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TMI Blog2017 (11) TMI 59X X X X Extracts X X X X X X X X Extracts X X X X ..... lant : Sh. K. Sampath, Adv For The Respondent : Sh. V. Raja Kumar, Sr. D.R. ORDER PER R.K. PANDA, A.M: These are cross appeals. The first one is filed by the assessee and the second one filed by the Revenue and are directed against the order dated 28th February, 2013 of the CIT(A)-XII New Delhi relating to assessment year 2009-10. For the sake of convenience both the appeals were heard together and are being disposed of by this common order. ITA No. 3206/Del/2013 (Assessee) 2. Although a number of grounds have been raised by the assessee they all relate to the order of Ld. CIT(A) in confirming the addition of ₹ 81,53,443/- and ₹ 59,27,785/- made by the AO under section 40(a)(ia) on account of non deduction of TDS. 3. Facts of the case in brief are that the assessee is a company and is a member of National Stock Exchange, Bombay Stock and MCX-SX. It is also earning brokerage income from providing platform of trading in shares etc and also engaged in its own trading of shares. It filed its return of income on 29th September, 2009 declaring an income of ₹ 3,48,590/- During the course of assessment proceedings, the AO observed th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7,785/- under section 40(ia) of the Income Tax Act. 6. In appeal, the learned CIT(A) upheld both the additions made by the AO under section 40(ia) by observing as under: I have perused the facts stated in assessment order as well facts stated by the assessee in his submission and the comments of the Assessing Officer dt. 31.12.12 26.2.13 respectively. Clause 7 of the agreement with J.V. Stock Broking Pvt. Ltd is important which states that: That out of total brokerage earned an amount*equivalent to 0.05% on the jobbing turnover value and a charge of 0.05% on the delivery turnover value shall be retained by the first party and the balance amount of brokerage earned shall be paid by the first party to the second party for managing whole of the affairs of the branch as Branch running Expenses. This arrangement may be reviewed with mutual consent of both the parties from time to time. From the above, it is clear that this agreement is contrary to assessee's submission stated supra. Hence the nature of transaction is of a work contract covered u/s 194C and TDS is applicable. Further, in respect of the addition of ₹ 59,27,785/- the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... brokerage made by the AO under section 40(ia) of the Income Tax Act. Referring to the decision of the Mumbai Bench of the Tribunal in the case of Prayas Securities Pvt. Ltd., Mumbai vs. Assistant Commissioner of Income Tax vide ITA No. 4731/Mum/2010 order dated 10th August, 2011 for assessment year 2006-07 he submitted that similar view has been taken and it has been held that any payment of commission or brokerage made in respect of a transaction in securities is not covered by the requirement of tax deduction under section 194H of the I.T. Act. It has been held that the assessee, which has paid commission or brokerage to the sub brokers for mobilizing business and securities was not required to deduct the tax. He submitted that similar view has been taken by the Mumbai Bench of the Tribunal in the case of Jain Investment vs. ITO in ITA No. 3663 / Mum / 2010 order dated 24th February, 2011 for assessment year 2006-07 and in the case of M/s Tanna Agro Impex P. Ltd., vs. Addl. Commissioner of Income Tax, Range 2(3) vide ITA No. 3224/Mum/2010 order dated 29th July, 2011 for assessment year 2007-08. He accordingly submitted that this being a covered matter in favour of the assessee, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rate of [ten] per cent: Provided . . . Provided . . . Provided . . . . . Explanation.-For the purposes of this section,- (i) commission or brokerage includes any payment received or receivable, directly or indirectly^ by a person acting on behalf of another person for services rendered (not being professional services) or for any services in the course of buying or selling of goods or in relation to any transaction relating to any asset, valuable article or thing, not being securities; (ii) . (iii) ..... (iv) ...... As can be seen from the above provision, the commission or brokerage definition does not include transactions in securities. There is no doubt that Mutual Funds are categorised as securities on which there is no. objection from the Revenue either before the A.O. or before the CIT(A). In fact the CIT(A) also gives a finding that the A.O. has not disputed that units of Mutual Funds are securities as per Securities Contracts (Regulation) Act, 1956. Assessee is in the business of Mutual Funds distrib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge made in respect of a transaction in securities is not covered by the requirement of tax deduction under section 194H of the Act. Therefore, the assessee which has paid commission or brokerage to the sub-brokers for mobilizing business in securities was not required to deduct the tax. In this view of the matter the disallowance made under section 40(a)(ia) in respect of NSE charges is also not justified. 12. In view of the above decisions cited (Supra) we are of the considered opinion that assessee has not violated the provisions of section 194H of the Income Tax Act so as to enable the AO to make addition / disallowance under section 40(ia) of the Income Tax Act on account of non-deduction of tax from the brokerage paid to various parties. The learned DR could not distinguish the above decisions cited by learned counsel for the assessee nor could bring any material before us so as to take a different view than the views taken by the Mumbai Bench of the Tribunal. We, therefore, set aside the order of the CIT(A) and direct the AO to delete the addition. ITA No. 3217/Del/2013 (Revenue) The grounds raised by the Revenue are as under: i. The Ld. CIT(A) erred in l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome or receipt and it relates to earning of taxable income by the assessee and is allowable as such against the said income. This amount of interest the ITO has not excluded in his calculation which was to be allowed. Therefore balance amount of interest of ₹ 75, 74,007/- is only to be considered for purposes of Rule 8D. The average of total current assets is to be considered for the purposes of rule 8D where as the Assessing officer has taken it as net assets i.e. total assets less liabilities as shown in the balance sheet of the assessee. The average of total assets as per submission of the assessee is ₹ 59,00,06,383/- and not ₹ 8,16,37,220/.- Moreover the word used in Rule 8 D is total asset not net asset. Rule 8D sub rule (ii) part C states:- The average of total assets as appearing in the balance sheet of the assessee, on the first day and the last day of the relevant accounting year. The term Total Assets means total assets as appearing in the balance sheet excluding the increase on account of revaluation of assets but including the decrease on account of revaluation of assets. Keeping in view of the above facts, the Assessing Officer is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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