DCIT 4(1), MUMBAI v. AMU SHARES & SECURITIES LTD, MUMBAI

ITA 5954/MUM/2009 | 2005-2006
Pronouncement Date: 16-07-2010 | Result: Partly Allowed

Appeal Details

RSA Number 595419914 RSA 2009
Assessee PAN AAACA3778L
Bench Mumbai
Appeal Number ITA 5954/MUM/2009
Duration Of Justice 8 month(s) 7 day(s)
Appellant DCIT 4(1), MUMBAI
Respondent AMU SHARES & SECURITIES LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 16-07-2010
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted D
Tribunal Order Date 16-07-2010
Assessment Year 2005-2006
Appeal Filed On 09-11-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D MUMBAI BEFORE SHRI R.V. EASWAR (PRESIDENT) AND SHRI R.K. PANDA (ACCOUNTANT MEMBER) I.T.A. NO. 5954/MUM/2009 (ASSESSMENT YEAR : 2005-06) I.T.A. NO. 5955/MUM/2009 (ASSESSMENT YEAR : 2006-07) DCIT-4(1) 6 TH FLOOR R. NO. 640 AAYAKAR BHAVAN MUMBAI-400 020 VS. M/S. AMU SHARES & SECURITIES LTD. CRESCENT CHAMBERS GR. FLOOR HOMI MODI CROSS LANE FORT MUMBAI-400 001 PAN:AAACA3778L APPELLANT RESPONDENT APPELLANT BY : SHRI JITENDRA YADAV RESPONDENT BY : NONE ORDER DATE OF HEARING: 06.07.2010 DATE OF ORDER: 16.07.2010 PER R.K.PANDA AM THE ABOVE TWO APPEALS FILED BY THE REVENUE ARE DIR ECTED AGAINST THE SEPARATE ORDERS DATED 21 ST AUGUST 2009 AND 26 TH AUGUST 2009 OF THE CIT(A)-IV MUMBAI RELATING TO ASSESSMENT YEARS 2005-06 AND 200 6-07 RESPECTIVELY. SINCE COMMON GROUNDS ARE INVOLVED IN BOTH THE APPEALS TH EREFORE THESE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON O RDER. 2. NONE APPEARED ON BEHALF OF THE ASSESSEE DESPITE SERVICE OF NOTICE. SINCE THE GROUNDS RAISED BY THE REVENUE IN BOTH THE APPEA LS ARE COVERED THEREFORE THESE WERE TAKEN UP FOR HEARING. I.T.A. NO. 5954/MUM/2009 (A.Y. 2005-06) 3. IN GROUNDS OF APPEAL NO. 1 THE REVENUE HAS CHALL ENGED THE ORDER OF THE CIT(A) IN DELETING THE DISALLOWANCE IN RESPECT OF S TOCK EXCHANGE EXPENSES U/S. 40(A)(IA) OF THE INCOME-TAX ACT 1961 (THE ACT) AMO UNTING TO RS.16 47 419. 4. AFTER HEARING BOTH THE SIDES WE FIND THE ASSESS ING OFFICER HELD THAT CLEARING HOUSE CHARGES PAID TO THE STOCK EXCHANGE ARE FOR TE CHNICAL SERVICES FALLING WITHIN THE PURVIEW OF SECTION 194J AND 194C AND SINCE THE ASSE SSEE HAS NOT DEDUCTED TDS ITA NOS. 5954 & 5955/MUM/2009 M/S. AMU SHARES & SECURITIES LTD. ========================= 2 THE PROVISIONS OF SECTION 40(A)(IA) ARE APPLICABLE. HE ACCORDINGLY MADE ADDITION OF RS.16 47 419 TO THE TOTAL INCOME OF THE ASSESSEE. 5. BEFORE THE CIT(A) THE ASSESSEE GAVE THE BREAK UP OF THE EXPENSES THE DETAILS OF WHICH ARE AS UNDER : PARTICULARS AMOUNT (RS.) TRANSACTION CHARGES 1575769 MTNL LEASE LINE CHARGES 15000 CONTRIBUTION TO INVESTORS PROTECTION FUND 3005 EPABX CHARGES 3240 WAN NETWORK (LEASE LINE) CHARGES 19500 CONTRIBUTION TO TRADE GUARANTEE FUND 2905 INSURANCE PREMIUM 16000 TWS CHARGES 12000 TOTAL 1647419 IT WAS SUBMITTED THAT THE PAYMENT MADE TO STOCK EXC HANGE WAS NOT FOR TECHNICAL SERVICES AND TDS WAS NOT DEDUCTIBLE ON TH E SAME. 6. THE CIT(A) DELETED THE ADDITION BASED ON THE ARG UMENTS ADVANCED BY THE ASSESSEE AND FOLLOWING THE DECISION OF THE TRIBUNAL IN THE CASE OF KOTAK SECURITIES VS. ADDL. CIT VIDE I.T.A. NO. 1955/MUM/2008 ORDER D ATED 26 TH AUGUST 2008 FOR A.Y. 2005-06 WHEREIN IT HAS BEEN HELD THAT STOCK EXCHANG E DOES NOT PROVIDE MANAGERIAL SERVICES AND THE FEES PAID BY THE MEMBER TO THE STO CK EXCHANGE IS NOT FOR ANY TECHNICAL SERVICES RENDERED. AGGRIEVED WITH SUCH O RDER OF THE CIT(A) THE REVENUE IS IN APPEAL BEFORE US. 7. AFTER HEARING THE LEARNED DR AND ON PERUSAL OF THE ORDER OF THE CIT(A) WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A ). THE ISSUE STANDS COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY T HE DECISION OF THE TRIBUNAL IN KOTAK SECURITIES (SUPRA) WHICH HAS BEEN RELIED ON B Y THE CIT(A). THE LEARNED DR COULD NOT BRING ANY OTHER DECISION REVERSING THE SA ID DECISION. IN ABSENCE OF ANY DISTINGUISHABLE FEATURES BROUGHT BEFORE US WE DO N OT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) AND ACCORDINGLY UPHOLD THE SAME. THIS G ROUND RAISED BY THE REVENUE IS ACCORDINGLY DISMISSED. 8. GROUNDS OF APPEAL NO. 2 BY THE REVENUE RELATES T O THE ORDER OF THE CIT(A) IN DELETING THE DISALLOWANCE OF RS.6 22 925 ON ACCOUNT OF DEPRECIATION ON BSE MEMBERSHIP CARD. AFTER HEARING BOTH THE SIDES WE FIND THE ASSESSING OFFICER DISALLOWED AN AMOUNT OF RS.6 22 925 CLAIMED BY THE ASSESSEE AS DEPRECIATION ON ITA NOS. 5954 & 5955/MUM/2009 M/S. AMU SHARES & SECURITIES LTD. ========================= 3 BSE MEMBERSHIP CARD. IN APPEAL THE CIT(A) FOLLOWI NG THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE A.Y. 2001-02 ALLOWED THE CLAIM MADE BY THE ASSESSEE FOR WHICH THE REVENUE IS IN APPEAL BEFORE US. 9. AFTER HEARING THE LEARNED DR AND ON PERUSAL OF T HE ORDERS OF THE AUTHORITIES BELOW WE FIND THE ISSUE STANDS COVERED AGAINST THE ASSESSEE AND IN FAVOUR OF THE REVENUE BY THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. M/S. TECHNO SHARES & STOCK LTD. VIDE INCOME TAX APPEAL NO. 971 OF 2006 DECIDED ON 11TH SEPTEMBER 2009. IN VIEW OF THE DECISION OF T HE JURISDICTIONAL HIGH COURT THIS GROUND BY THE REVENUE IS ALLOWED. I.T.A. NO. 5955/MUM/09 (A.Y. 2006-07) 10. IN GROUNDS OF APPEAL NO. 1 THE REVENUE HAS CHA LLENGED THE ORDER OF THE CIT(A) IN DELETING THE DISALLOWANCE MADE IN RESPECT OF TRANSACTIONS & LEASELINE CHARGES U/S. 40(A)(IA) OF THE ACT AMOUNTING TO RS.2 4 31 340. 10.1 AFTER HEARING BOTH THE SIDES WE FIND THIS GRO UND IS IDENTICAL TO GROUNDS OF APPEAL NO. 1 IN I.T.A. NO. 5954/ MUM/2009. WE HAVE ALREADY DECIDED THE ISSUE AND THE GROUND RAISED BY THE REVENUE IS DISMISSED. FOL LOWING THE SAME RATIO THIS GROUND BY THE REVENUE HAS BEEN DISMISSED. 11. GROUNDS OF APPEAL NO. 2 BY THE REVENUE READS AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) HAS ERRED IN HOLDING THAT F&O/DERIVATIVE TRA NSACTION DURING 1.4.2005 TO 24.01.2006 AS NON SPECULATIVE BUSINESS LOSS WITHOUT APPRECIATING THE FACT THAT AS PER EXPLANATORY NOTE TO FINANCE ACT 2005 DERIVATIVE TRANSACTIONS HAS TO BE TREATED AS S PECULATIVE TRANSACTIONS AS AMENDMENT TO SECTION 43(5)(D) OF TH E I.T. ACT IS NOT RETROSPECTIVE IN NATURE. 12. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSES SING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTED THAT THE ASSESSEE HAS DEBITED THE DERIVATIVE LOSS OF RS.57 68 189. THE ASSESSING OFFICER ASKED THE ASSE SSEE TO SUBMIT THE BIFURCATION OF DERIVATIVE LOSS FROM F&O TRADING INCURRED UP TO 24 TH JANUARY 2006 AND FROM 25 TH JANUARY 2006 TO 31 ST MARCH 2006 AND TO EXPLAIN AS TO WHY THE DERIVATIV E LOSS UP TO THE PERIOD 25 TH JANUARY 2006 SHOULD NOT BE TREATED AS SPECULATION LOSS. IT WAS EXPLAINED BY THE ASSESSEE THAT IT HAS INCURRED THE LOSS FROM F&O UP TO 24 TH JANUARY 2006 AT RS.45 67 552 AND FOR THE PERIOD FROM 25 TH JANUARY 2006 TO 31 ST MARCH 2006 AT RS.12 00 637. IT WAS FURTHER SUBMITTED THAT THE LOSS UNDER F&O TRADING INCURRED UP TO 24 TH JANUARY 2006 DOES NOT QUALIFY AS SPECULATION LOSS SINCE FOR THE LOSS TO BE ITA NOS. 5954 & 5955/MUM/2009 M/S. AMU SHARES & SECURITIES LTD. ========================= 4 TREATED AS SPECULATION AS DEALINGS IN DERIVATIVES W AS A SEPARATE KIND OF TRANSACTION WHICH DID NOT INVOLVE ANY PURCHASE AND SALE OF SHAR ES AND THEREFORE LOSS ON ACCOUNT OF DERIVATIVE TRADING CANNOT BE TREATED AS SPECULATION LOSS. THE DECISION OF THE TRIBUNAL IN THE CASE OF DCIT VS. SSKI INVESTORS SERVICES PVT. LTD. REPORTED IN 113 TTJ 511 AND THE DECISION IN THE CASE OF RBK SECURIT IES LTD. REPORTED IN 118 TTJ 455 WERE CITED. HOWEVER NOT BEING SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSEE THE ASSESSING OFFICER HELD THE LOSS OF RS.45 67 552 AS INCURRED FROM SPECULATION TRANSACTIONS AND THEREFORE HELD AS SPECULATION LO SS AND HE DID NOT ALLOW THE SAME TO BE SET OFF AGAINST NON SPECULATION BUSINESS INCOME U/S. 43(5) OF THE ACT. 13. IN APPEAL THE CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE IN VIEW OF THE DECISION OF THE TRIBUNAL CITED BEFORE THE ASSESSING OFFICER. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REVENUE IS IN APPEAL BEFOR E US. 14. AFTER HEARING THE LEARNED DR AND ON PERUSAL OF THE ORDERS OF THE AUTHORITIES BELOW WE FIND THE ISSUE STANDS COVERED IN FAVOUR O F THE REVENUE AND AGAINST THE ASSESSEE BY THE DECISION OF THE KOLKATA SPECIAL BEN CH OF THE TRIBUNAL IN THE CASE OF SHREE CAPITAL SERVICES VS. ACIT. WE FIND THE SPECI AL BENCH IN THE SAID DECISION HAS IMPLIEDLY OVERRULED THE DECISION IN THE CASE OF SSK INVESTORS (SUPRA) AND RBK SECURITIES (SUPRA) WHICH HAS BEEN RELIED ON BY THE CIT(A). THE SPECIAL BENCH IN THE SAID DECISION HAS HELD AS UNDER: (I) A DERIVATIVE IS A SECURITY REPRESENTING THE V ALUE OF THE UNDERLYING STOCKS AND SHARES AND MUST BE GIVEN THE SAME TREATM ENT AS THAT GIVEN TO THE STOCKS AND SHARES. ALSO S. 43(5) USE S THE TERM COMMODITY IN A WIDER SENSE AND COVERS DERIVATIVE S. FURTHER THE FACT THAT S. 43(5)(D) EXEMPTS CERTAIN DERIVATIVES F ROM THE AMBIT OF THE DEFINITION OF SPECULATION TRANSACTION SHOWS THAT TH EY WOULD OTHERWISE HAVE COME WITHIN THAT TERM AS OTHERWISE THE AMENDME NT WOULD BE REDUNDANT. (II) CLAUSE (D) OF S. 43(5) CANNOT BE HELD TO BE CL ARIFICATORY BECAUSE IT DOES NOT EXEMPT ALL TRANSACTIONS IN DERIVATIVES BUT ONLY THE ELIGIBLE TRANSACTIONS ON RECOGNISED STOCK EXCHANGES. RUL ES 6DDA AND 6DDB WHICH DEAL WITH RECOGNISED EXCHANGES WERE IN SERTED W.E.F. 1.7.2005. CONSEQUENTLY IT APPLIES ONLY TO A.Y. 20 06-2007 & ONWARDS. 15. SINCE THE CIT(A) HAS ALLOWED THE APPEAL OF THE ASSESSEE BY RELYING ON CERTAIN DECISIONS WHICH WERE OVERRULED BY THE SPECIAL BENCH OF THE TRIBUNAL THEREFORE RESPECTFULLY FOLLOWING THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL THE ORDER OF THE CIT(A) ON THIS ISSUE IS SET ASIDE AND THAT OF T HE ASSESSING OFFICER IS RESTORED. ITA NOS. 5954 & 5955/MUM/2009 M/S. AMU SHARES & SECURITIES LTD. ========================= 5 16. IN GROUNDS OF APPEAL NO. 3 THE REVENUE HAS CHA LLENGED THE ORDER OF THE CIT(A) IN DELETING THE DISALLOWANCE OF RS.4 67 194 ON ACCOUNT OF DEPRECIATION ON BSE MEMBERSHIP CARD. 16.1 AFTER HEARING BOTH THE SIDES WE FIND THIS GRO UND IS IDENTICAL TO GROUNDS OF APPEAL NO. 2 IN I.T.A. NO. 5954/MUM/2009. WE HAVE ALREADY DECIDED THE ISSUE AND THE GROUND RAISED BY THE REVENUE HAS BEEN ALLOWED. FOLLOWING THE SAME RATIO THIS GROUND BY THE REVENUE IS ALLOWED. 17. IN THE RESULT BOTH THE APPEALS FILED BY THE RE VENUE ARE PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 16 TH JULY 2010 SD/- (R.V. EASWAR) PRESIDENT SD/- (R.K. PANDA) ACCOUNTANT MEMBER MUMBAI DATE 16 TH JULY 2010 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A)-IV MUMBAI 4. THE CIT-4 MUMBAI 5. THE DR D BENCH. //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT MUMBAI BENCHES MUMBAI TPRAO