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Income Tax Appellate Tribunal, “H” BENCH, MUMBAI
Before: S/SHRI SANJAY ARORA & AMARJIT SINGH
IN THE INCOME TAX APPELLATE TRIBUNAL “H” BENCH, MUMBAI
BEFORE S/SHRI SANJAY ARORA, ACCOUNTANT MEMBER AND AMARJIT SINGH, JUDICIAL MEMBER आयकर अपील सं/ I.T.A. No.5679/Mum/2014 (�नधा�रण वष� / Assessment Year: 2010-11) M/s. HSBC Securities and Income Tax Officer (TDS) बनाम/ Capital Markets (India) Pvt. (OSD) 1(1) Vs. 9th Floor, Ltd. 52/60,Mahatma Gandhi Road, Smt. K.G.Mittal Ayurvedic Fort, Mumbai - 400001 Hospital Building, Mumbai - 400002 �थायी लेखा सं./जीआइआर सं./PAN/GIR No. : AAACJ1395E (अपीलाथ� /Appellant) .. (��यथ� / Respondent)
Assessee by: Ms. Krupa R. Gandhi & Manshi Padhiar Department by: Shri S.K.Mishra सुनवाई क� तार�ख / Date of Hearing: 22.06.2016 घोषणा क� तार�ख /Date of Pronouncement: 05.10.2016 आदेश / 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 Income Tax (Appeals)-14, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the A.Y.2010-11.
The assessee has raised the following grounds:-
“GROUND I: PRINCIPLE OF NATURAL JUSTICE:
ITA No.5679/Mum/2014 Assessment Year: 2010-11
On the facts and in the circumstances of the case and in law, the Learned CIT(A) erred in upholding the action of the Income Tax Officer (OSD) (TDS)-1(1), Mumbai (“the AO”) in passing an order under section 201(1) / 201(1A) of the Act without giving a fair and reasonable opportunity of hearing to the Appellant and thereby violating the principles of natural justice. 2. The learned CIT(A) failed to appreciate and ought to have held that the notice for the hearing was not received 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 and in law, the Learned CIT(A) erred in upholding the action of the AO in levying the interest under section 201(1A) of the Act amounting to Rs.2,75,530/- on the alleged ground that the Appellant failed to deduct tax under section 194J 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 can be levied only when there is default in the payment of taxes. ii. When the recipient of income claims the refund of taxes paid by them or files the loss return of income, default in payment of taxes does not arise and therefore the 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.
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“GROUND III: EXCESS LIABILITY CALCULATED UNDER SECTION 201(1A) OF THE ACT :- 1. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in upholding the action of the AO in calculating the interest under section 201(1A) of the Act upto the date on which tax is to be deducted under 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, interest u/s.201(1A) of the Act is to be calculated upto the date on which recipients paid taxes on their income as advance tax or self-assessment tax.
The Appellant prays that the AO be directed to recalculate the interest liability under section 201(1A) of the Act from the date on which tax is to be deductible under section 194J of the Act upto the date on which the recipient has paid taxes on their income as advance tax or self assessment tax.
ADDITIONAL GROUND NO. I:- 1. There is no liability to deduct tax at source u/s.194J of the Act on the transaction charges paid to Stock Exchanges and thus the question of levying interest on non-deduction or late payments of TDS u/s.201(1A) of the Act does not arise. 2. The Appellant prays that the order passed by the Income 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.
The departmental representative raised the issue that the appeal of the assessee is time barred by 3 days. The assessee filed an application along with an affidavit stating that the assessee received the order on 8th July 2014 and last day of filing the appeal
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was 5th September 2014 on that day head of finance was not in office and 6th and 7th September were non working days and 8th September due to Ganpati Visarjan ITAT staff had left early. In view of the contention raised by assessee which is supported by affidavit , we are of the view that there are sufficient and reasonable ground are on record to condone delay in filing the appeal, hence application for condonation of delay is hereby allowed.
The brief facts of the case are that in the light of the decision of Hon’ble Bombay High Court in the case of M/s.Kotak Securities Ltd., the information was called from M/s. Bombay Stock 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 Exchange, M/s. National Stock Exchange, it was found that the assessee failed to deduct the TDS on payment on account of Transaction charges to M/s.Bombay Stock Exchange and M/s. National Stock Exchange. The services rendered by the stock exchanges against the payment of transaction charges represents payment for managerial services and are covered under the provision of section 194J read with explanation 2 to section 9(1)(vii) of the Income Tax Act, 1961( in short “the Act”). Thereafter a show cause notice was 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
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No. charges u/s.201(1A) Default 1 Bombay Rs.9,65,675/- -- Rs.19,694/- Rs.19,694/- Stock Exchange 2 National Rs.1,25,44,648/- -- Rs.2,55,836/- Rs.2,55,836/- Stock Exchange Total Rs.1,35,10,323/- Rs.2,75,530/- Rs.2,75,530/-
Thereafter the demand notice was issued for Rs.2,75,530/-. Feeling aggrieved the assessee filed an appeal before the CIT(A) who confirmed the order of the Assessing Officer, therefore the assessee has filed the present appeal before us.
ISSUE NO.1 TO 3 AND ADDITONAL GROUND:-
All these issues are interconnected, therefore are being taken up together for adjudication. Under these issues the sole controversy is that whether the assessee was under obligation to deduct the TDS on the transaction charges payable to the M/s.Bombay Stock Exchange and M/s. National Stock Exchange amounting to Rs.9,65,675/- and Rs.1,25,44,648/- respectively and was also in default on account of non payment of interest also. This matter of controversy has been adjudicated by the Hon’ble Supreme Court of India in case of Commissioner of Income Tax 4, Mumbai Vs. Kotak Securities Ltd. [2016] 67 taxmann.com 356 (SC). No doubt in the said case the Hon’ble Bombay High Court was of the view that the transaction charges paid by the member of the M/s. Bombay Stock Exchange to transact business of sale and
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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.
Thereafter, the matter went in appeal before the Hon’ble Supreme Court of India wherein it is specifically held that the services made available by the M/s. Bombay Stock Exchange [BSE Online Trading (BOLT) System] for which transaction charges are paid by members of BSE are common services that every member of Stock Exchange is necessarily required to avail of the carry out trading in securities in Stock Exchange and such services do not amount to ‘technical services’ provided by Stock Exchange, not being services specifically sought for by user or consumer. Therefore, transaction charges paid by the members of BSE to BSE are in nature of payments made for facilities provided by Stock Exchange and no TDS on such payments would be deductible under section 194J of the Act.
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 with 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 by the Hon’ble Supreme Court of India in the above cited case discussed above. In
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view of the above mentioned law in case of Commissioner of Income Tax 4, Mumbai Vs. Kotak Securities Ltd. (Supra), we are of the view that the assessee was not liable to deduct the TDS upon the transaction charges paid to the Stock Exchange. Therefore, when the amount was not due then no interest was liable 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 revenue.
In the result, the appeal of the assessee is hereby allowed.
Order pronounced in the open court on 5th October, 2016 Sd/- Sd/- (AMARJIT SINGH) (SANJAY ARORA) लेखा सद�य / ACCOUNTANT MEMBER �या�यक सद�य/JUDICIAL MEMBER मुंबई Mumbai; �दनांक Dated : 5th October, 2016 MP MP MP MP आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. आयकर आयु�त(अपील) / The CIT(A)- 4. आयकर आयु�त / CIT 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, मुंबई / DR, ITAT, Mumbai 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER, स�या�पत ��त //True Copy// उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील�य अ�धकरण, मुंबई / ITAT, Mumbai