DCIT 4(1), MUMBAI v. VIOLET ARCH SECURITIES P.LTD ( FORMERLY KNOWN AS M.S, ALCHEMY SHARE & STOCK BROKERS P.LTD), MUMBAI

ITA 5042/MUM/2012 | 2009-2010
Pronouncement Date: 31-07-2015 | Result: Dismissed

Appeal Details

RSA Number 504219914 RSA 2012
Assessee PAN AADCA0343C
Bench Mumbai
Appeal Number ITA 5042/MUM/2012
Duration Of Justice 2 year(s) 11 month(s) 23 day(s)
Appellant DCIT 4(1), MUMBAI
Respondent VIOLET ARCH SECURITIES P.LTD ( FORMERLY KNOWN AS M.S, ALCHEMY SHARE & STOCK BROKERS P.LTD), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 31-07-2015
Appeal Filed By Department
Order Result Dismissed
Bench Allotted F
Tribunal Order Date 31-07-2015
Date Of Final Hearing 02-07-2015
Next Hearing Date 02-07-2015
Assessment Year 2009-2010
Appeal Filed On 07-08-2012
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH MUMBAI . . BEFORE MS. SUSHMA CHOWLA JM AND SHRI N.K. BILLAIYA AM ./ ITA NO. 5042/MUM/2012 ./ ITA NO. 5845/MUM/2013 ( / ASSESSMENT YEARS : 2009 - 10 & 2010 - 11 ) DCIT RANGE 4(1) ROOM NO. 640 6TH FLOOR AYAKAR BHAVAN M.K. ROAD MUMBAI 400020 / VS. M/S. VIOLET ARCH SECURITIES P. LTD. (FORMERLY ALCHEMY SHARE & STOCK BROKERS P. LTD.) NAVSARI BUILDING 4TH FLOOR 240 D .N. ROAD FORT MUMBAI 400001 ./ PAN : AADCA0343C ( / APPELLANT ) .. ( / RESPONDENT ) ./ ITA NO. 507 2/MUM/2013 ( / ASSESSMENT YEAR : 2009 - 10 ) M/S. VIOLET ARCH SECURITIES P. LTD. (FORMERLY ALCHEMY SHARE & STOCK BROKERS P. LTD.) NAVSARI BUILDING 4TH FLOOR 240 D .N. ROAD FORT MUMBAI 400001 / VS. DCIT RANGE 4(1) ROOM NO. 640 6TH FLOOR AYAKAR BHAVAN M.K. ROAD MUMBAI 400020 ./ PAN : AADCA0343C ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI PAWAN KUMAR BIRLA / RESPONDENT BY : SHRI S.C. TIWARI & MS. PRIYANKA J. MARU / DATE OF HEARING : 29.07.2015 / DATE OF PRONOUNCEMENT : 31 .0 7 .2015 / ORDER PER SUSHMA CHOWLA J.M. OUT OF THIS BUNCH OF THREE APPEALS TWO ARE CROSS APPEALS FILED BY THE ASSESSEE AND REVENUE AGAINST THE ORDER OF THE CIT(A) - 8 MUMBAI DATED ITA NO S . 5042 5845 &5072 /MUM/2012 M/S. VIOLET ARCH SECURITIES P. LTD. 2 10.05.2012 RELATING TO ASSESSMENT YEAR 2009 - 10 AGAINST THE ORDER PASSED UNDER SECTION 143(3) OF THE ACT. THE REVENUE IS IN APPEAL AGAINST THE ORDER OF THE CIT(A) - 8 MUMBAI DATED 18.07.2013 RELATING TO ASSESSMENT YEAR 2010 - 11 AGAINST THE ORDER PASSED UNDER SECTION 143(3) OF THE ACT. ALL THE THREE APPEALS RELATED TO THE SAME ASSESSEE WERE HEARD TOGETHER AND ARE BEING DISPO SED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. THE ASSESSEE IN ITA NO. 5072/MUM/2012 HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 'DISALLOWANCE OF TRANSACTION CHARGES IN UPHOLDING THE DISALLOWANCE MADE UNDER SECTION 40(A)(IA) OF THE ACT BY THE DEPUTY COMMISSIONER OF INCOME - TAX RANGE 4(1) MUMBAI WITH REGARD TO TRANSACTION CHARGES OF RS. 4 552 858 PAID BY THE APPELLANT TO THE STOCK EXCHANGES ON THE GROUND THAT NO TAXES WERE DEDUCTED THEREON UNDER SECTION 40(A)(IA) OF THE ACT. THE APPELLANT PRAYS THAT THE AFORESAID ADDITION BE DELETED.' 3. THE LEARNED A.R. FOR THE ASSESSEE AT THE OUTSET POINTED OUT THAT THE ISSUE RAISED IN THE PRESENT APPEAL DECIDED AGAINST THE ASSESSEE BY THE HON'BLE HIGH COURT IN ASSESSEES OWN CASE. HOWEVER THE ASS ESSEE HAS FILED AN APPLICATION IN FORM NO. 8 I.E. DECLARATION UNDER SECTION 158A(1) OF THE ACT TO THE EFFECT THAT THE DECISION OF THE APEX COURT IN THE EARLIER YEARS BE APPLIED TO THE ISSUE IN THE PRESENT ASSESSMENT YEAR. IT WAS FURTHER POINTED OUT BY TH E LEARNED A.R. FOR THE ASSESSEE THAT SIMILAR ISSUE HAD ARISEN BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2008 - 09 AND THE TRIBUNAL IN ITA NO. 3358/MUM/2012 VIDE ORDER DATED 06.06.2013 HAS DECIDED THE ISSUE AGAINST THE ASSESSEE. HOWEVER A DIRECTION WAS GIVEN TO THE AO TO APPLY THE DECISION ON THE QUESTION OF LAW AS DECIDED BY THE HON'BLE APEX COURT. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY PERUSED THE RECORD. IDENTICAL ISSUE OF DEDUCTION ON ACCOUNT OF TRANSACTION CHARGES OF ` 45 52 852/ - PAID TO THE STOCK EXCHANGE WAS DECIDED AGAINST THE ASSESSEE SINCE NO TAXES WERE DEDUCTED AT SOURCE AND BY APPLYING PROVISIONS OF SECTION 40(A)(IA) OF THE ACT THE ISSUE WAS DECIDED AGAINST THE ASSESSEE. THE RELEVANT ITA NO S . 5042 5845 &5072 /MUM/2012 M/S. VIOLET ARCH SECURITIES P. LTD. 3 OBSERVATIONS OF THE TRIBUNAL IN ASSESSEES OWN CASE RELATED TO ASSESSMENT YEAR 2008 - 09 VIDE ORDER DATED 06.06.2013 ARE AS UNDER: - 2. THE ASSESSEE IN PRESENT CASE HAS FILED FORM NO.8 UNDER THE PROVISIONS OF SECTION 158A OF THE INCOME TAX ACT 1961(THE ACT). SIMILAR FORM WAS ALSO FILE D BY THE ASSESSEE IN RESPECT OF SIMILAR ISSUE FOR ASSESSMENT YEAR 2007 - 08 WHEREIN MATTER WAS DISPOSED OF WITH THE FOLLOWING OBSERVATIONS VIDE ORDER DATED 15/05/2013 IN ITA NO.298/MUM/2011 A.Y.2007 - 08 (DEPARTMENTAL APPEAL). 7. SO FAR AS CHARGES ON ACCOU NT OF VSAT CHARGES AND LEASELINE CHARGES THE ISSUE IS NOW WELL SETTLED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF ITO VS ANGEL CAPITAL & DEBIT MARKET LTD. IN ITA (L) 475 OF 2011 DECIDED ON 28TH JULY 2011. THIS LEAVES THE ISSUE OF DEDUCTABILITY OF TRANSACTION CHARGES OF RS. 50 30 187/ - THE LD. COUNSEL FOR THE ASSESSEE FAIRLY CONCEDED THAT THIS ISSUE HAS BEEN DECIDED AGAINST THE ASSESSEE BY THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE C ASE OF CIT VS M/S. KOTAK SECURITIES LTD IN ITA NO. 3111 OF 2009 DECIDED ON 21ST OCTOBER 21.10.2011. HOWEVER AT THE SAME TIME THE LD. COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO THE ORDER OF THE HONBLE SUPREME COURT BY WHICH THE HONBLE SUPREME COURT H AS ACCEPTED A SPECIAL LEAVE PETITION OF THE ASSESSEE ON IDENTICAL POINT OF LAW FOR PRECEDING ASSESSMENT YEAR. INVOKING THE PROVISIONS OF SEC. 158A OF THE ACT THE ASSESSEE WAS ASKED TO FILE A DECLARATION THAT IF THE AO AGREES TO APPLY IN THE RELEVANT CASE THE FINAL DECISION ON THE QUESTION OF LAW IN THE OTHER CASE HE SHALL NOT RAISE SUCH QUESTION OF LAW IN THE RELEVANT CASE IN APPEAL BEFORE ANY APPELLATE AUTHORITY. THE ASSESSEE FILED THE NECESSARY DECLARATION IN FORM NO. 8. 8. THE LD. DEPARTMENTAL REPRES ENTATIVE STATED THAT REVENUE HAS NO OBJECTION FOR ADMITTING THE DECLARATION FILED BY THE ASSESSEE. 9. CONSIDERING THE ABOVE FACTS IN THE LIGHT OF THE PROVISIONS OF SEC. 158A AND FOLLOWING THE DECISION OF THE JURISDICTIONAL HIGH COURT (SUPRA) WE DIRECT T HE AO TO ALLOW THE EXPENDITURE ON ACCOUNT OF VSAT CHARGES AND LEASELINE CHARGES. EXPENDITURE ON ACCOUNT OF TRANSACTION CHARGE IS ACCORDINGLY TO BE DISALLOWED SUBJECT TO THE OUTCOME OF THE SLP FILED BY THE ASSESSEE. COPY OF THE AFOREMENTIONED DECLARATION IN FORM NO.8 WAS ALSO FILED WITH THE LD. DR. LD. D.R DID NOT RAISE ANY OBJECTION. 3. IN THIS VIEW OF THE SITUATION FOLLOWING THE AFOREMENTIONED DECISION OF HONBLE HIGH COURT WE UPHOLD THE DISALLOWANCE OF TRANSACTION CHARGES AND DISMISS THE APPEAL FIL ED BY THE ASSESSEE. IN PURSUANCE OF SUB - SECTION (5) OF SECTION 158A WE DIRECT THE A.O THAT WHEN THE DECISION ON THE QUESTION OF LAW IN THE SLP BECOMES FINAL THE SAME ITA NO S . 5042 5845 &5072 /MUM/2012 M/S. VIOLET ARCH SECURITIES P. LTD. 4 SHOULD BE APPLIED TO THE PRESENT CASE AND IF NECESSARY ASSESSEE CAN ALSO FILE AN APPLICATI ON BEFORE US FOR AMENDMENT OF THE ORDER AND ASSESSEE WILL NOT BE ENTITLED TO RAISE IN RELATION TO THE ISSUE INVOLVED IN QUESTION OF LAW IN APPEAL BEFORE HONBLE HIGH COURT. WITH THESE OBSERVATIONS THE APPEAL FILED BY THE ASSESSEE IS DISMISSED UNDER THE PRO VISIONS OF SUB - SECTION (4) OF SECTION 158A OF THE ACT. 5. IDENTICAL ISSUE WAS DECIDED BY THE HON'BLE BOMBAY HIGH COURT IN ASSESSEE'S OWN CASE FOR THE EARLIER YEAR S WHEREIN THE COURT OBSERVED THAT PROVISIONS OF SECTION 40(A)(IA) GETS ATTRACTED IN RESPECT OF THE PAYMENTS MADE TO STOCK EXCHANGES TOWARDS TRANSACTION CHARGES. THE A SSESSEE THEREFORE MOVED A PETITION IN FORM 8 (UNDER SECTION 158A OF THE INCOME TAX ACT) W HEREBY IT WAS ADMITTED THAT IDENTICAL ISSUE WAS DECIDED AGAINST THE ASSESSEE AND IT WOULD ABIDE BY THE SAID DECISION SUBJECT TO THE CONDITION THAT IF THE FINAL DECISION ON THE QUESTION OF LAW IN THE OTHER CASE IS IN FAVOUR OF THE ASSESSEE IT SHALL BE ENTI TLED TO THE BENEFITS OF THE DECISION TAKEN THEREIN. CONSIDERING THE PROVISIONS OF SECTION 158A OF THE ACT AND ALSO IN THE LIGHT OF THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN ASSESSEE'S OWN CASE FOR 20 0 8 - 09 WE DIRECT THE AO TO DISALLOW THE TR ANSACTION CHARGES SUBJECT TO THE OUTCOME O F THE SLP FILED BY THE ASSESSEE. THUS THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE DISMISSED. 6. THE REVENUE IN BOTH THE APPEALS HAVE RAISED IDENTICAL GROUNDS OF APPEAL WHICH READ AS UNDER: - '1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE ED. CIT(A) ERRED IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF CAR LEASE CHARGES OF RS.9474001 - U/S 40(A)(IA) OF THE ACT FOR NON - DEDUCTION OF TDS U/S 194 - I. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE IMPUGNED ORDER OF THE ID. CIT(A) IS CONTRARY TO LAW AND CONSEQUENTLY MERITS TO BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED.' 7. THE CASE OF THE REVENUE IS THAT AS PER PROVISIONS OF SECTION 194 - I OF THE ACT RENT PAID ON CAR LEASE SHOULD BE SUBJECTED TO DEDUCTION OF TAX AT SOURCE. IN THIS REGARD THE AO OBSERVED THAT AS PER THE AMENDED PROVISIONS OF SECTION 194 - I PAYMENTS MADE IN THE FORM OF RENT FOR HIRING ANY 'PLANT' SHOULD BE SUBJ ECTED TO DEDUCTION OF TAX WHEREAS THE ASSESSEE HAS NOT DEDUCTED TAX. THE AO MAINLY RELIED UPON THE PROVISIONS OF SECTION 44BB OF ITA NO S . 5042 5845 &5072 /MUM/2012 M/S. VIOLET ARCH SECURITIES P. LTD. 5 THE ACT WHEREIN THE STATUTE FOR SPECIAL PURPOSES INCLUDED CAR IN THE EXPRESSION 'PLANT'. ADMITTEDLY THE ASSESSEE HIRED CARS F OR TRANSPORTATION NEEDS OF THE BUSINESS AND THE PAYMENTS ARE MADE ON MONTHLY BASIS. THEREFORE IN THE OPINION OF THE AO THE PAYMENTS MADE FOR CAR LEASE RENT IS COVERED BY SECTION 194 - I OF THE ACT CONSEQUENTLY NON - DEDUCTION OF TAX AT SOURCE CAN BE SAID TO BE IN CONTRAVENTION TO PROVISIONS OF SECTION 40(A)(IA). 8. ON AN APPEAL FILED BY THE ASSESSEE THE LEARNED CIT(A) OBSERVED THAT THE DEFINITION OF THE TERM 'PLANT' PROVIDED IN SECTION 44BB OF THE ACT SHOULD NOT BE EXTENDED TO THE LEASE RENT PAID BY THE ASSES SEE UNDER THE NORMAL PROVISIONS OF THE ACT. IN THIS REGARD HE OBSERVED AS UNDER: - '3.4 I HAVE CAREFULLY CONSIDERED THE CONTENTIONS OF THE AO AS WELL AS OF THE L D. AR. I AM INCLINED TO AGREE WITH THE CONTENTIONS OF THE L D. AR OF THE ASSESSEE. THE PROVISIONS OF SECTION 44BB ARE SPECIAL PROVISIONS FOR COMPUTING PROFITS AND GAINS IN CONNECTION WITH THE BUSINESS OF EXPLORATION ETC. OF MINERAL OILS AND SPECIAL PROVISIONS CANNOT OVER - RIDE THE GENERAL PROVISIONS OF THE ACT. I FURTHER FI ND THAT IN SECTION 194 - I 'RENT' MEANS PAYMENT MADE UNDER ANY LEASE SUB LEASE TENANCY OR ANY OTHER AGREEMENT OR ARRANGEMENT FOR THE USE OF ANY OF THE ITEMS MENTIONED THEREIN AND SUCH LIST DOES NOT INCLUDE MOTOR CAR. CONSIDERING THE ABOVE FACTS I ALLOW T HE APPEAL OF THE ASSESSEE AND GRANT RELIEF OF RS. 9 47 000/ - . THIS GROUND OF APPEAL IS ALLOWED.' 9. FURTHER AGGRIEVED REVENUE IS IN APPEAL BEFORE US. THE LEARNED D.R. S UBMITTED THAT THE EXPRESSION 'PLANT' INCLUDES CARS ALSO IN THE ORDINARY PROVISIONS FOR THE PURPOSE OF DEPRECIATION AND HENCE THE AMOUNT PAID BY THE ASSESSEE TOWARDS CAR LEASE SHOULD BE TREATED AS RENT PAID WITHIN THE MEANING OF SECTION 194 - I OF THE ACT. 10. ON THE OTHER HAND THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT SECTION 194 - 1 REFERS TO RENT PAYABLE FOR HIRING OF ANY ITEM MENTIONED IN THE LIST GIVEN IN THE EXPLANATION TO SECTION 194 - 1 OF THE ACT (TAXATION LAWS (AMENDMENT) ACT 2006) AND IT IS ONLY BY VIRTUE OF THE SPECIAL PROVISION TO SECTION 44BB OF THE ACT CAR CAN BE CONSIDERE D AS 'PLANT' AS OTHERWISE IT CANNOT BE TREATED AS FORMING PART OF THE PLANT WHICH WAS TAKEN ON LEASE. AT ANY RATE THE AMOUNT PAID BY THE ASSESSEE IN THE FORM OF LEASE INSTALMENTS NEED NOT NECESSARILY BE THE INTEREST LIKE COMPONENT AND HENCE IT CANNOT B E TREATED AT PAR WITH RENT WITHIN THE MEANING OF SECTION 194 - 1 OF THE ACT. ITA NO S . 5042 5845 &5072 /MUM/2012 M/S. VIOLET ARCH SECURITIES P. LTD. 6 11. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE RECORD. AS RIGHTLY OBSERVED BY THE CIT(A) A BROADER DEFINITION IS GIVEN TO THE EXPRESSION 'PLANT' FOR THE LIMITED PURPOSE OF SECTION 44BB OF THE ACT WHICH CANNOT BE EXTENDED TO THE ORDINARY PROVISIONS. IN THE INSTANT CASE IT IS A CAR NOT OWNED BY THE ASSESSEE. THE ISSUE WITH WHICH WE ARE CONCERNED IS WITH REGARD TO THE RENT PAYABLE BY THE ASSESSEE ON THE LEASED CAR WITHIN THE MEANING OF SECTION 194 - 1 OF THE ACT. IN OUR CONSIDERED VIEW IT CANNOT BE TREATED AS RENT PAYABLE FOR LEASE OF PLANT. IN OTHER WORDS THE EXTENDED DEFINITION OF PLANT PROVIDED UNDER SECTION 44BB OF THE ACT CANNOT BE TAKEN INTO CONSIDERATION FOR THE PURPOSE OF UNDERSTANDING THE EXPRESSION 'PLANT' UNDER SECTION 194 - 1 OF THE ACT IN WHICH EVENT THE PAYMENT MADE FOR LEASE OF CAR IS NOT ATTRACTED BY PROVISIONS OF SECTION 194 - 1 OF THE ACT AND CONSEQUENTLY THE SAME CANNOT BE CONSIDERED FOR DISALLOWANCE U NDER SECTION 40(A)(IA) OF THE ACT. WE THEREFORE UPHOLD THE ORDER OF THE CIT(A) ON THIS ISSUE AND DISMISS THE APPEAL FILED BY THE REVENUE. 12. THE ISSUE RAISED IN ITA NO. 5845/MUM/2013 IS IDENTICAL TO THE ISSUE RAISED IN ITA NO. 5042/MUM/2012 AND OUR DECISION IN ITA NO. 5042 /MUM/ 2012 WILL APPLY MUTATIS MUTANTS TO ITA NO. 5845/MUM/2013. 13. IN THE RESULT THE APPEAL OF THE ASSESSEE AND BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. / ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST JULY 2015. 31.07.2015 SD/ - SD/ - ( N.K. BILLAIYA ) ( SUSHMA CHOWLA ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI ; DATED : 31 ST JULY 2015 ITA NO S . 5042 5845 &5072 /MUM/2012 M/S. VIOLET ARCH SECURITIES P. LTD. 7 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 8 4. / CIT - III 5. / DR F BENCH ITAT MUMBAI 6. / GUARD FILE . / BY ORDER //TRUE COPY// /ASSTT. REGISTRAR) /ITAT MUMBAI N.P.