TaxTMI 
TaxTMI 
2015 (9) TMI 659
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.... 7.20 lakh to jobbers disallowed under section 40(a)(ia), when no TDS was deducted. 2. On the facts and in the circumstances of the case and in law has erred in allowing to take cost of the acquisition of the BSE card as cost of acquisition of BSE share under the provision of section 55(2)(ab) of the Act." 2. The assessee, in the present case, is engaged in the business of share broking and is a member of the Bombay Stock Exchange Limited (BSE) and a SEBI registered stock broker. It filed its e-return of income for the year under consideration on 21st September 2008, disclosing total income of Rs. 51,34,070. The Assessing Officer completed assessment under section 143(3) of the Income Tax Act, 1961 (for short "the Act") determining the ....
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....e number of the Broker/Assessee for whom they work. VI. Generally all the positions are closed at the end of the day, no deliveries are taken or given. VII. The margins for trading and taking positions in the market are provided by the principal. Due to the multiplicity and huge volume of transactions generally the margins required are also very large. VIII. The bolt/access to exchange and the office space is provided by the member." The Assessing Officer held that the payments made are in lieu of services rendered for carrying out certain work and the payments made falls within the meaning of section 194C. Since the assessee has not deducted the tax, therefore, the total amount paid for Rs. 7.20 lakh was disallowed. 4. The learned....
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....ore the jobber / arbitrager cannot be termed as a contractor for carrying out any work for the assessee and in these circumstances there was no question of invoking section 194C. It was explained that this was a business done by the assessee on its own account in the Stock Exchange and not for or on behalf of its clients for brokerage and for the purpose of trading in shares and securities in the Stock Exchange on its own account, the assessee entered into agreements with several jobbers / arbitragers with the understanding that the ultimate profit or loss in such trade would be divided between them equally. At our instance the learned representative for the assessee has filed copies of the agreements entered into with the jobbers / arbitra....
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.... applicable expenses will be deducted / added before the distribution of the profit / loss as agreed upon in clause 2 above". Clause 6 says that the parties will abide by the Rules prescribed by NSE and SEBI and clause 7 provides for discontinuance of the agreement by giving one day's notice. All the agreements filed before us are identically worded. It has been argued on behalf of the assessee on the basis of these agreements that there was a joint venture between it and the jobbers or arbitragers for trading in shares and securities in the Stock Exchanges on the company's own account and the profits or losses on such trading were to be divided equally between the assessee and the concerned jobber or arbitrager. It was further represented ....
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....ich was explained in Schedule "G" to the accounts. The assessee again wrote a letter dated 11th April 2008 to the AO explaining the jobbing / arbitrage income which was included in the figure of Rs. 6,91,06,196/-. In this letter it was submitted to the AO that the jobbing / arbitrage activity was carried out by the assessee in association with the jobbers / arbitragers in accordance with profit sharing agreements entered into with them. It was pointed out in this letter that the share of the jobbers and arbitragers were given to them and the details of such amounts had already been enclosed in the earlier dated 11th March 2008. We have looked into the details filed by the assessee along with its letter dated 11th March 2008 filed before the....
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.... arbitragers under the agreement entered into with them. In such a case the assessee is right in saying that there was no question of deducting any tax at source. The above facts also establish that the relationship between the assessee and the jobbers / arbitragers was not of principal and agent but was that of principal to principal. Both had agreed to embark upon a joint venture to trade in shares and securities in the Stock Exchange and to share the profit / loss equally. We do not see how such payments can be termed as payments to contractors for any work to be carried out by them. We therefore uphold the finding of the CIT(A) that these payments do not attract section 194C and the assessee was not liable to deduct tax there from. Acco....