HSBC SECURITIES AND CAPITAL MARKETS (INDIA) P.LTD, MUMBAI v. ITO (TDS) 1(1), MUMBAI

ITA 5679/MUM/2014 | 2010-2011
Pronouncement Date: 05-10-2016 | Result: Allowed

Appeal Details

RSA Number 567919914 RSA 2014
Assessee PAN AAACJ1395E
Bench Mumbai
Appeal Number ITA 5679/MUM/2014
Duration Of Justice 2 year(s) 26 day(s)
Appellant HSBC SECURITIES AND CAPITAL MARKETS (INDIA) P.LTD, MUMBAI
Respondent ITO (TDS) 1(1), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 05-10-2016
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted H
Tribunal Order Date 05-10-2016
Date Of Final Hearing 21-06-2016
Next Hearing Date 21-06-2016
Assessment Year 2010-2011
Appeal Filed On 09-09-2014
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH MUMBAI BEFORE S/SHRI SANJAY ARORA ACCOUNTANT MEMBER AND AMARJIT SINGH JUDICIAL MEMBER / I .T.A. NO.5679/MUM/2014 ( / ASSESSMENT YEAR: 2010-11) M/S. HSBC SECURITIES AND CAPITAL MARKETS (INDIA) PVT. LTD. 52/60 MAHATMA GANDHI ROAD FORT MUMBAI - 400001 / VS. INCOME TAX OFFICER (TDS) (OSD) 1(1) 9 TH FLOOR SMT. K.G.MITTAL AYURVEDIC HOSPITAL BUILDING MUMBAI - 400002 ./ ./ PAN/GIR NO. : AAACJ1395E ( / APPELLANT ) .. ( / RESPONDENT ) ASSESSEE BY: MS. KRUPA R. GANDHI & MANSHI PADHIAR DEPARTMENT BY: SHRI S.K.MISHRA / DATE OF HEARING: 22.06.2016 /DATE OF PRONOUNCEMENT: 05.10.2016 ! / O R D E R PER AMARJIT SINGH JM: THE ASSESSEE HAS FILED THE PRESENT APPEAL AGAINST THE ORDER DATED 23.06.2014 PASSED BY THE COMMISSIONER OF INCO ME TAX (APPEALS)-14 MUMBAI [HEREINAFTER REFERRED TO AS TH E CIT(A)] RELEVANT TO THE A.Y.2010-11. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS:- GROUND I: PRINCIPLE OF NATURAL JUSTICE: ITA NO.5679/MUM/2014 ASSESSMENT YEAR: 2010-11 2 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LEARNED CIT(A) ERRED IN UPHOLDING THE ACTI ON OF THE INCOME TAX OFFICER (OSD) (TDS)-1(1) MUMBAI (T HE AO) IN PASSING AN ORDER UNDER SECTION 201(1) / 201 (1A) OF THE ACT WITHOUT GIVING A FAIR AND REASONABLE OPPORT UNITY OF HEARING TO THE APPELLANT AND THEREBY VIOLATING THE PRINCIPLES OF NATURAL JUSTICE. 2. THE LEARNED CIT(A) FAILED TO APPRECIATE AND OUGHT T O HAVE HELD THAT THE NOTICE FOR THE HEARING WAS NOT RECEIV ED BY THE APPELLANT. 3. THE APPELLANT PRAYS THAT THE ORDER PASSED BY THE AO UNDER SECTION 201(1) / 201(1A) OF THE ACT BE ANNULLED AS VOID AB- INITIO AND /OR OTHERWISE BAD IN LAW. GROUND II: INTEREST LEVIED UNDER SECTION 201(1A) OF THE ACT AMOUNTING TO RS.2 72 530/- :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LEARNED CIT(A) ERRED IN UPHOLDING THE ACTI ON OF THE AO IN LEVYING THE INTEREST UNDER SECTION 201(1A ) OF THE ACT AMOUNTING TO RS.2 75 530/- ON THE ALLEGED GROUN D THAT THE APPELLANT FAILED TO DEDUCT TAX UNDER SECTION 19 4J OF THE ACT FROM THE TRANSACTION CHARGES PAID TO THE STOCK EXCHANGES. 2. HE FAILED TO APPRECIATE AND OUGHT TO HAVE HELD THAT : I. INTEREST OF THE ACT IS COMPENSATORY IN NATURE AND C AN BE LEVIED ONLY WHEN THERE IS DEFAULT IN THE PAYMENT OF TAXES. II. WHEN THE RECIPIENT OF INCOME CLAIMS THE REFUND OF T AXES PAID BY THEM OR FILES THE LOSS RETURN OF INCOME DE FAULT IN PAYMENT OF TAXES DOES NOT ARISE AND THEREFORE TH E INTEREST CANNOT BE LEVIED UNDER SECTION 201(1A) OF THE ACT ON THE APPELLANT. III. IN THE CASE OF THE APPELLANT THE QUESTION OF LEVY OF INTEREST DOES NOT ARISE WHERE THE TAX LIABILITY OF THE RECIPIENTS ITSELF IS NOT THERE. 3. THE APPELLANT PRAYS THAT THE INTEREST LEVIED UNDER SECTION 201(1A) OF THE ACT BY THE AO BE DELETED. ITA NO.5679/MUM/2014 ASSESSMENT YEAR: 2010-11 3 GROUND III: EXCESS LIABILITY CALCULATED UNDER SECTION 201(1A) OF THE ACT :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LEARNED CIT(A) ERRED IN UPHOLDING THE ACTI ON OF THE AO IN CALCULATING THE INTEREST UNDER SECTION 201(1A ) OF THE ACT UPTO THE DATE ON WHICH TAX IS TO BE DEDUCTED UN DER SECTION 194J OF THE ACT BY THE APPELLANT. 2. HE FAILED TO APPRECIATE AND OUGHT TO HAVE HELD THAT THE RECIPIENTS HAVE ALREADY PAID TAXES ON THEIR INCOME AS ADVANCE TAX OR SELF-ASSESSMENT TAX AND THEREFORE I NTEREST U/S.201(1A) OF THE ACT IS TO BE CALCULATED UPTO THE DATE ON WHICH RECIPIENTS PAID TAXES ON THEIR INCOME AS ADVA NCE TAX OR SELF-ASSESSMENT TAX. 3. THE APPELLANT PRAYS THAT THE AO BE DIRECTED TO RECA LCULATE THE INTEREST LIABILITY UNDER SECTION 201(1A) OF THE ACT FROM THE DATE ON WHICH TAX IS TO BE DEDUCTIBLE UNDER SEC TION 194J OF THE ACT UPTO THE DATE ON WHICH THE RECIPIENT HAS PAID TAXES ON THEIR INCOME AS ADVANCE TAX OR SELF ASSESS MENT TAX. ADDITIONAL GROUND NO. I:- 1. THERE IS NO LIABILITY TO DEDUCT TAX AT SOURCE U/S.1 94J OF THE ACT ON THE TRANSACTION CHARGES PAID TO STOCK EXCHAN GES AND THUS THE QUESTION OF LEVYING INTEREST ON NON-DEDUCT ION OR LATE PAYMENTS OF TDS U/S.201(1A) OF THE ACT DOES NO T ARISE. 2. THE APPELLANT PRAYS THAT THE ORDER PASSED BY THE IN COME TAX OFFICER (TDS)-1(1) MUMBAI LEVYING INTEREST U/S.201(1A) OF THE ACT AMOUNTING TO RS.2 75 530/- BE SET ASIDE AND THE DEMAND BE DELETED. 4. THE DEPARTMENTAL REPRESENTATIVE RAISED THE ISSUE THAT THE APPEAL OF THE ASSESSEE IS TIME BARRED BY 3 DAYS. T HE ASSESSEE FILED AN APPLICATION ALONG WITH AN AFFIDAVIT STATING THA T THE ASSESSEE RECEIVED THE ORDER ON 8 TH JULY 2014 AND LAST DAY OF FILING THE APPEAL ITA NO.5679/MUM/2014 ASSESSMENT YEAR: 2010-11 4 WAS 5 TH SEPTEMBER 2014 ON THAT DAY HEAD OF FINANCE WAS NOT IN OFFICE AND 6 TH AND 7 TH SEPTEMBER WERE NON WORKING DAYS AND 8 TH SEPTEMBER DUE TO GANPATI VISARJAN ITAT STAFF HAD LE FT EARLY. IN VIEW OF THE CONTENTION RAISED BY ASSESSEE WHICH IS SUPPORTED BY AFFIDAVIT WE ARE OF THE VIEW THAT THERE ARE SUFFI CIENT AND REASONABLE GROUND ARE ON RECORD TO CONDONE DELAY IN FILING THE APPEAL HENCE APPLICATION FOR CONDONATION OF DELAY IS HEREBY ALLOWED. 5. THE BRIEF FACTS OF THE CASE ARE THAT IN THE LIGH T OF THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF M/S.KOT AK SECURITIES LTD. THE INFORMATION WAS CALLED FROM M/S. BOMBAY S TOCK EXCHANGE/S M/S. NATIONAL COMMODITY AND DERIVATIVE EXCHANGE AND M/S. MULTI COMMODITY EXCHANGE OF INDIA. AFTER THE RECEIPT OF THE INFORMATION RECEIVED FROM M/S.BOMBAY STOCK EXCH ANGE M/S. NATIONAL STOCK EXCHANGE IT WAS FOUND THAT THE ASSE SSEE FAILED TO DEDUCT THE TDS ON PAYMENT ON ACCOUNT OF TRANSACTION CHARGES TO M/S.BOMBAY STOCK EXCHANGE AND M/S. NATIONAL STOCK E XCHANGE. THE SERVICES RENDERED BY THE STOCK EXCHANGES AGAINS T THE PAYMENT OF TRANSACTION CHARGES REPRESENTS PAYMENT FOR MANAG ERIAL SERVICES AND ARE COVERED UNDER THE PROVISION OF SECTION 194J READ WITH EXPLANATION 2 TO SECTION 9(1)(VII) OF THE INCOME TA X ACT 1961( IN SHORT THE ACT). THEREAFTER A SHOW CAUSE NOTICE W AS ISSUED AND SERVED UPON THE ASSESSEE. AFTER DISCUSSION AND THE DETAILS AVAILABLE ON RECORD THE TOTAL DEFAULT WAS WORKED OUT AS UNDER :- SR. DESCRIPTION TRANSACTION TDS INTEREST TOTAL ITA NO.5679/MUM/2014 ASSESSMENT YEAR: 2010-11 5 NO. CHARGES U/S.201(1A) DEFAULT 1 BOMBAY STOCK EXCHANGE RS.9 65 675/- -- RS.19 694/- RS.19 694/- 2 NATIONAL STOCK EXCHANGE RS.1 25 44 648/- -- RS.2 55 836/- RS.2 55 836/- TOTAL RS.1 35 10 323/- RS.2 75 530/- RS.2 75 530/- 6. THEREAFTER THE DEMAND NOTICE WAS ISSUED FOR RS.2 75 530/-. FEELING AGGRIEVED THE ASSESSEE FILED AN APPEAL BEFO RE THE CIT(A) WHO CONFIRMED THE ORDER OF THE ASSESSING OFFICER T HEREFORE THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US. ISSUE NO.1 TO 3 AND ADDITONAL GROUND:- 7. ALL THESE ISSUES ARE INTERCONNECTED THEREFORE A RE BEING TAKEN UP TOGETHER FOR ADJUDICATION. UNDER THESE ISSUES T HE SOLE CONTROVERSY IS THAT WHETHER THE ASSESSEE WAS UNDER OBLIGATION TO DEDUCT THE TDS ON THE TRANSACTION CHARGES PAYABLE T O THE M/S.BOMBAY STOCK EXCHANGE AND M/S. NATIONAL STOCK E XCHANGE AMOUNTING TO RS.9 65 675/- AND RS.1 25 44 648/- RES PECTIVELY AND WAS ALSO IN DEFAULT ON ACCOUNT OF NON PAYMENT OF IN TEREST ALSO. THIS MATTER OF CONTROVERSY HAS BEEN ADJUDICATED BY THE HONBLE SUPREME COURT OF INDIA IN CASE OF COMMISSIONER OF I NCOME TAX 4 MUMBAI VS. KOTAK SECURITIES LTD. [2016] 67 TAXMANN. COM 356 (SC). NO DOUBT IN THE SAID CASE THE HONBLE BOMBAY HIGH COURT WAS OF THE VIEW THAT THE TRANSACTION CHARGES PAID B Y THE MEMBER OF THE M/S. BOMBAY STOCK EXCHANGE TO TRANSACT BUSINESS OF SALE AND ITA NO.5679/MUM/2014 ASSESSMENT YEAR: 2010-11 6 PURCHASE OF SHARES AMOUNTS TO PAYMENT OF A FEE FOR TECHNICAL SERVICES RENDERED BY THE BOMBAY STOCK EXCHANGE AND THEREFORE UNDER THE PROVISIONS OF SECTION 194J OF THE ACT ON SUCH PAYMENTS TDS WAS DEDUCTIBLE AT SOURCE. 8. THEREAFTER THE MATTER WENT IN APPEAL BEFORE THE HONBLE SUPREME COURT OF INDIA WHEREIN IT IS SPECIFICALLY H ELD THAT THE SERVICES MADE AVAILABLE BY THE M/S. BOMBAY STOCK EX CHANGE [BSE ONLINE TRADING (BOLT) SYSTEM] FOR WHICH TRANSACTION CHARGES ARE PAID BY MEMBERS OF BSE ARE COMMON SERVICES THAT EVE RY MEMBER OF STOCK EXCHANGE IS NECESSARILY REQUIRED TO AVAIL OF THE CARRY OUT TRADING IN SECURITIES IN STOCK EXCHANGE AND SUCH SE RVICES DO NOT AMOUNT TO TECHNICAL SERVICES PROVIDED BY STOCK EX CHANGE NOT BEING SERVICES SPECIFICALLY SOUGHT FOR BY USER OR C ONSUMER. THEREFORE TRANSACTION CHARGES PAID BY THE MEMBERS OF BSE TO BSE ARE IN NATURE OF PAYMENTS MADE FOR FACILITIES P ROVIDED BY STOCK EXCHANGE AND NO TDS ON SUCH PAYMENTS WOULD BE DEDUCTIBLE UNDER SECTION 194J OF THE ACT. 9. IN THE INSTANT CASE THE REVENUE WAS OF THE VIEW THAT THE SERVICES RENDERED BY THE STOCK EXCHANGE IS PAYMENT ON TRANSACTION CHARGES REPRESENTS PAYMENT FOR MANAGERIAL SERVICES AND ARE COVERED UNDER THE PROVISION OF SECTION 194J READ WI TH EXPLANATION 2 TO SECTION 9(1)(VII) OF THE ACT. ACCORDINGLY THE REVENUE WAS OF THE VIEW THAT THE INTEREST U/S.201(1) / 201(1A) OF THE ACT IS ALSO LIABLE TO BE PAYABLE. THIS VIEW HAS BEEN CHANGED B Y THE HONBLE SUPREME COURT OF INDIA IN THE ABOVE CITED CASE DISC USSED ABOVE. IN ITA NO.5679/MUM/2014 ASSESSMENT YEAR: 2010-11 7 VIEW OF THE ABOVE MENTIONED LAW IN CASE OF COMMISSI ONER OF INCOME TAX 4 MUMBAI VS. KOTAK SECURITIES LTD. (SUP RA) WE ARE OF THE VIEW THAT THE ASSESSEE WAS NOT LIABLE TO DED UCT THE TDS UPON THE TRANSACTION CHARGES PAID TO THE STOCK EXCHANGE. THEREFORE WHEN THE AMOUNT WAS NOT DUE THEN NO INTEREST WAS LI ABLE TO BE PAYABLE. ACCORDINGLY THE ORDER PASSED BY THE CIT( A) IS WRONG AGAINST LAW AND FACTS AND IS LIABLE TO BE SET ASIDE AND THESE ISSUES ARE DECIDED IN FAVOUR OF THE ASSESSEE AGAINST THE R EVENUE. 10. IN THE RESULT THE APPEAL OF THE ASSESSEE IS HE REBY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 5 TH OCTOBER 2016 SD/- SD/- (SANJAY ARORA) (AMARJIT SINGH) / ACCOUNTANT MEMBER #$ /JUDICIAL MEMBER % & MUMBAI; ' DATED : 5 TH OCTOBER 2016 MP MP MP MP / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ( ) / THE CIT(A)- 4. ( / CIT 5. )*+ $$ - - % & / DR ITAT MUMBAI 6. +./ 0 / GUARD FILE. / BY ORDER ) $ //TRUE COPY// / ! (DY./ASSTT. REGISTRAR) ' # % & / ITAT MUMBAI