DCIT 4(1), MUMBAI v. ISE SECURITIES & SERVICES LTD, NAVI MUMBAI

ITA 4900/MUM/2010 | 2007-2008
Pronouncement Date: 14-07-2011 | Result: Dismissed

Appeal Details

RSA Number 490019914 RSA 2010
Bench Mumbai
Appeal Number ITA 4900/MUM/2010
Duration Of Justice 1 year(s) 1 month(s) 3 day(s)
Appellant DCIT 4(1), MUMBAI
Respondent ISE SECURITIES & SERVICES LTD, NAVI MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 14-07-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted I
Tribunal Order Date 14-07-2011
Assessment Year 2007-2008
Appeal Filed On 11-06-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH MUMBAI. BEFORE SHRI R.V.EASWAR PRESIDENT AND SHRI T.R.SOOD ACCOUNTANT MEMBER I.T.A. NO.4900/MUM/2010 (ASSESSMENT YEAR : 2007-08) THE ASSISTANT COMMISSIONER OF INCOME TAX-4(1) R.NO.640 AAYAKAR BHAVAN MUMBAI-400 020. VS. M/S. ISE SECURITIES & SERVICES LTD. INTERNATIONAL INFOTECH PARK TOWER 7 5 TH FLOOR VASHI RAILWAY STATION COMPLEX SECTOR 30A VASHI NAVI MUMBAI-400 703. (APPELLANT) (RESPONDENT) APPELLANT BY : MR. BALAKRISHNA MENON (DR) RESPONDENT BY : MR. AJAY R.SINGH A.R. O R D E R PER R.V.EASWAR PRESIDENT: THIS IS AN APPEAL BY THE REVENUE AND IT RELATES TO THE ASSESSMENT YEAR 2007-08. THE ASSESSEE IS A PUBLIC LIMITED COMPANY CARRYING ON BUSINESS AS SHAR E AND STOCK BROKER. IT IS A FULLY OWNED SUBSIDIARY OF INTERCONN ECTED STOCK EXCHANGE INDIA OF LTD. AND IS AN ACTIVE MEMBER OF T HE CAPITAL MARKET AND FUTURES & OPTIONS SEGMENT OF NATIONAL ST OCK EXCHANGE AND THE EQUITY SEGMENT OF BSE. 2. THE FIRST GROUND INCLUDING THE SUB-GROUNDS IS D IRECTED AGAINST THE DELETION OF THE DISALLOWANCE OF THE LEA SE LINE CHARGES OF RS.7 45 422/- PAID TO NSE. THESE CHARGES ARE PAY ABLE TO NSE FOR SERVICES PROVIDED WITH REGARD TO TRANSACTIONS I N SECURITIES THROUGH THE EXCHANGE. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE LEASE LINE CHARGES WERE PAID AS FEES FOR T ECHNICAL SERVICES RENDERED BY THE NSE TO THE ASSESSEE AND TH EREFORE THE ASSESSEE WAS LIABLE TO DEDUCT TAX THEREFROM IN TERM S OF SECTION 194J OF THE INCOME TAX ACT. THIS SECTION CONTAINS A DEFINITION OF FEES FOR TECHNICAL SERVICES IN CLAUSE (B) OF THE EX PLANATION WHICH ITA NO.4900/MUM/10 2 IN TURN REFERS TO EXPLANATION 2 TO CLAUSE (VII) OF SUB-SECTION 1 OF SECTION 9. SINCE THE ASSESSEE DID NOT DEDUCT TAX T HE ASSESSING OFFICER INVOKED SECTION 40(A)(IA) OF THE ACT AND DI SALLOWED THE LEASE LINE CHARGES. THIS SECTION GIVES AUTHORITY TO THE ASSESSING OFFICER TO DISALLOW THE PAYMENT BY WAY OF FEES FOR TECHNICAL SERVICES ON WHICH TAX HAS NOT BEEN DEDUCTED BY THE ASSESSEE THOUGH DEDUCTIBLE. IN MAKING THE DISALLOWANCE THE A SSESSING OFFICER REJECTED THE ASSESSEES CLAIM THAT THE PAYM ENT DID NOT REPRESENT ANY FEES FOR TECHNICAL SERVICES WITHIN TH E MEANING OF SECTION 194J. 3. ON APPEAL THE CIT(A) DELETED THE DISALLOWANCE FO LLOWING THE APPELLATE ORDER PASSED BY HIM IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2005-06 ON 18.09.2008. HENCE T HE PRESENT GROUND. 4. AT THE TIME OF THE HEARING IT WAS POINTED OUT O N BEHALF OF THE ASSESSEE THAT THE GROUND IS COVERED IN FAVOUR O F THE ASSESSEE BY THE ORDER OF THE TRIBUNAL DATED 20.10.2010 IN IT A NO.7039/MUM/2008 FOR THE ASSESSMENT YEAR 2005-06. A COPY OF THE SAID ORDER WAS FILED AND WE HAVE GONE THROUG H THE SAME. IN THIS ORDER THE TRIBUNAL HAS CONFIRMED THE ORDER OF THE CIT(A) PASSED FOR THE ASSESSMENT YEAR 2005-06. THE TRIBUNA L HAS DONE SO BY FOLLOWING THE ORDER OF THE MUMBAI BENCH OF TH E TRIBUNAL IN THE CASE OF KOTAK SECURITIES LTD. VS. ADDITIONAL CIT 24 DTR 214 IN WHICH IT WAS HELD THAT THE LEASE LINE CHARGE S PAID TO THE STOCK EXCHANGE CANNOT BE EQUATED WITH TECHNICAL SER VICES AND HENCE NO TAX IS REQUIRED TO BE DEDUCTED. THE TRIBUN AL ALSO NOTICED THAT THE MUMBAI BENCHES HAVE TAKEN THE SAME VIEW IN TWO OTHER ORDERS NAMELY DCIT VS. ANGEL BROKING LTD. 35 SOT 457 AND SONAL SHARES AND STOCK BROKERS P.LTD. IN IT A NO.744/MUM/2009 VIDE ORDER DATED 23.02.2010. 5. SINCE THE ISSUE STANDS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2005-06 AND SINCE THERE IS NO CHANG E IN THE ITA NO.4900/MUM/10 3 FACTS AS WELL AS THE LEGAL POSITION RESPECTFULLY F OLLOWING THE AFORESAID ORDER WE CONFIRM THE DECISION OF THE CIT (A) AND DISMISS THE GROUND NO.1 TOGETHER WITH ITS SUB-GROUN DS. IT MAY BE CLARIFIED THAT IN THE FIRST SUB-GROUND REFERENCE TO TRANSACTION CHARGES VSAT AND LAN CHARGES IS WRONG AND THE REFE RENCE SHOULD HAVE BEEN TO LEASE LINE CHARGES. THIS HAS AL SO BEEN ADMITTED BY THE LEARNED D.R. BEFORE US. THUS GROUND NO.1 IS DISMISSED. 6. THE SECOND GROUND IS DIRECTED AGAINST THE DELETI ON OF THE DISALLOWANCE OF RS.3 85 844/- PAID BY THE ASSESSEE TO THE STOCK EXCHANGE FOR VIOLATION OF THE BYE-LAWS ON THE GROU ND THAT THE PAYMENT AMOUNTS TO PAYMENT OF PENALTY FOR INFRACTIO N OF LAW. IT IS SEEN THAT THE PAYMENT WAS MADE TO NSE AND BSE FO R NON- MAINTENANCE OF COMPLETE RECORDS DELAY IN PAYOUT OF FUNDS AND SECURITIES INCOMPLETE KYC FORMS SHORT COLLECTION OF MARGINS ETC. THE ASSESSING OFFICER INVOKED THE EXPLANATION BELOW SECTION 37(1) WHICH PROHIBITS ALLOWANCE OF ANY EXPE NDITURE INCURRED BY AN ASSESSEE FOR ANY PURPOSE WHICH IS AN OFFENCE OR WHICH IS PROHIBITED BY LAW. THE ASSESSING OFFICER T OOK THE VIEW THAT THE PAYMENT WAS MADE FOR VIOLATION OF LAW AND THEREFORE IT CANNOT BE ALLOWED IN TERMS OF THE ABOVE STATUTORY P ROVISION. HE ACCORDINGLY DISALLOWED THE PAYMENT. ON APPEAL THE CIT(A) FOLLOWED HIS OWN ORDER FOR THE ASSESSMENT YEAR 2005 -06 AND THE ORDER OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FO R THE ASSESSMENT YEAR 2004-05 AND DELETED THE DISALLOWANC E AGAINST WHICH THE REVENUE HAS PREFERRED THE GROUND. THIS IS SUE STANDS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF T HE TRIBUNAL FOR THE ASSESSMENT YEAR 2005-06(SUPRA). IN PARAGRAPHS 5 TO 7 OF THIS ORDER THE TRIBUNAL HAS DELETED THE DISALLOWAN CE OF SIMILAR PAYMENTS MADE TO STOCK EXCHANGE FOR ALLEGED VIOLATI ON OF THE BYE-LAWS BY FOLLOWING THE JUDGEMENT OF THE PUNJAB & HARYANA HIGH COURT IN CIT VS. HERO CYCLES LTD. 17 DTR 121 AND THE ORDERS OF THE MUMBAI BENCHES OF THE TRIBUNAL IN THE CASE OF ITA NO.4900/MUM/10 4 GOLD CREST CAPITAL MARKET LTD. VS. ITO 2 ITR 355(T RIB) AND KAIRA CAN COMPANY LTD. VS. DCIT. 32 DTR 485. COPIE S OF THESE ORDERS OF THE TRIBUNAL HAVE ALSO BEEN FILED B EFORE US. WE FIND THAT THE ISSUE IS THUS COVERED IN FAVOUR OF TH E ASSESSEE. IN THE ABSENCE OF ANY CHANGE IN THE FACTS AND LEGAL PO SITION RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL FO R THE ASSESSMENT YEAR 2005-06 WE CONFIRM THE DECISION OF THE CIT(A) AND DISMISS THE SECOND GROUND. 7. GROUND NOS.3 & 4 ARE GENERAL AND REQUIRE NO DECI SION. 8. IN THE RESULT THE APPEAL OF THE DEPARTMENT IS D ISMISSED WITH NO ORDER AS TO COSTS. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 14 TH DAY OF JULY 2011. SD/- ( T.R. SOOD ) SD/- ( R.V.EASWAR ) ACCOUNTANT MEMBER PRESIDENT MUMBAI DATED 14 TH JULY 2011. SOMU COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT- 4 MUMBAI. 4. THE CIT(A)- 8 MUMBAI 5. THE DR I BENCH /TRUE COPY/ BY ORDE R ASSTT. REGISTRAR I.T.A.T MUMBAI