Itxa/1187/2017 Of Pr. Commissioner Of Income Tax - 7 v. National Stock Exchange

Priya Soparkar 1 1-4 itxa 1187-17-o IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL (IT) NO.1187 OF 2017 Pr.Commissioner of Income Tax-7… AppellantV/s.National Stock Exchange… Respondent … Respondent --- Mr.Suresh Kumar with Ms.Priyanka Tiwary andMs.Sumandevi Yadav, Advocate for the Appellant.Mr.J.D.Mistri, Senior Advocate with Mr.Atul K. Jasani forthe Respondent. --- CORAM : UJJAL BHUYAN & MILIND N. JADHAV, JJ. DATE : FEBRUARY 3, 2020 P.C.:- 1.Heard Mr.Suresh Kumar, learned standing counsel, Revenue for the appellant and Mr.J.D.Mistri, learnedsenior counsel assisted by Mr.Atul K. Jasani, learnedcounsel for the respondent. 2.This appeal has been preferred by the Revenueunder Section 260A of the Income Tax Act, 1961 (briefly“the Act” hereinafter) against the order dated 4[th] April, Priya Soparkar 21-4 itxa 1187-17-o 2016 passed by the Income Tax Appellate Tribunal,Mumbai Bench “B”, Mumbai (briefly “the Tribunal”hereinafter) in Security Tax Appeal No.02/Mum/2010 forthe financial year 2005-06. 3.In this appeal appellant has proposed the followingquestions as substantial questions of law:- “(i) Whether in the facts and in thecircumstances of the case and in law theTribunal was correct in holding that under thestatute National Stock Exchange (NSE) is notliable for any alleged short deduction ofSecurity Transaction Tax (STT)?(ii) Whether in the facts and in thecircumstances of the case and in law theTribunal was correct in holding that NSE hadnot committed any fault in collection ofcorrect STT, when infact section 100(1) ofSecurities Transaction Tax mandates therecognized stock exchange for collection andrecovery of STT at the rates specified insection 98 of STT Act? (iii) Whether in the facts and in thecircumstances of the case and in law theTribunal was correct in holding that it was theresponsibility of member brokers of NSE tocollect the correct STT on the transactions,when infact these member brokers are of NSEitself and operate on NSE’s platform? (iv) Whether in the facts and in thecircumstances of the case and in law theTribunal was correct in deleting the penalty forfailure to collect the said Security TransactionTax?” 4. The appeal has arisen on the following facts :- 5.For the financial year 2005-06 respondent filedreturn of taxable securities transaction on 29[th] June,2006 declaring the total taxable securities transactionat Rs.6,99,10,47,72,669.00. The case was selected forscrutiny, whereafter notices were issued to therespondent. 6.Be it stated that, respondent is the National StockExchange of India Limited (NSE). In the course of theassessment proceeding Assessing Officer expressedapprehension that there was some under-collection ofSecurities Transaction Tax (STT) by the respondent inrespect of certain institutional investors like foreigninstitutional investors. Assessing Officer made an enquiryon sample basis amongst the brokers registered with therespondent. According to the Assessing Officer, there wasdiscrepancy in the total amount of STT collected by the Priya Soparkar 41-4 itxa 1187-17-o 6.Be it stated that, respondent is the National StockExchange of India Limited (NSE). In the course of theassessment proceeding Assessing Officer expressedapprehension that there was some under-collection ofSecurities Transaction Tax (STT) by the respondent inrespect of certain institutional investors like foreigninstitutional investors. Assessing Officer made an enquiryon sample basis amongst the brokers registered with therespondent. According to the Assessing Officer, there wasdiscrepancy in the total amount of STT collected by the Priya Soparkar 41-4 itxa 1187-17-o brokers from their foreign institutional investors, atleastby nine brokers, and the amount of STT collected by therespondent. According to the Assessing Officer, the ninebrokers had reported a total of Rs.2,80,78,444.00 asshort collection of STT by the respondent from thebrokers pertaining to transactions entered into by theforeign institutional investors (FIIs) through the brokers.According to them, the total amount of STT collected fromtheir foreign institutional investor clients wasRs.2,79,27,48,914.00 whereas the total amount of STTrecovered by the respondent was Rs.2,76,46,70,470.00,thus leading to a shortfall of Rs.2,80,78,444.00. It wasobserved that the figure of discrepancy pertaining to FIIstransaction was likely to be higher as the discrepanciesnoticed by the Assessing Officer was from amongstnine brokers which were only illustrative and notexhaustive. Assessing Officer therefore held thatrespondent had failed to take inbuilt measures tocollect STT properly and accurately from the members(brokers) as per requirement of Section 100 of ChapterVII of Finance (No.2) Act, 2004. Taking the view that his Priya Soparkar 51-4 itxa 1187-17-o inquiry covered only 1/4th of the total number of brokersregistered with the respondent, Assessing Officer calledupon the respondent to explain as to why a bonafideestimate of Rs.5 crores of STT should not be paid by therespondent which had escaped collection in its hand fromthe brokers. After considering the response of therespondent Assessing Officer passed the assessmentorder dated 28[th] March, 2008 raising STT collectable bythe respondent by an additional amount of Rs.5 croresover and above the STT collected and deposited by therespondent during the year under consideration. It wasobserved that Assessing Officer had kept the option opento continue with the inquiry and to amend theassessment order if necessary since there was likelihoodthat the actual figure of under collection of STT pertainingto the FIIs transactions would be much more. Accordingly,an amount of Rs.5 crores was added as the additional STTpayable by the respondent and together with theinterest, the amount payable was estimated atRs.6,14,21,680.00. Assessing Officer further directed Priya Soparkar 61-4 itxa 1187-17-o initiation of penalty proceedings under Section 105(a) ofChapter VII of the Finance (No.2) Act, 2004. Priya Soparkar 61-4 itxa 1187-17-o initiation of penalty proceedings under Section 105(a) ofChapter VII of the Finance (No.2) Act, 2004. 7.RespondentpreferredappealbeforetheCommissioner of Income Tax (Appeals)-13, Mumbai. Bythe appellate order dated 1[st]December, 2009,Commissioner of Income Tax (Appeals) took the view thatliability to collect STT and to credit the same to theaccount of Central Government was a strict liabilitywhich the respondent had failed to discharge. Respondenthad failed to collect due STT as per Section 100 readwith Section 98 of the Finance (No.2) Act, 2004.However, Commissioner of Income Tax (Appeals) notedthat since the actual discrepancy noted by the AssessingOfficer on account of shortfall of STT collected from thebrokers was Rs.2,80,78,444.00, Assessing Officer wasdirected to restrict the addition on account of shortfall ofSTT to Rs.2,80,78,444.00. However, Assessing Officer wasdirected to collect information from other brokers todetermine whether any further shortfall of collectableSTT was there and to raise the same accordingly. Priya Soparkar 71-4 itxa 1187-17-o Regarding initiation of penalty proceedings, it wasobserved that the same would be decided at the time ofpenalty proceedings. Thus, appeal of the respondentwas partially allowed. 8.Respondent carried the matter in further appealbefore the Tribunal. The said appeal was heard withseveral other appeals of the respondent on the sameissue for different financial years as well as on theincidental issue of imposition of penalty. In its appellateorder dated 4[th] April, 2016, Tribunal posed a question toitself as to whether respondent could be held liable forthe alleged short deduction of STT on certaintransactions of FIIs for which higher rates are applicablebeing delivery based transactions in respect of bothpurchases as well as sales. After considering relevantprovisions of the Finance (No.2) Act, 2004, moreparticularly Sections 98, 99 and 100 as well asExplanation to Rule 3(a)(iv) of the Security TransactionTax Rules, 2004, Tribunal held that all the STT werecollected through and under the client codes of the Priya Soparkar 81-4 itxa 1187-17-o member brokers. Duty of the respondent was to collectthe tax at the correct rate of purchase and sale of sharesexecuted through a particular client code. If there isdefault by a member either at the time of collecting STTin accordance with the client code or certain additionalamount of STT was to be collected which had not beendone, then the respondent could not be held responsibleor liability could not be fastened on the respondent.Respondent could only ensure the determination of valueof taxable security transaction purchased and soldthrough a client code and in accordance with theprescribed rate. Beyond that there is no mechanismprovided that respondent should mandatorily collectSTT beyond the client codes. Though there could bedefault by member brokers for not taking two separateclient codes for sale and purchase but in so farrespondent is concerned, it had not committed anydefault under the law because what respondent wasrequired to see was whether the transaction of purchaseand sale was undertaken through a particular client codeor not. Respondent had admittedly complied with the Priya Soparkar 91-4 itxa 1187-17-o statutory requirement. Therefore, no default could beascribed to the respondent. Accordingly, the addition asmodified by the Commissioner of Income Tax (Appeals)was deleted. In view of the finding given in the quantumproceedings that there was no shortfall of STT and thatthere was no further liability of STT to be paid by therespondent, penalty levied was deleted. 9.Aggrieved, Revenue has preferred the presentappeal proposing the above questions for consideration. Priya Soparkar 91-4 itxa 1187-17-o statutory requirement. Therefore, no default could beascribed to the respondent. Accordingly, the addition asmodified by the Commissioner of Income Tax (Appeals)was deleted. In view of the finding given in the quantumproceedings that there was no shortfall of STT and thatthere was no further liability of STT to be paid by therespondent, penalty levied was deleted. 9.Aggrieved, Revenue has preferred the presentappeal proposing the above questions for consideration. 10.Mr.Suresh Kumar, learned standing counsel, Revenuereferred to the provisions of Sections 98, 99 and 100 ofthe Finance (No.2) Act, 2004 and submits that on aconjoint reading of the aforesaid provisions it is evidentthat the liability for payment of STT is squarely on therespondent. He has also referred to the table providedin Section 98 as well as the columns thereto and submitsthat STT is charged as per the rate provided in column (3)to the table having regard to the nature of transaction ofequity shares and securities. Referring to Section 100 he Priya Soparkar 101-4 itxa 1187-17-o submits that every recognized stock exchange ismandatorily required to collect the STT from every personbeing a purchaser or a seller who enters into a taxablesecurities transaction in that stock exchange at the ratespecified under Section 98 and failure to collect anddeposit STT at the prescribed rate would invite theconsequences as provided in sub- section (4) to Section100. He also placed reliance on a circular dated30.09.2004 issued by the respondent to its membersasking them to use two trading client codes for thoseinvestors whose transactions are to be settled only bydelivery basis and submits that respondent ought to haveensured that the members used the proper code forcorrect collection of STT. He therefore submits that orderpassed by the Assessing Officer as modified by theCommissioner of Income Tax (Appeals) is fully justified.Tribunal erred in interfering with the said decision. 11.On the other hand, Mr.Mistri, learned senior counselappearing for the respondent submits that respondentonly provides the platform for carrying on of trading in Priya Soparkar 111-4 itxa 1187-17-o shares by the registered brokers. Value of taxablesecurities transaction is settled as per client code and inso far allocation of client code is concerned, respondenthas no role to play. FIIs were not given a separate clientcode for intra-day buying and selling of the securities bythe brokers who operated on their behalf. There wasnothing that the respondent could do about it. Accordingto him, the problem might have arisen because somebrokers did not take two client codes separately forbuying and selling of the same scrip in intra-daytransactions and further in not making correction of theclient codes in their respective system. He submits that inview of the provisions contained in Section 98 read withSections 99 and 100 of the Finance (No.2) Act, 2004,respondent is a mere collector of STT. It is not the caseof the Revenue that respondent had defaulted indepositing the STT collected to the credit of the CentralGovernment account. He also submits that the entireSTT collected by the respondent has been credited inthe account of the Central Government. His contention isthat millions of transactions take place in the platform of 121-4 itxa 1187-17-o 121-4 itxa 1187-17-o the respondent during the day. It is simply not possibleon the part of the respondent to monitor each transactionor identify each transaction undertaken digitally on theplatform of the respondent. If there is underpayment ofSTT, the liability would be on the broker and not on therespondent. All that it ensures is that brokers pay theprescribed rate of STT as per the table to Section 98. Hetherefore submits that Tribunal had correctly decidedthe issue in favour of the respondent. That apart, findingreturned by the Tribunal is a finding of fact and nosubstantial question of law arises therefrom. Therefore,the appeal at the instance of the Revenue should bedismissed. 12.Submissions made by learned counsel for theparties have been duly considered. 13.Chapter VII of Finance (No.2) Act, 2004 deals withSecurities Transaction Tax (already referred to as theSTT). Section 97(11) defines securities transaction taxto mean tax leviable on the taxable securities Priya Soparkar 131-4 itxa 1187-17-o transactions under the provisions of the said chapter. Asper Section 97(13), taxable securities transaction hasbeen defined to mean transaction of purchase or sale ofequity shares in a company or a derivative or a unit ofan equity oriented fund or a unit of a business trustentered into in a recognized stock exchange; sale ofunlisted equity shares by any holder of such sharesunder an offer for sale to the public included in an initialpublic offer and where such shares are subsequentlylisted on a recognized stock exchange; or sale of unlistedunits of a business trust by any holder of such units whichwere acquired in consideration of a transfer referred to inclause (xvii) of Setion 47 of the Income Tax Act, 1961under an offer for sale to the public included in an initialoffer and where such units are subsequently listed on arecognized stock exchange; or sale of an unit or anequity oriented fund to the mutual fund. 14.Section 98 is the charging section providing forcharge of STT. It says that on and from thecommencement of the chapter dealing with STT, there Priya Soparkar 141-4 itxa 1187-17-o shall be a charge of STT in respect of taxable securitiestransactions specified in column (2) of the table formingpart of Section 98 at the rate specified in thecorresponding column (3) on the value of suchtransaction and such STT shall be paid either by thepurchaser or by the seller as specified in thecorresponding entry in column (4). A glance at the tablewould show that at Sr.No.1 is mentioned purchase of anequity share in a company or a unit of a business trustwhere the transaction of such purchase is entered into ina recognized stock exchange and the contract for thepurchase of such share or unit is settled by the actualdelivery or transfer of such share or unit. For thiscategory of taxable securities transaction the rate is0.1% which is to be paid by the purchaser. Similarly, atSr.No. 2 the transaction is of sale of an equity share in acompany or a unit of a business trust. Here also therate is the same but is required to be paid by the seller.Sr.No.3 deals with sale of an equity share in acompany or in an unit of an equity oriented fund or anunit of a business trust where the transaction of such Priya Soparkar 151-4 itxa 1187-17-o sale is entered into in a recognized stock exchange andthe contract for the sale of such share or unit is settledotherwise than by the actual delivery or transfer of suchshare or unit. In case of such transaction the rate of STTis 0.025 % and is required to be paid by the seller. 15.From the above, it is seen that there is difference inthe rate between the transactions at Sr.Nos.1 and 2 asabove and Sr. No.3. 16.Before deliberating on this aspect further, we mayalso refer to the other provisions of Chapter VII of theFinance (No.2) Act, 2004. Priya Soparkar 151-4 itxa 1187-17-o sale is entered into in a recognized stock exchange andthe contract for the sale of such share or unit is settledotherwise than by the actual delivery or transfer of suchshare or unit. In case of such transaction the rate of STTis 0.025 % and is required to be paid by the seller. 15.From the above, it is seen that there is difference inthe rate between the transactions at Sr.Nos.1 and 2 asabove and Sr. No.3. 16.Before deliberating on this aspect further, we mayalso refer to the other provisions of Chapter VII of theFinance (No.2) Act, 2004. Before deliberating on this aspect further, we may 17.Section 99 provides the value of taxable securitiestransaction. 18.Section 100 deals with collection and recovery ofSTT. Sub-section (1) says that every recognized stockexchange shall collect STT from every person being apurchaser or a seller, as the case may be, who enters Priya Soparkar161-4 itxa 1187-17-o into a taxable securities transactions in that stockexchange at the rates specified in Section 98. As per sub-section (3), STT collected during any calendar month shallbe paid by every recognised stock exchange to the creditof the Central Government by the seventh day of themonth immediately following the said calendar month. Incase of failure to collect STT, it shall be liable to pay thesame to the credit of the Central Government under sub-section (4). 19.Section 101 requires every recognized stockexchange to file return within the prescribed period andin the prescribed manner setting forth such particularsas may be prescribed in respect of all taxable securitiestransactions entered into during such financial year inthat stock exchange. Section 101 requires every recognized stock 20.Section 102 provides for making of assessmentorder by the Assessing Officer. The recognized stockexchange who submits return under Section 101 isconstrued to be an assessee for this purpose. 21.Section 104 provides for interest on delayedpayment of STT. 22.While as per Section 105 an assessee is liable to paypenalty for failure to collect or pay STT, Section 108clarifies that no order imposing a penalty shall be madeunless the assessee has been given a reasonableopportunity of being heard. 23.Section 114 empowers the Central Government tomake Rules for carrying out the provisions of thechapter. 24.In exercise of the powers conferred by sub-section(1) read with sub-section (2) of Section 114 of theFinance (No.2) Act, 2004, the Central government hasmade a set of rules for carrying out the provisions ofChapter VII of the said Act relating to STT called theSecurities Transaction Tax Rules, 2004 (briefly “the Rules”hereinafter). Rule 3 deals with value of taxable 181-4 itxa 1187-17-o securities transaction. As per the explanation to clause(a)(iv) of Rule 3, the determination of the value oftaxable securities transaction in a case where the equityshare or unit is purchased or sold through a member ofthe stock exchange shall be made with reference to thetrades executed in the equity share or unit under aparticular client code through that member. 25.A careful reading of the above explanation wouldindicate that for determination of the value of the taxablesecurities transaction what is relevant is that thedetermination would be with reference to the tradesexecuted in the equity share or unit under a particularclient code through the concerned member (broker). 26.Having noticed the relevant legal provisions asabove, it would be apposite to examine as to how theTribunal dealt with the matter. Having noticed the relevant legal provisions as 27.After considering the entire gamut of factsTribunal summed up the main issue as to whether Priya Soparkar 191-4 itxa 1187-17-o 25.A careful reading of the above explanation wouldindicate that for determination of the value of the taxablesecurities transaction what is relevant is that thedetermination would be with reference to the tradesexecuted in the equity share or unit under a particularclient code through the concerned member (broker). 26.Having noticed the relevant legal provisions asabove, it would be apposite to examine as to how theTribunal dealt with the matter. Having noticed the relevant legal provisions as 27.After considering the entire gamut of factsTribunal summed up the main issue as to whether Priya Soparkar 191-4 itxa 1187-17-o respondent could be held liable for alleged shortdeduction of STT on certain transactions of FIIs forwhich higher rates were applicable being delivery basedtransactions in respect of both purchases as well assales. After referring to the various provisions, Tribunalsummed up the legal propositions in the following manner:- “11. Now, from the conjoint reading ofaforesaid provisions, following proposition canbe culled out: (I)The security transaction tax is charged ata specified rate in accordance with section 98.Such security transaction tax is payable by thepurchaser and / or seller and not by the StockExchange; (ii)The value of taxable security transactionhas to be determined in accordance withsection 99 which provides that, the value oftaxable security transaction shall be the priceat which such securities are purchased or soldand same has to be determined, which is asper proviso; (iii)The Proviso below clause (c) of section99 in turn empowers the Board to notify therules and the method for determining the priceof such securities; (iv)In pursuance and in accordance withsection 99(c), Rule (3) has been notified whichprescribes, how the security transaction tax isto be determined; (v)Clause (a) of Rule 3 provides fordetermination of STT in case where the equityshares or unit is purchased or sold by a person on a trading day in the netted settlementmode; (vi) Explanation to clause (a) provides that,determination of STT which is purchased orsold through Member of stock exchange shallbe made with reference to the trade executedin the equity share or unit under particular“client code” through that member.” 28.Having culled out the propositions as above, Tribunalheld as under: “12. Here in this case, there cannot be anydispute that the assessee had collected the STTin accordance with the provisions specified insection 98, which has been determined as perthe mechanism laid down in section 99(c) r.w.Rule 3 and Explanation thereto. This is evidentfrom the fact that, all the STT have beencollected through and under the client codes ofthe members. It is not the case that assesseehas not collected the STT under the given clientcode. If a member / broker does not collect STTthrough client code or has not taken theseparate client codes in case of FIIs, then so faras assessee is concerned, no liability can befastened on the NSE. The duty of the NSE so faras the provisions of Security Transaction Tax Actr.w. STT Rules are concerned, is to collect thetax at a correct rate of purchase and sale ofshares executed through particular client code.If there is default by a member either at thetime of collecting the STT in accordance withthe client code; or certain additional amount ofSTT is to be collected on account of anycompliance of SEBI Regulations, which has notbeen done without adherence of client code;then, the assessee cannot be held responsible or liability can be fastened under the provisionsof section 98 to 100 r.w. Rule 3. The assesseecan only ensure the determination of value oftaxable security transaction purchase and soldthrough a client code and in accordance withthe prescribed rate. Beyond that, there is nomechanism provided under the Act or Rulesthat assessee should mandatorily collect STTbeyond the client codes. The SEBI issued theCircular to the National Stock Exchange forusing two client codes, One for sale and Secondfor purchase transaction for those investorswhose transactions are to be settled throughdelivery only, specifically in the case of FIIs. Ifthe broker or the member have not taken anyseparate client code, then the assessee cannotbe held responsible, because the assessee hasalready intimated / circulated that each andevery broker or member should in such casetake two client codes. Any failure cannot beascribed to the assessee, because, it is anundisputed fact that the client code is notprovided by the assessee, but by the memberbrokers. In case where the two separate clientcodes have not been taken for purchase andsale of shares for the same day and there isonly one client code, then transactions aresettled in the netted settlement mode, that is,squaring of the transaction and STT iscalculated as per the netted settlement modeas prescribed under Rule 3. This netting offmode is not applicable in the case of FIIs interms of SEBI regulations and Circular. If insome cases, there has been default by theMembers brokers for not taking two separateclient codes, then so far as assessee isconcerned, it has not committed any defaultunder the provisions of the STT Act r.w. relevantrules, because what assessee is required to seeis whether the transactions of purchase andsale has undertaken through particular client Priya Soparkar codes or not. Here in this case, the assesseehas admittedly complied with this statutoryrequirement hence, we do not find any reasonto ascribe any fault to the assessee or hold thatbe assessee committed and default to collectthe correct STT. Thus, it is under the StatuteNSE is not liable for any alleged short-deductionof STT. Accordingly, the addition which hasbeen sustained by the CIT(A) to the extent ofRs.2,80,78,444/- stands deleted.” 29.Thus Tribunal held that STT is charged at aspecified rate in accordance with Section 98. STT ispayable either by the purchaser or by the seller and notby the stock exchange. Value of taxable securitiestransaction has to be determined in accordance withSection 99 and as per proviso thereto. Rule 3 of theRules including the Explanation thereto have beennotified prescribing how value of STT is to be determined.For determination of STT which is purchased or soldthrough a broker registered with the stock exchange,reference has to be made to the trade executed underthe particular client code of the member broker. Thus,the STT is collected through a member broker under aparticular client code. The client code is provided by thebrokers and not by the stock exchange. Responsibility of Priya Soparkar 231-4 itxa 1187-17-o the stock exchange is to ensure firstly that STT iscollected as per Section 98; secondly, it has beendetermined in accordance with Section 99 read with Rule3 and Explanation thereto; and lastly, such STTcollected from the purchaser or seller is credited to theCentral Government as provided under Section 100. 30.Tribunal further held that the stock exchange i.e.the respondent can only ensure determination of thevalue of taxable securities transaction purchased andsold through a client code at the prescribed rate.However, there is no mechanism provided enabling therespondent to collect STT beyond the client code. Priya Soparkar 231-4 itxa 1187-17-o the stock exchange is to ensure firstly that STT iscollected as per Section 98; secondly, it has beendetermined in accordance with Section 99 read with Rule3 and Explanation thereto; and lastly, such STTcollected from the purchaser or seller is credited to theCentral Government as provided under Section 100. 30.Tribunal further held that the stock exchange i.e.the respondent can only ensure determination of thevalue of taxable securities transaction purchased andsold through a client code at the prescribed rate.However, there is no mechanism provided enabling therespondent to collect STT beyond the client code. 31.Tribunal also noted that Securities Exchange Boardof India (SEBI) had issued circular to the respondent forusing two client codes, one for sale and the other forpurchase in respect of those investors like FIIs whosetransactions are to be settled through delivery modeonly pursuant to which the respondent had issued circulardated 30.09.2004 to its member brokers to use the two Priya Soparkar 241-4 itxa 1187-17-o client codes. If a broker had not taken any separateclient code then the stock exchange cannot be heldresponsible. Such failure could not be ascribed to therespondent because the client codes were not providedby the respondent but by the member brokers. If in somecases there had been default by the member brokers innot taking two separate client codes, then so far therespondent is concerned it had not committed any defaultbecause what the respondent was required to see waswhether the transactions of purchase and sale wereundertaken through particular client codes or not.Respondent had admittedly complied with the statutoryrequirement. 32.Tribunal also returned a finding of fact that the STTcollected by the respondent were through and under theclient codes of the member brokers and the collectedSTT had been credited into the account of the CentralGovernment. Priya Soparkar 251-4 itxa 1187-17-o 33.Holding that respondent had not committed anydefault and that under the statute respondent was notliable for any alleged short deduction of STT, Tribunaldeleted the addition made on this count as modified bythe first appellate authority. Consequently, levy ofinterest and penalty were deleted. 34.To buttress what has been discussed above, we mayadvert to the explanation provided by one of ninebrokers before the Assessing Officer. Morgan StanleyIndia Company Private Limited which was one of thebroking companies dealing with FIIs stated before theAssessing Officer that for institutional clients the stockexchange provided facility of different client codes forpurchase and sale trade for the same client to ensurethat such trades were not netted. On occasions whereclient codes for institutional trades were not modifiedby the broker, the trades were treated as squared offtrades and a lower STT was levied. This resulted in theexchange charging a lower STT from the member broker Priya Soparkar 261-4 itxa 1187-17-o while the member broker collected a higher deliverybased STT from the client. 35.In such circumstances and on thoroughconsideration, we find no error or infirmity in the viewtaken by the Tribunal that under the statute respondentwas not liable for any alleged short deduction of STT andtherefore, no fault can be prescribed to the respondentand to hold the respondent to be in default for shortcollection of STT. In such circumstances and on thorough 36.Consequently, we do not find any merit in theappeal. No substantial question of law arises from theimpugned order passed by the Tribunal. 37.Resultantly, the appeal is dismissed. No cost. (MILIND N. JADHAV, J.) (UJJAL BHUYAN, J.) ….