Case Law Details
ACIT Vs Rajesh Falor (ITAT Kolkata)
Assessee had paid commission to the remisiers in the sum of Rs 46,63,217/- and claimed the same as deduction. The ld CITA had given a finding that the said payment was made by the assessee in relation to the security transactions carried out by him in the capacity of sub-broker and accordingly the said payment would not be liable for deduction of tax at source in terms of Explanation to section 194H of the Act.
FULL TEXT OF THE ITAT JUDGMENT
1. This appeal by the Revenue arises out of the order of the Learned Commissioner of Income Tax(Appeals)-Durgapur [in short the ld CIT(A)] in Appeal No. 08/CIT(A)/DGP/2015-16 dated 31.08.2016 against the order passed by the DCIT, Circle-1, Dgp [ in short the ld AO] under section 143(3) of the Income Tax Act, 1961 (in short “the Act”) dated 18.03.2015 for the Assessment Year 2012-13.
2. The only issue to be decided in this appeal of the revenue is as to whether the ld CITA was justified in deleting the disallowance of commission paid in the sum of Rs 46,63,217/- in the facts and circumstances of the case.
3. The brief facts of this issue are that the assessee during the year under appeal had derived income from share broking, income from other sources and short term capital The return of income for the Asst Year 2012-13 was filed by the assessee on 29.3.2013 declaring total income of Rs 11,37,019/-. The assessee is a proprietor of DIC Finance & Securities and is carrying on business as share sub-broker. The assessee is registered with SEBI as sub-broker. The assessee’ s main broker is Shree Bahubali International Ltd which is also mentioned in the SEBI Registration Certificate. The assessee received sub brokerage amounting to Rs 90,43,890.77 from Shree Bahubali International Ltd during the year under appeal. Out of the said amount, the assessee paid Rs 46,63,2 16.75 to 48 persons as commission without deduction of tax at source in terms of section 194H of the Act. The assessee explained that he is engaged in securities transaction under main broker Shree Bahubali International Ltd ; that he pays commission to Remisiers for services rendered in introducing clients to the broker for dealing in securities ; that he has to pay commission to Remisiers as per monthly advice received from Principal ; that commission paid to Remisiers relate to security transaction hence no TDS is required to be made u/s 194H of the Act ; that payments to Remisiers were made through account payee cheques. The assessee also placed reliance on the decision of the co-ordinate bench of Mumbai Tribunal in the case of Senetor Commodities Pvt Ltd vs DIT in ITA No. 8321/M/2010. The ld AO however did not agree to the contentions of the assessee and proceeded to disallow the commission paid in the sum of Rs 46,63,216.75 u/s 40(a)(ia) of the Act for violation of provisions of section 194H of the Act.
4. The assessee submitted before the ld CITA that he is registered with SEBI since 27.5.1999 and has been carrying on similar business till date, which has been accepted by the revenue in earlier years even in scrutiny assessment proceedings for the Asst Year 2006-07 u/s 143(3) of the Act. The accounts of the assessee have been audited and no violation on account of TDS had been reported by the tax auditor in his report. The assessee has made payments to Remisiers appointed by the main broker a sum of Rs 46,63,216.75 and the same has been paid to 48 parties. The list of Remisiers, as appointed by Shree Bahubali International Ltd to whom commission / brokerage was paid was enclosed before the ld CITA. It was further pleaded that from the audited accounts, it would be evident that the assessee does not have any other line of business apart from being a registered sub-broker and deals in security only i.e commission from deposit schemes, sub-brokerage from main broker , commission from mutual funds etc. Hence it was argued that the conclusion of the ld AO in his order that the payments are not for security transactions is misconceived and without any basis. Accordingly it was pleaded that payment of commission / brokerage in relation to security transactions would not fall under the ambit of provisions of section 194H of the Act in view of Explanation thereon. It was also stated that the disallowance of such commission payments in Asst Year 2009-10 has been deleted by this tribunal in ITA No. 1818/Kol/2012 in assessee’s own case and disallowance was deleted by the ld CITA itself for the Asst Year 2011-12 in assessee’s own case.
5. The ld CITA granted relief to the assessee by observing as under:-
“Admittedly, there is no dispute that the amount paid was a commission to the remisier and the transaction was in respect of purchase and sale of securities in the stock exchange. A perusal of the order of the AO clearly shows that he has accepted the fact that the commission has been paid on behalf of Shree Bahubali International ltd., the principal and the broker. A perusal of the Explanation (i) to section 194 does not in any way make any distinction between brokers and sub-brokers. It only says that the provision of section 194H would not apply in respect of commission in respect of purchase and sale of securities. Therefore, respectfully following the decision of Hon’ble I.T.A. No. 1818/Kol/2012 in case of appellant for the Assessment year 2009-10 by Hon ’ble “A” Bench which was followed by the decision of the co-ordinate of the Hon’ble Tribunal Kolkata in the case of Smt. Usha Chowdhury in I.T.A. Nos. 511 & 512/Kol/2012, dated 22.1 0.2014, the disallowed made by the AO is hereby deleted.”
6. Aggrieved, the revenue is in appeal before us.
7. We have heard the ld DR. None appeared on behalf of the assessee. We find that the assessee had paid commission to the remisiers in the sum of Rs 46,63,217/- and claimed the same as deduction. The ld CITA had given a finding that the said payment was made by the assessee in relation to the security transactions carried out by him in the capacity of sub-broker and accordingly the said payment would not be liable for deduction of tax at source in terms of Explanation to section 194H of the Act. This finding was not controverted by the revenue before us. We also find that similar issue had been decided in favour of the assessee in his own case for the Asst Year 2009-10 by this tribunal in ITA No. 1818/Kol/2012 , which has been followed by the ld CITA while deleting the disallowance. Hence we find no infirmity in the order of the ld CITA. Accordingly, the grounds raised by the revenue are dismissed.
8. In the result, the appeal of the revenue is dismissed.
Order pronounced in the Court on 25.05.2018
