Mahesh Kum,Ar Damani, Mumbai vs Assessee

सर्वश्री डी.भनभोहन, उऩाध्मऺ एवुं श्री आय.सी.शभाव, रेखा सदस्म BEFORE SHRI D.MANMOHAN, VICE PRESIDENT & SHRI R.C.SHARMA, AM आमकय अऩीर सं./ITA No.4072/Mum/2012 ( नििाारण वषा / Assessment Year :2005-06) Mahesh Kumar Damani, 1st Vs. Jt.CIT-4(3), Mumbai Floor, Surya Mahal,5, Burjorji Bharucha Marg, Fort, Mumbai-

400023 स्थामी रेखा सं ./ जीआइआय सं ./ PAN/GIR No. : AAEPD 9125 D (अऩीराथी /Appellant) .. (प्रत्मथी / Respondent)

ननधावरयती की ओर से /Assessee by : Shri Hiro Rai याजस्र् की ओर से /Revenue by : Shri S.J.Singh

सन ु र्ाई की तायीख / Date of Hearing : 15th April, 2015 घोषणा की तायीख/Date of Pronouncement : 24th April, 2015

आदे श / O R D E R PER R.C.SHARMA (A.M.) :

This is an appeal filed by the assessee against the order of CIT(A)-

8, Mumbai dated 11-4-2012 for the assessment year 2005-06, in the

matter of order passed u/s.143(3) r.w.s.147 of the I.T.Act.

2. In this appeal the assessee is aggrieved for reopening of

assessment as well as merit of the addition confirmed on account of

disallowance of transaction charges paid to stock exchange without

deduction of tax at source.

3. Nothing was stated by ld. AR with regard to validity of reopening.

Accordingly ground No.1 of assessee's appeal is dismissed.

4. With regard to merit of addition, ld. AR placed on record order of the

Hon'ble Bombay High Court in the case of Kotak Securities Ltd., 340 ITR 2 ITA No.4072/12

333, wherein the Hon'ble High Court held that transaction charges paid to

stock exchange is liable to deduction of tax at source u/s.194J, however,

disallowance so made was deleted by the Hon'ble High Court after having

following observations :-

"(ii) That though section 194J was inserted with effect from July, 1 1995, till the assessment year in question that is assessment year 2005-06 both the Revenue and assessee proceeded on the footing that section 194J was not applicable to the payment of transaction charges and accordingly during the period from 1995 to 2005 neither had the assessee deducted tax at source while crediting the transaction charges to the account of the stock exchange nor had the Revenue raised any objection or initiated any proceedings for not deducting the tax at source. In these circumstances, if both the parties for nearly a decade proceeded on the footing that section 194J was not attracted, then in the assessment year in question no fault could be found with the assessee in not deducting the tax at source under section 194J of the Act and consequently no action could be taken under section 40(a)(ia) of the Act. From assessment year 2006-07 the assessee had been deducting tax at source while crediting the transaction charges to the account of the stock exchange though not as fees for technical services but as royalty.

5. On the other hand, ld. DR relied on the order of lower authorities.

6. We have considered rival contentions, carefully gone through the

orders of the authorities below. We had also deliberated on the judicial

pronouncements cited at Bar, wherein Hon'ble jurisdictional High Court in

the case of Kotak Securities (supra) held that the transaction charges paid

to the stock exchange for managerial services constitute fees for technical

services u/s.194J read with Explanation 2 to Section 9(1)(vii) and hence,

assessee is liable to deduct tax at source before crediting the transaction

charges to the account of the stock exchange.

7. In addition to the above, the Hon'ble High Court also held that

provisions of Section 194J was introduced w.e.f. 1st July, 1995. From the

year 1995 to 2005 neither the assessee deducted tax at source while

crediting the transaction charges to the account of stock exchange nor 3 ITA No.4072/12

had the Revenue initiated any proceedings for not deducting at source.

Under these circumstances, it was held that both the parties for nearly a

decade proceeded on the footing that section 194J was not attracted,

then in the assessment year in question no fault could be found with the

assessee in not deducting the tax at source under Section 194J of the Act

and consequently no action could be taken under section 40(a)(ia) of the

Act. We found that in the case of Kotak Securities (supra) also

disallowance was made for the first time by the AO in the assessment

year 2005-06. In the instant case before us also relevant assessment year

under consideration is 2005-06, respectfully following the decision of the

Hon'ble jurisdictional High Court, we do not find any merit in the

disallowance made u/s.40(a)(ia) on account of non-deduction tax at

source out of the transaction charges paid to the stock exchange.

8. In the result, appeal of the assessee is allowed in part.

Order pronounced in the open court on this 24/04/2015. आदे श की घोषणा खुरे न्मामारम भें ददनांकः 24/04/2015 को की गई ।

Sd/- Sd/- (डी.भनभोहन) (आय.सी.शभाव) (D.MANMOHAN) (R.C.SHARMA) उऩाध्मऺ / VICE PRESIDENT ऱेखा सदस्य / ACCOUNTANT MEMBER

भुंफई Mumbai; ददनांक Dated 24/04/2015 प्र.कु.मभ/pkm, नन.स/ PS

आदे श की प्रनिलऱपप अग्रेपषि/Copy of the Order forwarded to :

1. अऩीराथी / The Appellant

2. प्रत्मथी / The Respondent.

3. आमकय आमुक्त(अऩीर) / The CIT(A), Mumbai.

आदे शािसार/ BY ORDER,

4. आमकय आमुक्त / CIT

5. वर्बागीम प्रनतननधध, आमकय अऩीरीम अधधकयण, भुंफई / DR, ITAT, Mumbai

6. गाडव पाईर / Guard file.

उप/सहायक पुंजीकार

सत्मावऩत प्रनत //True Copy// (Asstt. Registrar) आयकर अपीऱीय अधिकरण, भुंफई / ITAT, Mumbai