This appeal by the assessee company is directed against the order passed by the CIT(A)-8, Mumbai and it pertains to asst. yr. 2006-07.
2. Following grounds were urged before us :
"1. The learned CIT(A) erred in upholding the reopening of assessment by issue of notice under s. 148 dt. 29/3/2011, without appreciating that the original assessment was completed under s. 143(3) by the AO after application of mind to the provisions of s. 40(a)(ia) of the Act and also the TDS provisions, therefore again reopening of assessment on same set of facts merely on change of opinion is bad in law.
2. The learned CIT(A) failed to appreciate that reopening of assessment was based on mere change of opinion as there were no new facts or tangible material before the AO to Come to a conclusion that there is escapement of income.
3. The learned CIT(A) erred in upholding the disallowance of depository charges paid of Rs. 6,27,423 under s. 40 (a)(ia) of the Act without appreciating that depository charges paid was not for technical services therefore, provisions of ss. 194C/ 194J were not applicable.
4. The learned CIT(A) failed to appreciate that s. 40(a)(ia) is applicable to amount payable and not already paid. Further, the expenses had been claImed year after year and no disallowance was made in scrutiny assessment therefore, on bona fide belief no disallowance under s 40(a)(ia) ought to be made ..
5. The learned CIT(A) also failed to appreciate that the payees are assessed to tax and already paid taxes on the said amount and therefore, there should not be any disallowance, the aforesaid view is also supported by the subsequent amendment made by the Finance Act, 2012 inserting proviso to s. 40(a)(ia) of the Act which is clarificatory in nature and inserted With a View to rationalize the provisions of disallowance, therefore the amendment should be applicable With retrospective effect."
3. Facts necessary for disposal of the appeal are stated in brief. The assessee is engaged in the business of share and stock broking. It debited ,a sum of Rs. 6,27,423 to the P&L a/c under the head 'depository charges Which are payable on account of services provided With regard to transactions in securities through Stock Exchange. According to the AO assessee ought to have deducted tax at source under s. 194C of the Act With reference to payments made to the contractor. Assessee paid depository charges m accordance With the agreement made With depository participants for execution of work, as per the rate already fixed. According to the assessee, there is no need to deduct tax on payments because these are not for technical services/for execution of work. The AO, however, in the reassessment proceedings was of the opinion that the payments made to the Stock Exchange, 'by whatever name called, are technical service falling Within the purview of ss. 194J and 194C and the assessee having not deducted tax he invoked provisions of s. 40(a)(ia) of the Act. The learned CIT(A) affirmed the action of the AO and thus the assessee preferred an appeal before us.
4. The case of the learned counsel for the assessee is that': (a) reopening of assessment on same set of disallowance, which was made in the original assessment proceedings would amount to change of opinion, Which is not permissible under law, (b) depository charges do not fall under the head 'technical services' so as, to invoke s. 40(a)(ia) since it is only a contract between the assessee and the party who has to participate m execution of work, and (c) even otherwise, amount having been paid by the assessee, this being the first year where amount were sought to be disallowed, s. 40 (a)(ia) comes into play only in the case of amount payable and not With reference to amount paid. Reliance in this regard was placed on the decision of the Tribunal Special Bench in the case of Menlyn Shipping & Transports us. Addl. CIT (2012) 146 TTJ (Visakha) 1 (SB) : (2012) 70 DTR (Visakha) 81 (5B) : (2012) 136 ITD 23 (Visakha)(SB) and similar view was taken by the Hon'ble Allahabad High Court in the case of CIT us. Vector Shipping Service (P) Ltd. (2013) 262 CTR (All) 545 : (2013) 94 DTR (Ali) 101 : (2013) 38 taxmann.com 77 (All) on which the SLP filed by the Revenue has been rejected. The learned counsel for the assessee placed detailed arguments which are referred to in his written submissions and also placed before us supporting case law to submit that reopening is based upon change of opinion and even otherwise there is no case for making a disailowance under s. 40(a)(ia) both on merit as well as on the issue that the said section is applicable only when the amount is payable and not after payment is made.
5. On the other hand, the learned Departmental Representative relied upon the orders passed by the tax authorities.
6. We have heard the rival submissions and carefully perused the record. We shall first take up the last alternative ground, I.e., when the payment is made by the assessee whether s. 40 (a)(ia) can be attracted. On this issue this very Bench, in the case of Amit Naresh Shah (ITA No. 4154/ Mum/2013), had taken a consistent stand that in the light of the decision rendered by Hon'ble Supreme Court, in the form of dismissal of Revenue's SLP in the case of Vector Shipping Services (P) Ltd. (supra) s. 40(a)(ia) is not applicable With reference to payments already made since the expression 'payable' has to be satisfied for invoking provisions of s. 40(a)(ia). The Bench, in the aforecited decision, observed in this regard as under:
"4. Before us, Departmental Representative stated that order of the Special Bench delivered in the case of Marilyn Shipping & Transports us. Addl. CIT (supra) has been kept in abeyance of the Hon'ble Andhra Pradesh High Court, that the Hon'ble Gujarat High Court had taken a different view. Authorised Representative supported the order of the first appellant authorities. We have heard the rival submissions and perused the material before us. We find that expenses related to professional fees, advertisement and management were debited in P&L a/ c, that same were paid. Therefore, in our View, no disallowance under s. 40(a)(ia) of the Act should be made. We further find that while deciding the appeal in the case of Janapriya Engineers Syndicate (ITTA. No. 352 of 2014 dt. 24th June, 2014) [reported at (2015) 113 DTR (AP) 311-Ed.] the Hon'ble Andhra Pradesh High Court has clarified the issue of interim stay granted by it in the case of Merilyn Shipping & Transports (supra). We will like to reproduce the relevant part of the said order and same reads as under :
'4. We are of the view that until and unless the decision of the Special Bench is upset by this Court, it binds smaller Bench and co-ordinate Bench of the Tribunal. Under the circumstances, it is not open to the Tribunal. as rightly contended by Mr. Narasimha Sarma, learned counsel. to remand on the ground of pendency on the same issue before this Court, overlooking and overruling, by necessary implication, the decision of the Special Bench. We simply say that it is not permissible under quasi judicial discipline'.
From the clarification isstied by the Hon'ble High Court, it is clear that until and unless the decision of Marilyn Shipping & Transport (supra) is reversed by the Court, it is binding on all the benches of the Tribunal. We find that Hon'ble Court has held that judicial discipline mandates that the decision of the special bench has to be followed by other benches. As on today, the stay order granted by the Hon'ble Court has been vacated and the order of the special bench is binding on other benches of the Tribunal. Therefore, respectfully following the same, we hold that the first appellant authorities was justified in following the order of Merilyn Shipping & Transport (supra). Considering the facts of the case and the clarification issued by the Hon'ble Andhra Pradesh High Court on 24th June, 2014 in the case of Janapriya Engineers Syndicate (supra) we decide the effective ground of appeal in favour of the assessee and confirm the order of the first appellant authorities."
7. Reverting to the facts on hand, the tax authorities had not disputed the fact that the assessee paid depository charges without deducting the tax and taxes are already paid by the recipient [see paras 3.3 and 3.4 of the order passed by the CIT(A)]. Since the amount was already paid ami the taxes are paid by the recipient, in our opinion, the decision of the Special Bench in the case of Merilyn Shipping & Transports (supra) is applicable and by following the decision of the Tribunal, Mumbai Bench (supra) we hold that the tax authorities have wrongly invoked provisions of s. 40 (a)(ia) in the instant case. We, therefore, set aside the orders passed by the tax authorities disallowing Rs. 6,27,423. In the light of the decision on merit it is not necessary for us to deal with the other aspects urged before us since they will be of academic importance. Suffice to say that disallowance made by the AO is not called for in the circumstances of the case, in the light of the decision of the Tribunal (supra), which in turn was based upon the decision of the Hon'ble Supreme Court in the case of Vector Shipping Services (P) Ltd. (supra).
8. In the result, the appeal filed by the assessee is allowed.