2013 (11) TMI 157 - AT - Income Tax

TDS u/s 194H - Brokerage or sub-brokerage on securities disallowance of sub-brokerage under section 40(a)(ia) - Held that - According to the provisions of Section 194H Explanation(i) brokerage or sub-brokerage paid on units of mutual funds is not covered under the provisions of tax deduction at source In this case Sub-brokerage paid was not for any other service but for services relating to securities Decided against Revenue.

Summary

Issues involved:
1. Disallowance of sub-brokerage under section 40(a)(ia) of the Income-tax Act, 1961 for assessment years 2005-06 and 2007-08.

Detailed Analysis:
The case involved two appeals by the Revenue challenging the deletion of disallowance of sub-brokerage under section 40(a)(ia) of the Act for the assessment years 2005-06 and 2007-08. The assessee, a mutual fund distributor and investment agent, had paid sub-brokerage without deducting tax at source, leading to the Assessing Officer disallowing an amount under section 40(a)(ia) and reopening the assessment under section 147 of the Act. The Assessing Officer completed the assessment at an income of Rs. 3,59,61,760 for the relevant years. However, the Commissioner of Income-tax (Appeals) allowed the claim of the assessee for both assessment years, leading to the Revenue's appeal before the Appellate Tribunal.

During the hearing, the Departmental representative supported the Assessing Officer's order, while the assessee's counsel argued that the issue was covered in favor of the assessee by a previous Tribunal order in the assessee's own case for the assessment year 2006-07. The Tribunal had held that the sub-brokerage paid was connected with services rendered in the course of buying and selling mutual fund units, which were not covered by the provision for deduction of tax at source under section 194H. The Tribunal further noted that the sub-brokerage was related to securities and not subject to TDS. The Tribunal upheld the Commissioner's order, rejecting the Revenue's grounds for both assessment years.

Ultimately, the Appellate Tribunal, after considering the submissions and material on record, declined to interfere with the Commissioner's order based on the precedent set by the Tribunal in the assessee's own case. The Tribunal confirmed the Commissioner's decision to allow the claim of the assessee and dismissed the Revenue's appeals for both assessment years. The judgment was delivered on January 2, 2013, by the Appellate Tribunal ITAT Mumbai.