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M/s. Guiness Securities Ltd. Versus Deputy Commissioner of Income-tax, Circle-6, Kolkata

2016 (6) TMI 1087 - ITAT KOLKATA

Disallowance u/s. 40(a)(ia) - non TDS on SMS charges - Held that:- We find that the nature of services rendered by the two parties are just to provide an Internet platform wherein the software of stock broker gets automatically interfaced with Internet platform without any human intervention and SMS gets automatically generated and sent to customers of assessee. It can at best be considered only as these two parties selling SMS credits to the assessee. It is nobody’s case that the transactions f .....

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nd that the activity carried on in the instant case does not fall under the definition of ‘work’ in terms of section 194C of the Act as it does not involve any human intervention - Decided in favour of assessee - Eligibility for getting rebate u/s. 88E - Held that:- We direct the Ld. AO to disallow the rebate u/s. 88E of the Act at 10% on the claim of the assessee and grant relief for the remaining amount. See Destiny Securities Ltd. Versus Deputy Commissioner of Income Tax [2016 (6) TMI 880 .....

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t ) for AY 2008-09 vide his order dated 31.12.2010. 2. The first issue to be decided in this appeal of assessee is as to whether the disallowance u/s. 40(a)(ia) of the Act could be made towards SMS charges to the extent of ₹ 6,22,008/- in the facts and circumstances of the case. 2.1. The brief facts of this issue are that the assessee is a registered stock broker. The Ld. AO observed that the assessee had made payments to Max Motilities Pvt. Ltd. - ₹ 3,24,508/- and E Biz Technology P .....

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to section 9(1)(vii) and section 194J of the Act the aforesaid SMS service provided in the Mobile Phone cannot be regarded as technical service . The Ld. CIT(A) observed that the service provider i.e. M/s. Max Motilities Pvt. Ltd. and M/s. E Biz Technology P. Ltd. are not themselves telephone operators but they are providing the services on behalf of the telecom operators. They act as contractors for giving the service between the assessee and the telecom service provider. It was held that M/s. .....

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tified in holding that the provision of section 194C of the I. T. Act, 1961 is applicable on the amount of expenditure incurred by the appellant for the payment of SMS charges. 2. For that the CIT(A)-VI, Kol is not justified in holding that the provisions of section 40(a)(ia) of the I. T. Act, 1961 is applicable in respect of the expenditure incurred by the appellant company for payment of SMS charges of ₹ 6,22,008/-. 2.3. The Learned AR argued that the aforesaid two parties provide an Int .....

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he stock broker s software and the customer wherein the net effect of the transactions in the contract notes gets automatically interfaced with Internet platform provided by the two parties and the SMS is generated to the customers without any element of human intervention. This is nothing but transmission of SMS. He placed reliance on the decision of the Coordinate bench of this Tribunal in the case of ITO Vs. Saha Agency in ITA No. 2453/Kol/2013 dated 20.05.2016, which in turn, placed reliance .....

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aforesaid two parties without which there is no reason for these two parties to play a role for transmission of SMS to the customers of the assessee. Accordingly, he argued that the works indeed carried out by these two parties and hence, the provisions of section 194C of the Act are very much applicable. 2.5. We have heard rival submissions and perused the material available on record and the case laws cited by the parties. We find that the nature of services rendered by these two parties are j .....

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gredients - (i) the existence of contract (whether oral or written) and (ii) such contract should be for carrying out any work requiring the human intervention. In the instant case, there is no contract entered into by and between the assessee with two parties as we find that SMS credits sold by two parties were just consumed by the assessee on need basis. In this regard, we find that the case law relied on by the ld. AR on the decision of Kolkata Tribunal in the case of Saha Agency, supra is we .....

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d, the reliance placed by the Ld. AR on the decision of jurisdictional High Court in the case of M/s. Stumm India, supra, wherein it has been held as under: It is urged before us that the learned Tribunal ought not to have accepted the judgment and order of the CIT (Appeal) who has quashed the disallowance of deduction of ₹ 41,33,710/- and on account of tax deduction at source. The learned Tribunal has recorded the fact that the department has not been able to bring any material on record .....

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r. Hence, we hold that the provisions of section 194C of the Act cannot be made applicable to the payments made to Air Transport Corporation (Assam) Ltd. 2.6. We find that the activity carried on in the instant case does not fall under the definition of work in terms of section 194C of the Act as it does not involve any human intervention. In this regard, reliance is placed on the decision of Coordinate bench of this Tribunal in the case of West Bengal State Electricity Distribution Co. Ltd., su .....

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t Bengal State Electricity Distribution Co. Ltd. The wheeling charges represent the charges for permitting use of state transmission utility for permitting use of state transmission utility by the person other than the distribution licensee. The transmission charges simply constitute a fee for availing of the transmission utility to be used by open asset concept for distribution of electricity, licensees and consumers. In our view, the wheeling charges and transmission charges are neither contra .....

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ours is supported by the decision of Hon ble Bombay High Court in the case of CIT Vs. Maharastra State Electricity Distribution Co. Ltd. (2015) 375 ITR 23 (Bom). We find that this issue is squarely covered by this decision in favour of assessee. Therefore, on these two payments, in view of our reasoning, we confirm the order of CIT(A). This common issue of revenue s appeals is dismissed. Respectfully following the aforesaid judicial precedents and in view of the aforesaid facts and circumstance .....

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is given below: Computation of Tax rebate u/s. 88E Net Taxable Income 16,974,200.00 Net Tax payable before surcharge & E.cess 5,092,260.00 Avg. rate of Tax 30.00% Gross Profit in share trading Sale of shares 21,555,959.00 Income from derivative trading 9,076,161.00 Increase in stock 3,662,800.04 34,294,920.04 Less: Purchase of shares 26,236,095.00 Demat charges 728.00 26,236,823.00 Profit from share trading 8,058,097.04 Tax at average rate 30% 2,417,429.00 STT claimed 1,734,845.00 That from .....

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in the said assessment u/S 88E are incorrect, arbitrary, and contrary to the relevant provisions of the act. 3.2. The Ld. CIT(A) observed as follows: 48. I have carefully considered the observations of the Assessing Officer in the assessment order and submissions of the appellant. The Assessing Officer has determined the ratio of receipt from share trading by taking the gross receipt as per income in the profit and loss account which includes sale of shares; increase in stock but without subtra .....

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her income ₹ 2,08,06,025/- ₹ 16,19,02,066/- Share trading & F&O ₹ 80,58.244/- ₹ 16,99,60,310/- 49. The Assessing Officer will calculate the taxable amount on account of STT related income by taking the figure of share trading at an amount of ₹ 80,58,824/- and gross receipt of ₹ 16,99,60,310/-. The STT related taxable income is 4.741% of the total taxable income as per this data. The Assessing Officer will calculate the tax as per the appeal effect resu .....

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d CIT(A)-VI, Kolkata has failed and/or neglected to consider the total rebate of ₹ 17,34,845/- claimed by the appellant company u/s. 88e of the I. T. Act, 1961. 4. For that the Ld. CIUT(A)-VI, Kol is not justified in holding that the appellant is entitled to get only 4.741% of its total taxable income as rebate u/s. 88e of the I. T. Act, 1961 for the assessment year 2008-09. 3.3. The Ld. AR argued that the assessee is having composite business of trading in shares wherein it incurred loss .....

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n in the case of Destiny Securities Ltd. Vs. DCIT in ITA Nos. 1447 & 1446/Kol/2012 dated 29.04.2016 in support of his contention. In response to this, Ld. DR vehemently supported the orders of the lower authorities. 3.4. We have heard rival submissions and perused the material available on record and the case law cited by the ld. AR. The facts stated hereinabove remained undisputed are not reiterated herein for the sake of brevity. We find that the Coordinate bench of this Tribunal had dealt .....

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wance. In respect to interest on FD, ld. Counsel for the assessee stated that interest on FD is not made out of surplus fund but 100% of these FDs have been deposited with the Stock Exchange as margin money against which business of bunch clients and self was carried on. Qua this, ld. Counsel for the assessee filed complete chart in respect to FD interest and other interest income as well as indirect expenses. Finally, Ld. Counsel for the assessee stated that a proportionate disallowance in resp .....

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