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TMI Blog2014 (4) TMI 246X X X X Extracts X X X X X X X X Extracts X X X X ..... h were rendered by TPL were in relation to 'securities' - No other services had been rendered - the dis-allowance u/s 40(a)(ia) was not warranted. A restrictive interpretation should be adopted because unless this were done, the expression 'securities' having been defined in an inclusive sense in Section 2(h) of the Securities Contracts (Regulation) Act, 1956, would exclude a large number of transactions from the ambit of Section 194-H where 'commission or brokerage' is paid to a person acting on behalf of another person for service rendered in relation to any transaction relating to securities - This is a matter of legislative policy - The duty of the Court is to adopt the plain & natural meaning of the words used, particularly in a taxing statute - Once Parliament has legislated by specifically incorporating that the expression 'securities' would have the same meaning as in Section 2(h) of the Securities Contracts (Regulation) Act, 1956, the plain effect cannot be diluted by the Court by reading down the statutory provision - The duty of the Court is to interpret a taxing statute on its plain and literal meaning - the expression 'in relation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Houses by mobilizing investments. Under the agreement, TPL canvased and marketed various Mutual Fund Schemes to potential investors after collecting details from the assessee. The CIT(A) held, while allowing the appeal and setting aside the dis-allowance, that under Explanation (i) to Section 194H, commission or brokerage includes any payment received or receivable by a person who acts on behalf of another person for any services in relation to any transaction relating to an asset, valuable article or thing, not being securities. The CIT (A) noted that the Assessing Officer had not doubted the genuineness of the payment made by the assessee nor was it contended that the payment was made for any other purpose. TPL was admittedly a commission agent to the assessee. In view of Explanation (i) to Section 194-H, it was held that the services rendered could also be in relation to any transaction relating to an asset, valuable article or thing, not being securities. Hence, services rendered relating to securities would get excluded from the express definition of 'brokerage or commission' which was the case here, since the renumeration paid by the assessee to TPL was admittedly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransaction would not fall within the exception that is carved out by the latter part of Explanation (i) to Section 194-H. Section 40 stipulates those amounts which shall not be deducted in computing income chargeable under the head profit and gains of business or profession . Clause (ia) covers any interest, commission or brokerage on which tax is deductible at source under Chapter XVII-B and which has not been deducted or, which after deduction, has not been paid on or before the due date specified in Section 139(1). The Assessing Officer disallowed the commission which was paid by the assessee to TPL under Clause (ia) of Section 40(a) on the ground that tax was liable to be deducted at source under Section 194-H, but had not been deducted. Section 194-H, in so far as is material, provides as follows:- 194H. Any person, not being an individual or a Hindu undivided family, who is responsible for paying, on or after the 1st day of June, 2001, to a resident, any income by way of commission (not being insurance commission referred to in section 194D) or brokerage, shall, at the time of credit of such income to the account of the payee or at the time of payment of such incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rendered in relation to any transaction relating to securities, it would fall outside the purview of Explanation (i) to Section 194-H. Now, it is in this background that it would be necessary to advert to the basis on which the JCIT had exercised jurisdiction under Section 144-A while issuing a direction to the Assessing Officer. The JCIT held that TPL through its employee had actually motivated potential investors to invest in various schemes of Mutual Funds through the assessee. Consequently, the element of rendering services by TPL was held to be proved on which the debit of brokerage had been made by the assessee. The debit of brokerage was found to be genuine. The relevant observations in that regard are as follows:- From the above deposition it is proved that M/s Tapasya Projects Ltd., through its employee Sri Shyam Gupta, has actually motivated Potential Investors to invest in various schemes of different Mutual Fund Registrars through the assessee firm namely M/s Tandon Mahendra. Thus the element of rendering of services by M/s Tapasya Projects Ltd. is proved on which debit of brokerage has been made by the assessee firm and debit of brokerage is found to be ge ..... X X X X Extracts X X X X X X X X Extracts X X X X
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