DCIT CIR 4(2), MUMBAI v. PRANAV SECURITIES P. LTD, MUMBAI

ITA 6443/MUM/2009 | 2006-2007
Pronouncement Date: 29-12-2010 | Result: Dismissed

Appeal Details

RSA Number 644319914 RSA 2009
Assessee PAN AABCP4651L
Bench Mumbai
Appeal Number ITA 6443/MUM/2009
Duration Of Justice 1 year(s) 15 day(s)
Appellant DCIT CIR 4(2), MUMBAI
Respondent PRANAV SECURITIES P. LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 29-12-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted C
Date Of Final Hearing 23-12-2010
Next Hearing Date 23-12-2010
Assessment Year 2006-2007
Appeal Filed On 14-12-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C : MUMBAI BEFORE SHRI D. MANMOHAN VICE PRESIDENT AND SHRI B.RAMAKOTAIAH ACCOUNTANT MEMBER ITA. NO. 6443/MUM/2009 ASSESSMENT YEAR 2006-2007 THE ACIT CIR. 4 (2) MUMBAI 400 020. VS. M/S. PRANAV SECURITIES PVT. LTD. MUMBAI 400 001 PAN AABCP4651L (APPELLANT) (RESPONDENT) FOR APPELLANT : SHRI D. SONGATE (DR) FOR RESPONDENT : -NONE- ORDER PER D. MANMOHAN V.P. 1. THIS APPEAL IS FILED AT THE INSTANCE OF THE RE VENUE AND IT PERTAINS TO THE ASSESSMENT YEAR 2006-2007. THE CASE WAS ORIGINALLY FIXED FOR HEARING ON 9-8-2010 ON WHICH DATE ASSESSE E-COMPANY REQUESTED FOR ADJOURNMENT AND ACCORDINGLY THE CASE WAS RE-FIXED FOR HEARING ON 20-10-2010. SINCE THE BENCH DID NOT FUNC TION ON THE SAID DATE AS PER THE STANDARD PRACTICE FOLLOWED BY THE REGISTRY THE NEXT DATE OF HEARING WAS DISPLAYED IN THE NOTICE BOARD A ND THUS THE CASE WAS LISTED FOR HEARING ON 23-12-2010. HOWEVER ON T HE SAID DATE NONE APPEARED ON BEHALF OF THE ASSESSEE. WE THEREFORE P ROCEED TO DISPOSE OF THE APPEAL EX-PARTE QUA THE ASSESSEE. 2. GROUNDS URGED BY THE REVENUE ARE TAKEN-UP IN SE RIATIM. VIDE GROUND NO.1 THE REVENUE CONTENDS THAT THE CIT (A) ERRED IN DELETING THE DISALLOWANCE MADE IN RESPECT OF VSAT LEASE LINE AND TRANSACTION CHARGES UNDER SECTION 40(A)(IA) OF THE ACT. ACCORDING TO THE REVENUE THESE WERE COMPOSITE CHARGES PAID BY TH E ASSESSEE FOR PROFESSIONAL AND TECHNICAL SERVICES RENDERED BY THE STOCK EXCHANGE TO ITS MEMBERS AND THUS THE ASSESSEE OUGHT TO HAVE DED UCTED TAX AT 2 SOURCE AND IN THE ABSENCE OF SUCH DEDUCTION THE PRO VISIONS OF SECTION 40(A)(IA) GETS ATTRACTED. 3. ON AN APPEAL FILED BY THE ASSESSEE-COMPANY THE LEARNED CIT(A) OBSERVED THAT THE PAYMENTS MADE BY THE ASSES SEE DO NOT FALL WITHIN THE DOMAIN OF FEES FOR TECHNICAL SERVICES AND BY APPLYING THE DECISION OF THE ITAT MUMBAI BENCH IN THE CASE OF K OTAK SECURITIES (REPORTED IN 25 SOT 440) HE CONCLUDED THAT THE IMPU GNED SUM IS NOT DISALLOWABLE UNDER SECTION 40(A)(IA) OF THE ACT. 4. LEARNED DR COULD NOT PLACE ANY CONTRARY DECISIO N ON THIS ISSUE AND MERELY RELIED UPON THE ORDER OF THE ASSES SING OFFICER. SINCE THE VIEW TAKEN BY THE LEARNED CIT(A) IS SUPPORTED B Y THE DECISION OF COORDINATE BENCH OF THE ITAT WE DO NOT FIND ANY IN FIRMITY IN THE ORDER PASSED BY HIM AND ACCORDINGLY REJECT GROUND N O.1 OF THE REVENUE. 5. VIDE GROUND NO.2 THE REVENUE CONTENDS THAT PENA LTY OF RS.2 14 465/- WAS LEVIED BY THE ASSESSING OFFICER O N ACCOUNT OF VIOLATION OF BYE LAWS OF THE STOCK EXCHANGE AND THE REFORE SUCH PAYMENTS SHOULD BE CONSIDERED AS PAYMENTS MADE FOR INFRACTION OF LAW IN WHICH EVENT THE SAME CANNOT BE ALLOWED AS DE DUCTION UNDER SECTION 37 OF THE ACT. SINCE THE ASSESSING OFFICER DISALLOWED THE CLAIM OF DEDUCTION THE ASSESSEE-COMPANY PREFERRED AN APP EAL AND CONTENDED BEFORE THE LEARNED CIT(A) THAT STOCK EXCH ANGES ARE NOT GOVERNMENT OR SEMI-GOVERNMENT BODIES AND PAYMENTS M ADE TO STOCK EXCHANGE FOR VIOLATION OF THEIR REGULATIONS CANNOT BE CATEGORISED AS PAYMENTS FOR INFRACTION OF LAW. LEARNED CIT(A) ACCE PTED THE PLEA OF THE ASSESSEE AND THUS THE REVENUE IS IN APPEAL BEFORE U S. 6. LEARNED DR SUBMITTED THAT PENALTY IS IMPOSED UN DER SEBI RULES 1995 WHICH HAS A BINDING CHARACTER AND HAS A STATUTORY FORCE IN WHICH EVENT ANY PAYMENT MADE FOR NOT ADHER ING TO THE 3 BINDING NATURE OF THE RULES WOULD FALL WITHIN THE D OMAIN OF PAYMENTS MADE FOR INFRACTION OF LAW. 7. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LEARN ED DR AND CAREFULLY PERUSED THE RECORD. 8. THE ITAT MUMBAI BENCHES HAVE CONSISTENTLY TAKE N A VIEW ON THIS ISSUE WHEREIN IT WAS HELD THAT PENALTY IMPOSED UNDER SEBI RULES 1995 CANNOT BE EQUATED TO PENALTY LEVIE D UNDER STATUTORY PROVISIONS AND THUS SUCH PAYMENTS ARE ALLOWABLE UND ER SECTION 37(1) OF THE ACT SINCE PAYMENTS WERE MADE IN THE COURSE OF CARRYING ON ITS BUSINESS (SEE ITA. NO. 1199/MUM/2006 DATED 24-11-20 10 IN THE CASE OF MAHESH KUMAR DAMANI). SINCE THE VIEW TAKEN BY THE LEARNED CIT(A) IS INCONFORMITY WITH THE VIEW TAKEN BY THE I TAT MUMBAI BENCHES WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY THE LEARNED CIT(A) AND ACCORDINGLY GROUND NO. 2 IS REJE CTED. 9. GROUND NO. 3 READS AS UNDER : ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) ERRED IN DELETING TH E ADDITION OF RS.12 06 100/- FOR NON-DEDUCTION OF TDS UNDER SECTION 194J OF THE I.T.ACT. 10. THE ASSESSEE IS A STOCK BROKER SERVICING HIS C LIENTS IN RESPECT OF STOCK MARKET. ONE OF THE FUNDAMENTAL NEE DS OF THE MARKET IS TO PROVIDE UP-TO-DATE INFORMATION WITH REGARD TO VARIOUS PARAMETERS OF THE NATIONAL ECONOMY GLOBAL SCENARIO COMPANY P ROFILES THEIR PROFITABILITY ETC. ; BASED ON THESE THE ASSESSEE P ROVIDES INFORMATION TO ITS CLIENTS. TO ENABLE THE ASSESSEE TO OBTAIN INFOR MATION IT ENLISTS THE SERVICES OF VARIOUS PROFESSIONAL AGENCIES. IN THIS REGARD THE ASSESSEE HAS SUBSCRIBED TO VARIOUS SERVICES AND ACCORDINGLY PAID CERTAIN SUMS TO THE FOLLOWING PERSONS : 4 (I) BLOOMBERG DATA SERVICES RS. 8 56 100 (II) CAPITAL MARKET PUBLISHERS RS. 3 50 000 ------------------ RS.12 06 100 ------------------- 10.1. ACCORDING TO THE ASSESSING OFFICER THESE AR E TECHNICAL OR PROFESSIONAL SERVICES RENDERED BY THE PARTIES AND P AYMENTS MADE TO OBTAIN SUCH DATA/SERVICES SHOULD BE SUBJECT TO DEDU CTION OF TAX AT SOURCE. SINCE THE ASSESSEE HAS NOT DEDUCTED TAX AT SOURCE THE ASSESSING OFFICER SOUGHT TO DISALLOW THE IMPUGNED S UM BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. ON AN APPEAL FILED BY THE ASSESSEE THE LEARNED CIT(A) SET ASIDE THE DISALLOW ANCE BY OBSERVING AS UNDER : 5.2. I HAVE GONE THROUGH THE ORDER OF THE A.O. AND SUBMISSION OF APPELLANT. LOOKING INTO THE BILLS IT IS OBVIOUS THAT THE PAYMENTS MADE BY THE APPELLANTS TO CAPITAL MARKET PUBLISHERS ARE SUBSCRIPTION CHARGES AND RENEWAL CHARGES FOR BSE RAW DATA/NSE DATA/PROFILE MUTUAL FUND AND THE PAYMENTS TO BLOOMBERG DATA SERVICES (INDIA) PVT. LTD. ARE SIMILARLY FOR USE OF BLOOMBERG TERMINAL FO R OBTAINING DATA OF DIFFERENT STOCK EXCHANGES OUTSIDE INDIA WHICH ARE UTILISED FOR THE PURPOSE OF THE BUSINESS OF THE APPELLANT. THESE PAYMENTS ARE IN THE NATURE OF SUBSCRIPTION OF A NEWSPAPER OR MAGAZINE IN THE PRESENT CASE IN THE ELECTRONIC FORMAT. THE PAYMENTS TO TWO PARTIES ARE NOT FOR OBTAINING ANY TECHNICAL SERVICES HENCE TDS WAS NOT DEDUCTIBLE. ADDITION OF RS. 12 06 100/- IS THEREFORE DELETED. 11. AGGRIEVED REVENUE IS IN APPEAL BEFORE US. LEA RNED DR STRONGLY RELIED UPON THE ORDER PASSED BY THE ASSESS ING OFFICER. 5 12. HAVING REGARD TO THE SUBMISSIONS AND UPON CARE FUL PERUSAL OF THE MATERIAL ON RECORD WE ARE OF THE VI EW THAT THESE PAYMENTS ARE MORE IN THE NATURE OF SUBSCRIPTION FOR A NEWSPAPER OR A MAGAZINE THOUGH IN AN ELECTRONIC FORM AND HENCE I T CANNOT BE EQUATED TO TECHNICAL SERVICES IN WHICH EVENT TDS IS NOT DEDUCTIBLE AT SOURCE. WE THEREFORE REJECT GROUND NO. 3 OF THE RE VENUE. 13. IN THE RESULT APPEAL OF THE REVENUE IS DISMIS SED. PRONOUNCED IN THE OPEN COURT ON THIS THE 29 TH DAY OF DECEMBER 2010 SD/- SD/- (B.RAMAKOTAIAH) (D.MANMOHAN) ACCOUNTANT MEMBER VICE PRESIDENT MUMBAI DATE 29 TH DECEMBER 2010 VBP/- COPY TO 1. ACIT CIRCLE 4 (2) ROOM NO. 642 6 TH FLOOR AAYAKAR BHAVAN M.K. ROAD MUMBAI 400 001. 2. M/S. PRANAV SECURITIES PVT. LTD. 17 B-1/2 RAJA BAH ADUR MANSION 8 AMBALAL DOSHI MARG FORT MUMBAI 400 001. PAN AABCP4651L 2. CIT(A)-8 MUMBAI. 3. CIT-4 MUMBAI. 4. DR C BENCH 5. GUARD FILE. (TRUE COPY) BY ORDER ASST. REGISTRAR ITAT MUMBAI BENCHES MUMBAI.