TMI Blog2010 (12) TMI 821X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the addition made by the A.O. u/s 40(a)(ia) on account of payments made by the assessee to jobbers/arbitragers sustained - Decided in favour of assessee. Under section 40(a)(ia) - V. SAT, Leaseline and transaction charges paid to stock exchange - This issue is squarely covered in favour of the assessee in the case of Kotak Securities Ltd.vs. ACIT (2011 -TMI - 206641 - Bombay High Court). relied upon by the ld. CIT(A) wherein it was held that stock exchanges do not render any managerial or technical services to its members in lieu of the payment of transaction charges etc. and since such payments are made by the member brokers mainly for the facilities provided by the stock exchange, the provisions of section 194J are not applicable so as to make the brokers liable to deduct tax at source from the said payment - It was also held that the provisions of section 40a(ia) thus are not attracted so as to make any disallowance on account of such charges - Decided in favour of assessee. - ITA No. 7123/Mum/2008, ITA No. 800/Mum/2009, - - - Dated:- 31-12-2010 - D. Manmohan, P.M. Jagtap, JJ. S.C. Karpadia for the Appellant Sanjeev Dutt for the Respondent ORDER P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e as deduction being revenue expenditure. Hon'ble Madras High Court has also taken a similar view in the case of CIT vs. S. Venkat Subramaniyan 291 ITR 193 wherein it was held that payment of admission fee to acquire the membership card of the stock exchange and to carry on business on the floor of stock exchange is allowable as revenue expenditure. Respectfully following the these judicial pronouncements, we delete the disallowance made by the A.O. and confirmed by the ld. CIT(A) on account of admission fees paid by the assessee to Bombay Stock Exchange and allow ground No. 3 of the assessee's appeal. 6. Ground No. 4 relates to the disallowance of Rs. 4,57,500/- made by the A.O. and confirmed by the ld. CIT(A) u/s 40A(2)(b) being payment made by the assessee company to the relatives of his directors. 7. The payment claimed to be made by the assessee company on account of salary paid to six relatives of its directors aggregating to Rs. 4,57,500/- was disallowed by the A.O. on the ground that the assessee could not satisfactorily establish the services claimed to be rendered by the said relatives. The explanation offered on behalf of the assessee company that the said relati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he submission of the assessee that salary paid to the same relatives at higher rate has been allowed in the subsequent years. Ground No. 4 of the assessee's appeal is accordingly treated as allowed for statistical purpose. 9. Now, we shall take up the appeal of the Revenue being ITA No. 800/Mum/09. 10. The first issue relating to assessee's claim for rebate u/s 88E has been raised by the Revenue in ground No. 1 and 2 of this appeal which read as under:- "1. On the facts and circumstances of the case and in law, the ld. CIT(A) erred in not recording reasons for admitting fresh evidences as required under Rule 46A(2). 2. On the facts and circumstances of the case and in law, the ld. CIT(A) erred in not allowing proportionate expenses incidental to jobbing for arising at net income eligible for rebate u/s 88E." 11. During the year under consideration, the main activity carried on by the assessee company was jobbing and arbitrage in its own proprietary account. In the return of income, the assessee had shown total tax payable at Rs. 1,79,90,227/- on which a rebate of Rs. 1,53,30,239/- was claimed u/s 88E in respect of Securities Transaction Tax (STT). As the said re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ufficient opportunity. He has submitted that even the books of account were not produced by the assessee in order to enable the A.O. to verify its claim for rebate u/s 88E. He has submitted that all these details, however, were furnished by the assessee before the ld. CIT(A) for the first time and although the ld. CIT(A) forwarded the same to the A.O. seeking his remand report, the later could not submit the same within a short period of 5-6 months given by the ld. CIT(A). He has contended that the A.O. thus has not got any effective opportunity to verify the additional evidence filed by the assessee for the first time before the ld. CIT(A) comprising of voluminous documents running into 226 pages. According to him, the A.O. also has not got the opportunity to verify the claim of the assessee for rebate u/s 88E from the books of account. He has contended that this is thus a fit case to give one more opportunity to the A.O. to verify the claim of the assessee for rebate u/s 88E in the light of additional evidence filed by the assessee. Although the learned counsel for the assessee has raised strong objection for sending this matter back to the A.O. for giving him an opportunity to v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e failure of the assesse to deduct the tax at source. 14. The amount of Rs. 1,01,62,325/- paid by the assessee company to its arbitragers/jobbers was claimed as deduction. According to the A.O., the assessee was required to deduct tax at source from the said amount u/s 194C and since it had failed to comply with the said requirements, the amount of Rs. 1,01,62,325/- was disallowed by him u/s 40(a)(ia). The ld.CIT(A), however, deleted the said disallowance accepting the contention of the assessee that the provisions of section 194C were not attracted to the transactions entered into by it with arbitragers/jobbers as the same were on principal to principal basis. 15. We have heard the arguments of both the sides and also perused the relevant material on record. It is observed that a similar issue has been decided in favour of the assessee by the co-ordinate Bench of this Tribunal in the case of DCIT vs. Asset Alliance Securities Pvt. Ltd. In ITA No. 1488/Mum/2009 dated 16th July 2010 after discussing all the relevant aspects in para No. 9 of its order which is reproduced below:- "The Revenue is in appeal. We have examined the facts and the rival contentions. Whereas the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by Mr Amit Zaveri. Clause 5 obliges the assessee to pay all margin monies to the Stock Exchange for the transactions carried out by Mr Amit Zaveri in the name of the assessee. More importantly it provides that "all applicable expenses will be deducted/added before the distribution of the profit/loss as agreed upon in clause 2 above". Clause 6 says that the parties will abide by the Rules prescribed by NSE and SEBI and clause 7 provides for discontinuance of the agreement by giving one day's notice. All the agreements filed before us are identically worded. It has been argued on behalf of the assessee on the basis of these agreements that there was a joint venture between it and the jobbers or arbitragers for trading in shares and securities in the Stock Exchanges on the company's own account and the profits or losses on such trading were to be divided equally between the assessee and the concerned jobber or arbitrager. It was further represented before us that no expenditure or payment made to the jobber or arbitrager was claimed in the assessee's books of account from which TDS had to be made and it was only the net income from the joint venture that was accounted for in the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /arbitragers is also given, jobber-wise and arbitrager-wise, from which the share of the jobber/arbitrager has been deducted and the balance has been taken as the assessee's share of profit in the joint ventures. The total share of the jobber out of the gross receipts and paid to them comes to Rs.1,42,24,997/- and the total share paid to the arbitragers came to Rs.19,46,576/-. The aggregate of the two comes to Rs.1,61,71,573/- which is the amount that has been disallowed by the AO by invoking section 194C read with section 40(a)(ia) of the Act. The facts show that there were separate joint ventures entered into by the assessee with several jobbers/arbitragers and payments have been made to them under such agreements and the assessee's share in the profits has been taken to the Profit and Loss Account. In these circumstances the provisions of section 194C are not attracted because in essence and substance the amounts paid to the jobbers or arbitragers did not in reality represent the expense of the assessee company but represented payment of the share of the jobbers/arbitragers under the agreement entered into with them. In such a case the assessee is right in saying that there was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of reimbursement of charges paid by the members of the stock exchange in lieu of infrastructure and trading facilities provided by the later. He held that the payment made by the assessee to the stock exchange on account of the said charges thus was not coming within the domain of "fee for technical services" and the same also not being for 'any work' done by NSE for the member broker, tax at source was not deductible there from u/s 194J. Accordingly, he deleted the disallowance made by the A.O. on account of V SAT charges, lease line and transaction charges u/s 40a(ia) relying on the decision of Mumbai Bench of ITAT in the case of Kotak Securities Ltd. vs. ACIT 318 ITR (AT) 258. Aggrieved by the order of the ld. CIT(A), the Revenue has preferred this appeal before the Tribunal. 19. We have heard the arguments of both the sides and also perused the relevant material on record. It is observed that this issue is squarely covered in favour of the assessee by the decision of co-ordinate Bench of this Tribunal in the case of Kotak Securities Ltd. (supra) relied upon by the ld. CIT(A) wherein it was held that stock exchanges do not render any managerial or technical services to its ..... X X X X Extracts X X X X X X X X Extracts X X X X
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