Payments to jobbers not subject to TDS under section 194C, BSE shares' cost considered BSE Card's cost.

The Tribunal dismissed the Revenue's appeal, confirming that payments to jobbers were not subject to TDS under section 194C and that the cost of acquisition of BSE shares should be considered the cost of acquisition of the BSE Card for capital gains purposes. The decision was pronounced on 14.05.2015.

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Issues Involved:
1. Disallowance of payment to jobbers under section 40(a)(ia) due to non-deduction of TDS.
2. Cost of acquisition of BSE shares as cost of acquisition of BSE Card for computation of capital gains.

Detailed Analysis:

1. Disallowance of Payment to Jobbers under Section 40(a)(ia):

The primary issue revolves around whether the payment of Rs. 7.20 lakh to jobbers should be disallowed under section 40(a)(ia) due to non-deduction of TDS. The Assessing Officer (AO) argued that jobbing is an activity involving the purchase and sale of scrips within a short period, often without taking delivery, and that the payments to jobbers fall under the purview of section 194C, necessitating TDS deduction. The AO disallowed the payment due to the absence of TDS deduction.

The CIT(A) reversed the AO's decision, referencing previous Tribunal decisions in similar cases, such as DCIT v/s M/s. Asset Alliance Securities Pvt. Ltd. and M/s. Total Securities Ltd. v/s DCIT. The Tribunal observed that the relationship between the assessee and the jobbers/arbitragers was on a principal-to-principal basis, not that of a contractor and contractee. The jobbers/arbitragers shared profits and losses with the assessee and were not merely providing services for a fee. Consequently, section 194C was not applicable, and there was no requirement for TDS deduction.

The Tribunal upheld the CIT(A)'s decision, stating that the payments represented the jobbers' share under a joint venture agreement, and thus, section 194C and the consequent disallowance under section 40(a)(ia) were not applicable.

2. Cost of Acquisition of BSE Shares as Cost of Acquisition of BSE Card:

The second issue pertains to whether the cost of acquisition of BSE shares should be considered the cost of acquisition of the BSE Card for capital gains computation. The AO had disallowed this consideration.

The CIT(A) reversed the AO's decision, citing section 55(2)(ab) of the Income Tax Act, which explicitly allows the cost of acquisition of the original BSE card to be taken as the cost of acquisition of BSE equity shares. The Tribunal found no infirmity in the CIT(A)'s decision, noting that the CIT(A) had correctly applied the specific provisions of section 55(2)(ab). The Departmental Representative did not present any contrary evidence.

Conclusion:

The Tribunal dismissed the Revenue's appeal on both grounds. It confirmed that the payments to jobbers were not subject to TDS under section 194C and that the cost of acquisition of BSE shares should indeed be considered the cost of acquisition of the BSE Card for capital gains purposes. The Tribunal's decision was pronounced in open court on 14.05.2015.

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