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Dy. Commissioner of Income Tax, Circle–4 (1) Mumbai Versus M/s. Dhyan Stock Broking Pvt. Ltd.

2015 (9) TMI 659 - ITAT MUMBAI

TDS u/s 194C - profit sharing - Disallowance under section 40(a)(ia) - non deduction of tds - payments made by the assessee to jobbers / arbitragers - CIT(A) deleted disallowance - Held that:- We respectfully follow the order of the Tribunal in the case of M/s Asset Alliance Securities Pvt. Ltd. (2010 (7) TMI 720 - ITAT MUMBAI) and uphold the impugned order of the learned CIT(A) deleting the addition made by the Assessing Officer holding that the provisions of section 194C of the Act are not att .....

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the original BSE card as cost of acquisition of BSE equity shares - Held that:- CIT(A) warranting interference at the instance of the Department inasmuch as the learned CIT(A) accepted the claim of the assessee holding that the assessee was allowed to take the cost of acquisition as per the specific provisions of section 55(2)(ab) of the Act. DR has not brought anything on record contrary to the above noted specific provisions of the Act. - Decided against revenue. - ITA no.1589/Mum./2012 - Dat .....

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llowing payment of ₹ 7.20 lakh to jobbers disallowed under section 40(a)(ia), when no TDS was deducted. 2. On the facts and in the circumstances of the case and in law has erred in allowing to take cost of the acquisition of the BSE card as cost of acquisition of BSE share under the provision of section 55(2)(ab) of the Act. 2. The assessee, in the present case, is engaged in the business of share broking and is a member of the Bombay Stock Exchange Limited (BSE) and a SEBI registered stoc .....

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t the exact nature of jobbing activity and also submit details of payments made to the jobbers and also explain as to whether the tax was deducted at source under section 194C of the Act or not. The Assessing Officer, however, rejected the submissions primarily on the following grounds:- I. Jobbing is an activity involving purchase and sale of scrips / derivatives within a short period of time, with a view to squaring them off within the same settlement period, without taking a delivery; II. Arb .....

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ed. Further as the profitability will depend on the motivation of the Jobber, he is generally paid a percentage of net profit generated, as consideration. V. The Jobbers/Arbitragers do not operate under their own code. For the purpose of entering into any transaction they use the code number of the Broker/Assessee for whom they work. VI. Generally all the positions are closed at the end of the day, no deliveries are taken or given. VII. The margins for trading and taking positions in the market .....

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s disallowed. 4. The learned CIT(A) reversed the order of the Assessing Officer and allowed the claim of the assessee while following the orders of the Tribunal, Mumbai Bench, in DCIT v/s M/s. Asset Alliance Securities Pvt. Ltd., ITA no.1488/Mum./2009, order dated 16th July 2010, and M/s. Total Securities Ltd. v/s DCIT, in ITA no.7123/Mum./ 2008, order 31st December 2010. Aggrieved, the Revenue is in appeal before the Tribunal. 5. The learned Departmental Representative, before us, relied on the .....

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ties Pvt. Ltd. (supra), the Tribunal observed as follows:- "The Revenue is in appeal. We have examined the facts and the rival contentions. Whereas the learned Senior DR strongly relied on the order passed by the AO and the statutory provisions, the basic contention of the assessee before us was that there was a joint venture between it and the jobbers / arbitragers to share the profits and losses arising on account of the dealings between them, that such an arrangement was on principal to .....

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with several jobbers / arbitragers with the understanding that the ultimate profit or loss in such trade would be divided between them equally. At our instance the learned representative for the assessee has filed copies of the agreements entered into with the jobbers / arbitragers. The agreements are in standard form. We may refer to the agreement with Mr. Amit Zaveri, which is at page 23 of the paper Book. The preamble to the agreement states that Mr. Amit Zaveri has shown his willingness to a .....

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ontrol will be with the assessee. Clause 2 provides that Mr Amit Zaveri is authorized to trade and out of the net proceeds, whether profit or loss, from such dealing of shares and securities will be shared between the assessee and him in the ratio of 50 : 50. Clause 3 provides that all transactions, dealings and other formalities will be carried out in the name of the assessee only. Clause 4 provides that the assessee will be solely entitled to receive and keep any kind of dividend, interest and .....

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use 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 arbi .....

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d upon the assessee to prove this claim with reference to the accounts. The assessee filed the accounts and other details to establish its claim. We find from the papers submitted by the assessee in the form of three separate Paper Books that on 11th March 2008 the assessee had explained the trading income of ₹ 6,91,06,197/- appearing in Schedule G to the audited Profit and Loss Account and it was pointed out that out of the above trading income, jobbing income amounted to ₹ 1,57,75, .....

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g, trading and depository income . It was this figure which was explained in Schedule G to the accounts. The assessee again wrote a letter dated 11th April 2008 to the AO explaining the jobbing / arbitrage income which was included in the figure of ₹ 6,91,06,196/-. In this letter it was submitted to the AO that the jobbing / arbitrage activity was carried out by the assessee in association with the jobbers / arbitragers in accordance with profit sharing agreements entered into with them. I .....

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ers, their Permanent Account Numbers and addresses. Similar details have also been given in respect of arbitragers. The gross amount received in respect of the business carried on by the assessee through the jobbers / 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 .....

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s 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 no question of deducting any tax at source. The above facts al .....

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n 194C and the assessee was not liable to deduct tax there from. Accordingly section 40(a)(ia) is also not applicable. The payments, in our view, were rightly allowed as deduction by the CIT(A). The grounds 7 to 10 are dismissed. Since the issue involved in the present case as well as all the material facts relevant thereto are similar, we respectfully follow the order of the Tribunal in the case of M/s Asset Alliance Securities Pvt. Ltd. (supra) and uphold the impugned order of the learned CIT( .....

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