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Income Tax Appellate Tribunal, MUMBAI BENCHES, ‘F’ MUMBAI
Before: Shri Joginder Singh, & Shri Jason P. Boaz
आदेश / O R D E R
Per Joginder Singh (Judicial Member)
This assessee is aggrieved by the impugned order dated 12/06/2014 of the ld. First Appellate Authority, Mumbai. The only ground raised in this appeal pertains to confirming the stand of the Assessing Officer in treating the assessee in default in terms of sec. 201(1) and 201(1A) of the Act for non- deduction of TDS allegedly deductible under the provision of sec. 194J of the Income Tax Act, 1961 (hereinafter ‘the Act’)
During hearing the ld. counsel for the assessee, Shri Satish R. Mody contended that the assessee was wrongly treated as an assessee in default by placing reliance upon the decision of the Tribunal in the case of DCIT v. M/s. Mehta Vakil & Company Pvt. Ltd. order dt. 13.3.2015 (ITA No. 8741/Mum/2011) and further the decision in Hindustan Coca Cola Beverage Pvt. Ltd. vs. CIT, 293 ITR 226 (SC). On the other hand, the ld. DR, Shri Mukundraj M. Chate, defended the conclusion arrived at in the impugned order by placing reliance upon the decision of the Tribunal in ACIT v. Twenty First Century Shares & Securities Ltd. (2013) 39 Taxmann.com 176 (Mumbai Trib) by further contending that the decision relied upon by the assessee in the case of Hindustan Coca Cola Beverage Pvt. Ltd. vs. CIT (supra) is not applicable to the facts of the present appeal being on different facts.
We have considered the rival submissions and perused the material available on record. Facts in brief are that the ld. Assessing Officer, while framing the assessment, found that the assessee paid transaction charges to BSE and NSE amounting to Rs.2,70,567/- and Rs.21,70,924/- respectively but did not deduct TDS from the aforesaid amounts as required by Sec. 194J of the Act. The assessee was issued show cause notice dt. 13.12.2011 asking the assessee- company to explain as to why the assessee be not treated as assessee in default in terms of Sec. 201(1) and 201(1A) of the Act for non-deduction of TDS u/s 194J of the Act. The assessee vide letter dt. 7.11.2012 claimed that TDS is not deductible. The explanation of the assessee was not accepted and the assessee was treated as assessee in default. On appeal before the ld. Commissioner of Income Tax (Appeals) the stand taken in the assessment order was affirmed, wherein the decision from Hon’ble Bombay High Court in Kotak Securities Ltd. was followed. The assessee is in further appeal before this Tribunal.
If the observation made in the assessment order, leading to addition made to the total income, conclusion drawn in the impugned order, material available on record, assertions made by the ld. respective counsels, if kept in juxtaposition and analyzed, under the facts discussed hereinabove we note that the Hon’ble Jurisdictional High Court in the case of M/s. Kotak Securities Pvt. Ltd. held as under :
“The assessee’s argument, based on M/s. Skycell Communications vs. DCIT 251 ITR 53 [Mad.] that the stock exchange does not render “managerial or technical services” is not acceptable because while in that case the subscriber had paid a fix amount for the use of air time on the mobile phone and was not concerned with the technology or the services rendered by the managerial staff in keeping the cellular mobile activated, in the case of a stock exchange, there is direct linkage between the managerial services rendered and the transaction charges levied by the stock exchange. The BOLT system provided by the BSE is a complete platform for trading in securities. A stock exchange manages the entire trading activity carried on by its members and accordingly renders “managerial services”. Consequently, the transaction charges constituted “fees for technical services” u/s. 194J and the assessee ought to have deducted TDS.”
It is noted that the Hon’ble High Court has clearly held that TDS was to be deducted by the assessee as per the provisions of Sec. 194J of the Act. It is worth mentioning that the decision from Hon’ble Jurisdictional High Court is dt. 21.10.2011 whereas the assessment was framed on 21.3.2012 meaning thereby while framing the assessment the order from Hon’ble Jurisdictional High Court was very much available but still the assessee did not deduct the TDS. It is worth mentioning that even issuance of show cause notice by the Assessing Officer to the assessee still the assessee did not deduct the tax. It is also noted that the Mumbai Bench of the Tribunal in ACIT v. Twenty First Century Shares & Securities Ltd. (2013) 39 Taxmann.com 176 (Mum) vide order dt. 15.5.2013 in para 5 of the order has clearly mentioned about the case of the present assessee (Appeal on. 8105/Mum/2010) for A.Y 2006-07 and made certain observation in order dt. 28.9.2012 which is reproduced hereunder :
“Further, there is no bifurcation of the amounts of VSAT, lease line and transaction charges. In the case of Deputy CIT v. Angel Broking Ltd. [2012] 3 ITR (Trib) 294 (Mum.) in of 2011 dated 28th July, 2011, the Hon’ble High Court held that VSAT and lease line charges paid to the stock exchange are not paid in consideration of technical services. Therefore, there is no need for deducting tax. The same principles were reiterated by the Hon’ble Bombay High Court in the case of CIT v. Stock and Bond Trading Company in ITA No. 4117 of 2010 dated 14th October, 2011 wherein VSAT charges, NSE lease line charges and transaction charges were considered and held against the Revenue following the decision in the case of Deputy CIT v. Angel Broking Ltd. [2010] 3 ITR (Trib) 294 (Mum). The same principles were reiterated in the case of CIT v. Kotak Securities Ltd. [2012] 340 ITR 333 (Bom); [2011] 203 Taxman 86 (Bom). To the extent of VSAT, lease line charges the Revenue did not even contest. Even though the Hon’ble Court held that the transaction charges paid to the stock exchange constitute fees for technical services on bona fide belief it was considered that the disallowance cannot be made in that year as the Revenue did not proceed on the footing that assessee is not liable to deduct the tax at source after introduction of the provisions. Since the Commissioner of Income-tax (Appeals) has only given partial relief of Rs. 2,50,000, after considering the Income-tax Appellate Tribunal orders in the cases of Kotak Securities Ltd. [2009] 318 ITR (AT) 268 (Mum); [2009] 124 TTJ 241 and Angel Broking Ltd. [2010] 3 ITR (Trib) 294 (Mum); 35 SOT 457 (Mum), we are of the opinion that there is no need to disturb the order of the Commissioner of Income-tax (Appeals). In view of this, grounds raised are dismissed.”
Totality of facts clearly indicates that the issue was not new to the assessee as it arose earlier also and knowing fully well that the assessee is to deduct tax at source still the assessee did not deduct the same and inspite of a decision from Hon’ble Jurisdictional High Court holding that TDS has to be deducted, still the assessee did not deduct. As mentioned earlier, even after getting show cause notice from the Assessing Officer still the assessee did not deposit the amount or deduct the tax. Therefore, we find no merit in the contention of the assessee. The transaction charges paid to BSE and NSE are fee for technical services, therefore, the assessee was liable to deduct tax as required u/s 194J. Therefore, we find no infirmity in the conclusion drawn in the impugned order, accordingly, the assessee was rightly held as assessee in default u/s. 201(1) and 201(1A) of the Act. The stand of the ld. Commissioner of Income Tax (Appeals) is affirmed. Finally, the appeal of the assessee is dismissed.
This order was pronounced in the open court on 11/03/2016.