KESHAV SECURITIES P.LTD,MUMBAI vs. ACIT 4(3), MUMBAI

The first issue in the appeal of the Assessee is that the Ld. CIT (Appeals) erred in confirming the action of the Assessing Officer in disallowing transaction 2 M/s Keshav Securities Pvt. Ltd. charges of Rs.35,83,628 u/s 40(a)(ia) of the Act for short deduction of tax at source u/s 194J of the Act.

At the very outset the Ld. Counsel for the Assessee submits that in Assessee’s own case in the proceedings u/s 201(1)/ 201(1A), this issue has been decided by the Co-ordinate Bench in for the assessment year 2010-11 by order dated 22.07.2016 holding that the transaction charges paid to the Bombay Stock Exchange (BSE) by its members are not in the nature of ‘payment for technical services’ for the purpose of Section 194J of the Act. Copy of the order is placed before us.

The Ld. DR places reliance on the orders of the authorities below.

We have heard the rival submissions. On a perusal of the assessment order, we find that the Assessing Officer while completing the assessment disallowed transaction charges of Rs.35,83,628/- paid by the Assessee to BSE for short deduction of TDS u/s 194J of the Act. He noticed that the Assessee deducted TDS u/s 194C but according to the Assessing Officer, the transaction charges are in the nature of fees for technical services and therefore liable for TDS u/s 194J of the Act. Therefore, the Assessing Officer disallowed the 3 M/s Keshav Securities Pvt. Ltd.

We have perused the orders of the Co-ordinate bench in Assessee’s own case in dated 22.07.2016 in the proceedings u/s 201(1)/201(1A) read with 194J of the Act, wherein the Co-ordinate Bench taking note of the fact that the decision of the Jurisdictional High Court in the case of CIT Vs. Kotak Securities Ltd., reported in 15 taxmann.com 77 has been reversed by the Hon’ble Supreme Court vide judgement in civil appeal no.3141 of 2016 dated 29.03.16 and following the said decision held that the Assessee is not in default within the meaning of section 201(1)/201(1A) of the Act on the payment of transaction charges made to BSE/NSE. While holding so, the Co- ordinate bench observed as under. “2. In this appeal, the only effective dispute relates to the issue as to whether tax is required to be deducted under section 194J of the Act in relation to payments made to Bombay Stock Exchange (BSE) as transaction charges. The Assessing Officer as well as the CIT(A) held that the transaction charges of Rs.50,80,175/- paid by the assessee to BSE/NSE were in the nature of ‘fee for technical services’ covered under section 194J of the Act and thus, assessee was liable to deduct tax at source while crediting/paying such amount to stock exchanges. 3. Before us, Ld. Representative for the assessee pointed out that the decision of the lower authorities was based on the judgment of the Hon'ble Bombay High Court in the case of CIT vs. Kotak Securities Ltd. (2011) 15 taxmann.com 77 (Bom) whereas, subsequently, the Hon'ble Supreme Court vide judgment in Civil Appeal No.3141 of 2016 dated 29/03/2016 has reversed the decision of the Hon'ble Bombay High Court. As per Hon'ble Supreme Court, the transaction charges paid to the BSE by its members are not in the nature of ‘payments for technical services’ for the purpose of section 194J of the Act . In view of the aforesaid pronouncement by the Hon'ble Supreme Court, the orders of the authorities below deserves to be reversed, which we do so. As a 4 M/s Keshav Securities Pvt. Ltd.

The last issue in the appeal of the Assessee is that the Ld. CIT (Appeals) erred in confirming the action of the Assessing Officer in disallowing the depreciation of Rs.1,99,594/- claimed on motor car which was used wholly and exclusively by the Assessee.

The Assessing Officer while completing the assessment noticed that the Assessee claimed depreciation on motor car and the motor car purchased was registered in the name of the Director. The Assessing Officer required the Assessee to explain as to why the depreciation should not be disallowed since 5 M/s Keshav Securities Pvt. Ltd. the motor car is not registered in the name of the Assessee Company but, it was registered in the name of the Director. The Assessee vide its letter dated 01.01.2012 submitted that the car was purchased by the Assessee Company in the name of the Director, the payment was made by the Company and the car was used wholly and exclusively by the Assessee Company for its business purposes and therefore the Assessee’s claim for depreciation cannot be denied merely on the ground that the motor car is not registered in the name of the Assessee company. Not convinced with the replay and explanation of the Assessee, the Assessing Officer disallowed depreciation of Rs.1,99,594/- for the reason that the car is registered in the name of Director and not in the name of the Assessee Company. On appeal, the Ld. CIT (Appeals) confirmed the disallowance accepting the view of the Assessing Officer. However, he directed the Assessing Officer to verify the contention of the Assessee that claim for depreciation was made @15% as it was put to use for less than 180 days and the total depreciation of motor cars was claimed only at Rs.1,70,654/- but the Assessing Officer disallowed Rs.1,99,594/-.

The Ld. Counsel for the Assessee before us submits that the provisions of Section 32 does not stipulate that vehicles should be registered in the name of the Assessee for the purpose of claiming depreciation. The Ld. Counsel submits that the car was purchased with the funds of the Assessee company in the name of the director, company is the owner of the asset. He further submits that all other expenses on motor car except depreciation were allowed by the Assessing Officer. The Ld. Counsel submits that identical issue has been considered by the Co-ordinate Bench in the case of Mehta Equities Ltd Vs. ACIT in ITA 6 M/s Keshav Securities Pvt. Ltd. No.570/Mum/15 dated 21.09.2016 and allowed the depreciation on motor car which was registered in the name of the Director but was owned and used by the Assessee for business purposes.

The Ld. DR places reliance on the orders of the authorities below.

We have heard the rival submissions, perused the orders of the authorities below and the Co-ordinate bench decision in the case of Mehta Equities Ltd. (supra). The Co-ordinate Bench considered the similar situation, where the car was purchased by the Assessee Company with its funds, but was registered in the name of the one of the Directors. The car was used for the purpose of Assessee’s business and in such circumstances, it was held as under. “17. We have gone through he orders passed by the lower authorities and copies of judgments placed before us and submissions made by both the parties before us. It is not in dispute that car has actually been purchased by the assessee company from the funds of the company and the same has been shown by the company in its balance-sheet. It was also stated that a resolution was passed by the company wherein it was clarified that though the car, for some reasons, has been purchased in the name of the director, but it belongs to the company and is owned by the company. The director has never claimed the ownership of the car. The company has undisputed ownership of the car. Both the parties involved in the transaction are clear about this factual and legal position. There is no confusion on that. Under these circumstances, it can be safely said that the company is the de-facto owner of the car. It is also not disputed that the car has been actually used by the company for its business purposes. Similar position came up before the Hon’ble Gujarat High Court in the case of Aravali Finlease Ltd (supra) wherein it was held that where vehicle though registered in the name of the director of the company, but if entire funds for 7 M/s Keshav Securities Pvt. Ltd. purchase of vehicles had gone from the coffers of the company and the same was used for the purpose of the business of the company, under these circumstances, the company was entitled to depreciation on the said vehicle. Similarly, the Hon’ble Delhi High Court in the case of Basti Sugar Mills Co Ltd (supra) held that the company was entitled to depreciation on car which was owned by it but not registered in its name. The law in this regard was also clarified by Hon’ble Supreme Court way back in the case of Mysore Minerals Ltd vs CIT 239 ITR 775 (SC). It is further noticed by us that the co-ordinate bench of Mumbai Tribunal in its later judgment passed in the case of Edwise Consultants Pvt Ltd (supra) clarified the correct legal position in this regard and following the aforesaid judgements of high courts held that depreciation will be allowable in such a situation. “ Facts in this case are almost similar to the facts of the above case and therefore respectfully following the said decision, we direct the Assessing Officer to delete the disallowance of depreciation made in the assessment order.

In the result, appeal of the assessee is allowed.