THE ORDER OF THE CIT (A) HOLDING THAT V-SAT CHARGES AND TRANSACTION CHARGES ARE NO T LIABLE FOR DEDUCTION OF TAX AT SOURCE AND NO DISALLOWANCE COULD BE M ADE IN RESPECT OF SUCH EXPENSES ON THE GROUND THAT NON-DEDUCTION OF TAX AT SOURCE. THE ORDER OF THE CIT (A) IS ACCORDINGLY UPH ELD. ITA 3854/M/2009 M/S PASHUPATI CAPITAL SERVICES P LTD 4 5. IN THE RESULT THE APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 15TH DAY OF J ULY 2010. SD/- SD/- (D MANMOHAN) (RAJENDRA SINGH) VICE PRESIDENT ACCOUNTANT MEMBER MUMBAI DATE: 15TH JULY 2010 . COPY TO 1. THE APPELLANT. 2. THE RESPONDENT 4. CIT(A)-IV MUMBAI. 5. CIT CITY 4 MUMBAI. 6. D R C BENCH MUMBAI. 7. GUARD FILE. BY ORDER / / TRUE COPY / / ASST. REGISTRAR ITAT MUMBAI BENCHES MUMBAI *CHAVAN/- ITA 3854/M/2009 M/S PASHUPATI CAPITAL SERVICES P LTD 5 SNO DATE INITIALS 1 DRAFT DICTATED ON 12-07-2010 SR.P.S 2. DRAFT PLACED BEFORE AUTHOR 13-07-2010 SR.P.S 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER V.P. 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER A.M 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.P.S 6. KEPT FOR PRONOUNCEMENT ON SR.P.S 7. FILE SENT TO THE BENCH CLERK SR.P.S 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER