ACTIVE FINSTOCK P.LTD,MUMBAI vs. ITO (TDS) 1(1), MUMBAI

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ITA 116/MUM/2015Status: DisposedITAT Mumbai21 September 2016AY 2008-095 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the disallowance made by the Assessing Officer under Section 40(a)(ia) for non-deduction of TDS on VSAT and lease line charges paid to the Stock Exchange was deleted by a coordinate bench. Therefore, the assessee cannot be held in default for non-deduction of tax.

What were the facts?

The assessee, a share broker, did not deduct TDS on VSAT and BOLT/Ethernet charges paid to the Stock Exchange. The Assessing Officer treated the assessee as an assessee in default for non-deduction of TDS and raised a demand. The CIT(A) dismissed the assessee's appeal.

What were the issues?

Whether TDS is required to be deducted on payments made to the Stock Exchange for VSAT and lease line charges. Whether the assessee can be treated as an assessee in default for non-deduction of TDS on such payments.

Which sections of the Income-tax Act were involved?

Section 194J,Section 40(a)(ia),Section 201(1),Section 201(1A)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCH “B”, MUMBAI

Before: SHRI R.C. SHARMA & SHRI SANDEEP GOSAIN

For Respondent: Shri Neil Philip
Hearing: 19/07/2016Pronounced: 21/09/2016

The present appeal has been filed by the assessee against the order of Commissioner of Income Tax (Appeals)-14, Mumbai (in short ‘CIT(A)’) dated 1.10.2014 for A.Y 2008-09 on the following ground of appeal :

1. The learned CIT (Appeals) erred in dismissing the appeal filed against the order u/s 201(1)/201(A) of the Act raising a demand of Rs.158144/-. In so doing she did not consider the evidence placed on record having regard to amended provisions of sec. 201(1)/201(1A) of the Act.

2 M/s. Active Finstock Pvt. Ltd.

2.

The brief facts of the case are that the assessee is a private limited company engaged in the business of share broking and dealing in securities. During the course of assessment proceedings for the year under consideration by the ACIT, Range 4(1), it was noticed that the assessee has not deducted TDS on payment made on account of VSAT charges/BOLT & Ethernet charges to Stock Exchange amounting to Rs.10,37,427/- as required as per provisions of sec.194-J of the Act. Accordingly, a disallowance under sec. 40(a)(ia) of the Income Tax Act, 1961 (in short ‘the Act’) was made by the Assessing Officer.

3. On the basis of information received from the Assessing Officer, a show cause notice dated 21.3.2011 was issued and served on the assessee on 21.3.2011 requiring it to explain as to why it should not be treated as an assessee in default in terms of Sec. 201(1) & 201(1A) of the Act for non deduction of TDS on the above payments as required as per provisions of Sec. 194J of the Act. Consequently, order u/s 201(1) and 201(1A) of the Act was passed by the Assessing Officer thereby raising demand of Rs.1,58,144/- on account of non-deduction of TDS on technical/professional fee and non-payment of interest thereon. Aggrieved by the order of the Assessing Officer, assessee preferred an appeal before the CIT(A) and CIT(A), after considering the case of both the parties, dismissed the appeal. Aggrieved by the order of CIT(A), assessee has preferred the present appeal before us on the grounds mentioned above.

4. The case was fixed for hearing, but none appeared on behalf of the appellant even inspite of repeated calls. This shows that the 3 M/s. Active Finstock Pvt. Ltd.

assessee/appellant is not interested in pursuing the appeal. Therefore, in these circumstances, the appellant is proceeded ex parte. On the other hand, the Ld. DR on behalf of the respondent is present in the court and is ready for argument, therefore, we have decided to decide the case on merits after going through the record as well as with the assistance of the Ld. DR. Ground no. 1

5.

We have heard the Ld. DR on behalf of Revenue and also perused the record. We have noticed from the record that a similar disallowance made in the scrutiny assessment for preceding year, i.e., Assessment Year 2007-08 stood deleted by the CIT(A) and, therefore, reliance was placed upon the said order even before CIT(A).

6.

We have also noticed that in the course of scrutiny of assessment u/s 143(3) the Assessing Officer disallowed assessee’s claim for VSAT and lease line charges paid to BSE/NSE invoking provisions of section 40(a)(ia), treating the same as Fee for technical services since the assessee did not deduct tax at source u/s 194C and 194J. However, on the similar ground, the coordinate Bench of ITAT in the case of M/s. Centrum Broking Pvt. Ltd. (ITA No. 158/Mum/2015) has decided this issue, wherein disallowance so made by the Assessing Officer u/s 40(a)(ia) has been deleted by the Tribunal after observing as under as under :-

“2. Rival contentions have been heard and record perused. In the course of scrutiny of assessment u/s 143(3) the AO disallowed

4 M/s. Active Finstock Pvt. Ltd. assessee’s claim for VSAT and lease line charges paid to BSE/NSE invoking provisions of section 40(a)(ia), treating the same as Fee for technical services. Since the assessee did not deduct tax at source u/s 194C and 194J, Ld. AR placed on record order of tribunal in assessee’s own case for the AY 2008-09 dated 28.02.2015 wherein disallowance so made by AO u/s 40(a)(ia) has been deleted by Tribunal after observing as under :

“At the time of hearing, the ld. AR submitted that this issue has been decided in favour of the assessee by the jurisdictional High Court in the case of The CIT Vs. M/s. The Stock and Bond Trading Company (ITA No. 4117 of 2010 dated 14.10.2011). A perusal of the said order shows that the High Court has followed its earlier decision rendered in the case of “The Income tax Commissioner, Mumbai City-4 Vs. Angel Capital & Debit Market Ltd in Income Tax Appeal (L) No. 475 of 2011 dated 28-07-2011 to hold that the there is no requirement to deduct tax at source from the payments made to NSE/BSE towards VSAT charges and Lease line charges. The ld. AR submitted that in the case of Kotak Securities Ltd, the Bombay High Court did not consider VSAT and lease-line charges issue. Accordingly, we set aside the order of Ld. CIT(A) on this issue and direct the AO to delete this addition.”

3.

Since the disallowance so made by AO has itself been deleted, there is no reason for holding the assessee in default u/s 201(1)/201(1A). Accordingly we do not find any merit in the order passed by AO holding the assessee in default for non deduction of tax in respect of VSAT and lease line charges.

4.

In the result, appeal of the assessee is allowed.”

7.

Since the identical question has already been decided by co- ordinate bench, therefore, maintaining judicial consistency, we while following the judgment of co-ordinate bench allow this appeal and hold

5 M/s. Active Finstock Pvt. Ltd. that the assessee is not defaulter for non-deduction of tax in respect of VSAT and lease line charges.

8.

In the result, appeal of the assessee is allowed.

Order pronounced in the open court on 21st September, 2016.

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