Mehta Vakil & Co, Mumbai vs Department Of Income Tax

Dy.Commissioner of Income बनाम/ M/s Mehta Vakil and Co.,Pvt.Ltd., Tax, 4(3), Vs. PG -11, Ground Floor, 6th floor, Room No.649, Rotunda Bldg, Aayakar Bhavan, M K Road, Mumbai Samachar Marg, Mumbai-400020 Mumbai-400001 (अपीलाथ /Appellant) .. ( यथ / Respondent)

थायी ले ख ा सं . /जीआइआर सं . /PAN/GIR No. :AAACM3089L

अपीलाथ ओर से / Appellant by Shri Asghar Zain-VP यथ क ओर से/ Respondent by Shri Satish Chandak

सन ु वाई क तार$ख / Date of Hearing : 14.1.2015 घोषणा क तार$ख /Date of Pronouncement :13.3.2015

आदे श / O R D E R

Per B.R.BASKARAN, Accountant Member:

The appeal of the revenue is directed against the order dated 24.10.2011 passed by Ld CIT(A)-8, Mumbai and it relates to the assessment year 2008-09. The revenue is aggrieved by the decision of Ld CIT(A) in respect of the following issues:-

(a) Whether the tax liability arising under normal provisions of the Act and u/s 115JB should be compared before allowing Rebate u/s 88E of the Act or after allowing the rebate.

(b) Whether the transaction charges paid to BSE/NSE is not liable to disallowed us 40(a)(ia) of the Act for non-deduction of tax at source.

2 ITA. No.8741/Mum/2011 2. We have heard the parties and perused the record. The assessee company is engaged in the business of Share broking, trading and investment in shares. We shall first take up the issue relating to the disallowance made u/s 40(a)(ia) of the Act. The assessee had paid transaction charges of Rs.98,85,800/- and VSAT charges/lease line charges of Rs.4,35,363/- to BSE/NSE without deducting tax at source under any of the provisions of the Act. The AO held that the above said payments are liable for Tax deduction at source u/s 194J of the Act, as they fall in the category of 'fee for technical services'. Accordingly he disallowed both the amounts by invoking the provisions of sec. 40(a)(ia) of the Act, since the assessee had not deducted tax at source. In the appellate proceedings, the Ld CIT(A) deleted the disallowance by following the decisions rendered by the co-ordinate benches in the following cases:-

(a) GSB Securities Pvt Ltd (ITA No.1825/Mum/2009)

(b) Kotak Securities Ltd (2009)(318 ITR (AT) 268)

(c) Shri Vinod K Nevatia (ITA No.6556/Mum/2009)

(d) M/s Angel Broking Ltd (2010)(35 SOT 457)(Mum).

The revenue is aggrieved by the decision of Ld CIT(A) in respect of transaction charges.

3. We notice that the Hon'ble jurisdictional Bombay High Court has held in the case of CIT Vs. Kotak Securities Ltd (2012)(340 ITR 333) that the transaction charges paid by the assessee to the stock exchanges constitute 'fee for technical services' and the same is liable for tax deduction at sources u/s 194J of the Act. However, before the Hon'ble High Court, the assessee therein pleaded that it was under bonafide belief that no tax was deductible at source. The Hon'ble High Court also noticed that the assessee has been paying the transaction charges for the past several years without subjecting the same to tax deduction at source and the 3 ITA. No.8741/Mum/2011

department has also allowed the claim. Hence the Hon'ble High Court, under these peculiar facts, held as under:-

"However, since both the revenue and assessee were under the bona fide belief for nearly a decade that tax was not deductible at source on payment of transaction charges, no fault can be found with the assessee in not deducting the tax at source in the assessment year in question consequently disallowance made by the assessing officer under section 40(a)(ia) of the Act in respect of the transaction charges cannot be sustained. We made it clear that we have arrived at the above conclusion in the peculiar facts of the present case, where both the revenue and the assessee right from the insertion of section 194J in the year 1995 till 2005 proceeded on the footing that the assessee is not liable to deduct tax at source and in fact immediately after the assessment year in question, i.e. from A.Y. 2006-07 the assessee has been deducting tax at source while crediting the transaction charges to the account of stock exchange."

4. The decision of the Hon'ble Bombay High Court was rendered on 21- 10-2011 and the present assessment year is AY 2008-09. We have already noticed that, prior to the decision of Honble Bombay High Court, the various benches of the Tribunal have been holding that the tax was not deductible at source from the transaction charges paid to the Stock exchanges. Hence, it can be seen that the assessee before us also, was under bona fide belief in this regard and hence, we are of the view that the benefit of doubt given to the assessee by the Hon'ble Bombay High Court in the case of Kotak Securities Ltd (supra) should also be extended to the assessee. The Ld A.R submitted that the assessee has started deducting tax at source from the transaction charges subsequent to the decision of Hon'ble Bombay High Court. The Ld A.R also brought to our notice the decision rendered by the co-ordinate bench of Mumbai Tribunal in the case of M/s Mape Securities Pvt Ltd (ITA No.842/Mum/2012 dated 24.11.2014 relating to AY 2008-09), wherein also the co-ordinate bench has taken identical view. Hence, for the foregoing reasons, we uphold the decision of Ld CIT(A) on this issue.

4 ITA. No.8741/Mum/2011 5. The next issue relate to the computation of MAT tax liability vis-à-vis the rebate u/s 88E of the Act. The AO took the view that the MAT tax liability should be compared with the tax payable under normal provisions of the tax after deducting the rebate allowable u/s 88E of the Act. However, the assessee contended that the tax liability under both the provisions should be compared before deducting rebate u/s 88E of the Act. The AO did not agree with the contentions of the assessee and held that, if the tax payable after allowing rebate u/s 88E works out to less than 10% of the Book Profit, the provisions of sec. 115JB shall be applicable. The AO noticed that the tax payable under the normal provisions of the Act after giving rebate u/s 88E of the Act was Rs.98,02,699/- and the same worked out to less than 10% of Book Profit computed u/s 115JB of the Act. Accordingly, the AO held that the book profit shall be deemed to be the total income and hence the tax shall be payable at 10% of book profit. However, the Ld CIT(A) reversed the decision of the AO and hence the revenue has filed this appeal before us.

6. We notice that the Ld CIT(A) has followed the decision rendered by the Bangalore bench of Tribunal in the case of M/s Horizon Capital Ltd (ITA No.592/Bangalore/2010) and also the decision rendered by the Delhi bench of Tribunal in the case of M/s MBL & Co. Ltd (ITA No.2478/Del/2010), wherein it was held that the rebate u//s 88A to 88E shall also apply to the tax computed u/s 115JB of the Act. The Tribunal has also noticed that the Return of income (ITR-6) prescribed in the Income tax Rules also supported the view taken by the assessees. Accordingly, the Ld CIT(A) reversed the view taken by the AO.

7. We notice that the decision rendered by the Bangalore bench of Tribunal in the case of M/s Horizon Capital Ltd (supra) has since been approved by the Hon'ble High Court of Karnataka (2011)(245 CTR 601; 64 DTR 306), wherein it was held that the assessee is entitled to deduct the rebate u/s 88E of the Act from the tax liability arising u/s 115JB of the Act.

5 ITA. No.8741/Mum/2011 The co-ordinate bench of the Tribunal has also taken identical view in the case of M/s Ambit Securities Broking P Ltd Vs. Addl. CIT (ITA No.7856/M/2011 dated 6.2.2013). All these decisions go to show that the Tribunal/High Court has taken a consistent view that the tax liability arising under normal provisions of the Act and u/s 115JB of the Act should be compared before allowing rebate u/s 88E of the Act. Consistent with the view taken by the Tribunal/High Court, we are of the view that there is no infirmity in the decision rendered by Ld. CIT(A) on this issue.

8. In the result, the appeal filed by the revenue is dismissed.

Pronounced accordingly in the open court on 13th March, 2015 in the

presence of both the parties.

घोषणा खल ु े यायालय म( )दनांकः13th March, 2015 को क गई ।

sd sd (संजय गग /SANJAY GARG) ( बी.आर.बा करन / B.R. BASKARAN) या यक सदस ्य / JUDICIAL MEMBER लेखा सद य / ACCOUNTANT MEMBER

मुंबई Mumbai: 13th March,2015.

व. न.स./ SRL , Sr. PS

आदे श क! "#त%ल&प अ'े&षत/Copy of the Order forwarded to :

1. अपीलाथ / The Appellant

2. यथ / The Respondent.

3. आयकर आयु4त(अपील) / The CIT(A)- concerned

4. आयकर आयु4त / CIT concerned

5. 5वभागीय त न7ध, आयकर अपील$य अ7धकरण, मुंबई / DR, ITAT, Mumbai concerned

6. गाड फाईल / Guard file.

आदे शानस ु ार/ BY ORDER,

true copy सहायक पंजीकार (Asstt. Registrar) आयकर अपील$य अ7धकरण, मब ुं ई /ITAT, Mumbai