ACIT 4(3), MUMBAI vs. MEHTA FINSTOCK P. LTD, MUMBAI

Order u/s.254(1)of the Income-tax Act,1961(Act) लेखा सद� राजे� के अनुसार PER RAJENDRA, AM- Challenging the order dt.18.02.2011 of CIT(A)-8,Mumbai the Assessing Officer(AO),has raised various Grounds,but primarily they deal with disallowance made in respect of VSAT, Transaction Charges and Leaseline Charges,amounting to Rs.12.35 lakhs. 2.Assessee-company,engaged in stock broking,filed its return of income on 30.10.2007, declaring income of Rs.30.22 lacs.The AO completed the assessment on 22.12.2009,u/s.143 (3)of the Act,determining the income of the assesse at Rs.1.14crores. 3.During the assessment proceedings,the AO found that the assessee had not deducted tax at source for the payments made under the heads VSAT, Transaction Charges and Leaseline Charges. He held that charges were for technical services,that same fell within the purview of section 194J of the Act,that the assessee had to deduct tax u/s.40(a)(ia)of the Act,that it had failed to do so. He made a disallowance of Rs.12,35,895/-. 4.Aggrieved by the order of the AO the assessee preferred an appeal before the First Appellate Authority(FAA) .Before him,the assessee submitted that issue was decided in its favour by the order of the Tribunal delivered in the case of Kotak Securities Ltd.Referring to the decisions of Angel Broking Ltd.(35 SOT 457)and Kotak Securities Ltd. (124 TTJ 241),he deleted the addition of Rs.12.35 lacs made by the AO. 5.During the course of hearing before us,the Departmental Representative(DR) left the issue to the discretion of the Bench. The Authorised Representative (AR) relied upon the cases of (Income tax Appeal (L) No.475 of 2011 dated 28.07.2011), Kotak Securities Ltd. Income tax Appeal (LOD) No.2910 of 2009 dt.21.10.2011, Ansal Landmark Township (P.)Ltd.(ITA 160 of 2015 dt.26.8.2015),Perfect Circle India ltd. (ITA/7241/M/2012 AY 09-10 dt.27.3. 2015).With regard to the Transaction charges,he stated that the tax was paid for the amount in question by the recipient and that for verification purposes the matter could be sent back to the file of the AO, in light of the amendment to the provisio to section 40(a)(ia)of the Act. 5.We have heard the rival submissions and perused the material before us.We find that the issue of Vsat and Lease Line charges paid to stock exchange has been deliberated upon and 3116/11MehtaFinstock-A.Y.07-08 decided by the Hon’ble jurisdictional High Court in the case of Angel Capital & Debit Market(supra)in following manner: “Three questions of law raised by the revenue in this appeal which read thus: A)Whether on the facts and in the circumstances of the case the Hon’ble Tribunal was justified in holding that VSAT and lease line charges paid to the stock exchange by the assessee company. were allowable as a deduction from taxable income eventhough the assessee company Had failed to deduct TDS thereon. B) Whether on the facts and in the circumstances of the case the Hon’ble Tribunal was justified in holding that Vsat and lease line charges paid to the stock exchange by the assessee company were not paid in consideration of technical services rendered by the stock exchange within the meaning of section 194J r.w. Explanation 2 section 9 (1)(vii) of the Income tax Act? XXXX 2.As regards first two questions are concerned the finding of fact recorded by the ITAT is that VSat and Lease line charges paid by the assessee to stock exchange were merely reimbursement of the charges paid/payable by the stock exchange to the department of telecommunication.Since the Vsat and lease line charges paid by the assessee donot have any element of income, deducting tax while making such payments do not arise.Hence, question nos.(A) and (B) cannot be entertained.” Respectfully following the above,the issue of Vsat and Lease Line charges paid to stock exchange is decided against the AO. 5.1As far as the transaction charges are concerned we are of the opinion that matter needs further verification as the assessee has claimed that the recipient of the money had paid taxes.We find that though the proviso to section 40(a)(ia) was not introduced from the year under consideration, yet the Hon’ble Delhi High Court in the case of Ansal Landmark Township(P) Ltd. (supra), has held, that amendment is retrospective in nature.In the matter of Perfect Circle India Ltd. (supra), same principle has been followed. 5.2Following the above decisions,we are of the opinion,that in the interest of justice,the matter should be restored back to the file of the AO for verification purposes.If it is found that the recipient had paid the taxes for the amount in question addition made should be deleted.In case it is found that no tax was paid the addition confirmed by the FAA would stay.Effective ground of appeal

is decided in favour of the AO,in part. As a result,appeal filed by the AO stands partly allowed. फलतः िनधा�रती अिधकारी �ारा दािखल क� गई अपील अंशतः मंजूर क� जाती है Order pronounced in the open court on 14th October,2015. आदेश की घोषणा खुले �ायालय म� िदनांक 14 अ�ूबर,2015 को की गई । Sd/- Sd/- (श��जीत डे / Saktijit Dey) (राजे� / RAJENDRA) �ाियक सद� / JUDICIAL MEMBER लेखा सद� / ACCOUNTANT MEMBER मुंबई/Mumbai,िदनांक/Date: 14.10. 2015 व.िन.स.Jv.Sr.PS. आदेश की �ितिलिप अ�ेिषत/Copy of the Order forwarded to : 1.Appellant /अपीलाथ�

2. Respondent /��थ�