SSJ COMMODITIES P.LTD,MUMBAI vs. ITO (TDS) WD 3(3), MUMBAI

Order u/s.254(1)of the Income-tax Act,1961(Act) लेखा लेखा सद�य लेखा लेखा सद�य सद�य, राजे�� सद�य राजे�� राजे�� केकेकेके अनुसार राजे�� अनुसार अनुसार/ PER Rajendra A.M.- अनुसार Challenging the orders,dated 18/08/2014 of the CIT (A)-14,Mumbai the Assessees have filed appeals for the above mentioned assessment years(AY.s). Issues involved in all the appeals are identical except for the amounts involved and all the assessees are from the same group.So,for the sake of convenience, we are adjudicating these appeals by passing a single order. ITA/6623/Mum/2014,AY. 2011-12: 2.Effective ground of appeal is about levy of interest under section 201(1A)of the Act.As per the information obtained from the Bombay Stock Exchange/National Stock Exchange of India/Multi Commodities Exchange/National Commodities Exchange, the (Assessing Officer) AO found that the assessee had not detected tax at source on payment on account of Transaction Charges (TC) made to various exchanges,amounting to Rs.14.48 lakhs. The AO was of the opinion that the assessee should have detected tax at source as per the provisions of section 194J of the Act.He issued a notice to the assessee requiring it to explain as to why it should not be treated as Assessee-In-Default(AID) in terms of section 201(1)/201(1A) of the Act for non-deduction of tax at source. As per the AO, the assessee did

6621,6622&6623/M/14 SSJ Commodities/Financial not file any reply to the notice.After considering the nature and manner of the services being provided by the stock exchanges,the AO held that TC were levied by the exchanges on the members who entered into transactions through the system provided by them, that the system was a screen-based system where the trading operations were made interactive by connecting the various stockbrokers to the exchanges through VSAT and leased line connections provided by the exchanges to its members, that the systems provide all the daughter that would be necessary for an intending buyer and the intending seller of the respective securities/commodities, under the systems members could proactively enter orders in the system, that the expenses would collect transaction charges depending upon the value of the transactions, that the system provided by the exchanges were complete platform containing the entire spectrum of trading in securities, that the system would not merely provide the live connection between prospective purchasers and the prospective sellers of the respective security/derivatives together with the rates, that they also provided a mechanism for concluding the transactions between the two parties, that with a view to regulate the trading in securities the exchanges would provide risk management and surveillance to the stockbrokers, that the surveillance functions involved price monitoring exposer of the members, that for rendering all the manager services TC were levied by the stock exchanges, that there was a direct linkage between the managerial services rendered and the transaction charges levied by the stock exchanges.Referring to the provisions of section 194-J r.w. explanation 2 to section 9 (1)(vii)of the Act he held that the expression fee for technical services included rendering of managerial services. He relied upon the case of Kotak Securities Ltd. (15 taxmann. com.77) of the Hon’ble, Bombay High Court and held that TC paid by the assessee to the stock exchange constituted fee for technical services covered under section 194 J of the Act, that the assessee was liable to deduct tax at source while crediting the TC to the account of stock exchange, that the assessee was liable to deduct tax at source at the rate of 10.30% of the TC paid while crediting the same to the account of the stock exchange, that it was the primary obligation on part of the assessee to deduct tax at source while making the payment to the credit of the stock exchanges, that the payment of TC was payment for technical and managerial services rendered by the stock exchanges.Accordingly,he treated the assessee as A-I-D and levied interest of Rs. 1.79 lakhs for the default of 24 months.

3.Aggrieved by the order of the AO, the assessee preferred an appeal before the First Appellate Authority (FAA). As per the FAA no one appeared before her not any written

6621,6622&6623/M/14 SSJ Commodities/Financial submissions were filed in support of the appeal. Relying upon the judgment of the Hon’ble Bombay High Court in the case of Kotak Securities Ltd,(supra),she confirmed the order of the AO and dismiss the appeal filed by the assessee.

4.During the course of hearing before us, the Authorised Representative (AR) stated that the Hon’ble Supreme Court had reversed the judgment of the Kotak Securities Ltd.,delivered by the Hon’ble Bombay High Court,vide its order dated 29/03/2016.The Departmental Representative (DR) stated that the matter could be decided on merits.

5.We find that the Hon’ble Apex Court had in the case of Kotak Securities Ltd.(383 ITR 1) has held that the services provided by the Stock Exchange for which transaction charges are paid fails to satisfy the test of specialised, exclusive and individual requirement of the user or consumer who may approach the service provider for such assistance/service, that it is only service of the above kind that should come within the ambit of the expression technical services appearing in Explanation 2 of the section 9 (1) (vii) of the Act, that in the absence of the above distinguishing feature, service, though rendered, would be mere in the nature of a facility offered or available which would not be covered by the aforesaid provision of the Act.The Hon’ble court further held that no tax was directed at source for such payment as per the provisions of section 194J. Respectfully following the above judgment of the Hon’ble Supreme Court,we decide the effective ground of appeal in favour of the assessee. ITA.s/6621 and 6622/Mum/2014,AY.s. 2008-09 and 2009-10: As stated earlier,the issue is identical in both the appeals. The amount of interest levied by the AO is Rs. 1.68 lakhs and Rs. 1.79 lakhs for the AY.s. 2008-09 and 2009-10 respectively. Following our order in the case of SSJ Finance and Securities Private Ltd.,we decide effective grounds of appeal in favour of the assessee for both the AY.s. As a result,appeals filed by the assessees stand allowed. फलतः िनधा�रती अिधकारी �ारा दािखल क� गई अपील� मंजूर क� जाती है. Order pronounced in the open court on 18th January 2017. आदेश क� घोषणा खुले �यायालय म� �दनांक 18 जनवरी, 2017 को क� गई । Sd/- Sd/- ( पवन�सह/Pawan singh) (राजे�� / RAJENDRA) �याियक सद�य / JUDICIAL MEMBER लेखा लेखा लेखा सद�य लेखा सद�य सद�य / ACCOUNTANT MEMBER सद�य मुंबई Mumbai; �दनांकDated : 18.01.2017. Jv.Sr.PS. आदेश क� क� �ितिलिप �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order forwarded to : आदेश आदेश आदेश क� क� �ितिलिप �ितिलिप अ�ेिषत अ�ेिषत 1.Appellant /अपीलाथ�

2. Respondent /��यथ� 3