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2010 (12) TMI 191 - ITAT, MUMBAIAddition/ Disallowance - Non deduction of TDS - disallowance made by the AO u/s 40(a)(ia) of the Act - Held that: the transaction fee paid to a stock exchange on the basis of volume of transactions is payment for use of facilities provided by stock exchange and not for any services, either technical or managerial and hence provisions of section 194J are not attracted and no disallowance can be made by invoking section 40(a)(ia) of the Act. Disallowance u/s 14A – assessee does not dispute the quantification of the disallowance made by the AO - dis allowance made by AO sustained. Disallowance made u/s 94(7) - From a reading of section 94(7) it is clear that it comes into play, only when all the three conditions are fulfilled, i.e. a) the assessee should buy securities or units within a period of three months, prior to the record date; b) should sell or transfer such securities within a period of three months from the record date or in cases of units within a period of nine months from the record date and c) the dividend or income on such securities or units is exempt from tax. The wording "then" occurring in the section makes it clear. - On going through the context used in s. 94(7)(b), the object of the legislature, circumstances under which the statute was amended, the conclusion is that the amended provision is applicable to the asstt. year 2005-06. - payment had been made to the Stock Exchange on account of short payment of margin money. This is only a compensatory payment under the rules of the Stock Exchange which is allowable as revenue expenditure as the same is not for infraction of law. Disallowance of protective addition amounting to Rs. 37,95,700 - the entire loss on purchase and sale is to be considered only in this year. - the loss to be disallowed is only the loss which arises on the purchase and sale of such securities or units. Loss on account of valuation has no place in the section. Section 94(7) comes into operation only in the event of sale of securities or units which is taken place in this year. As the loss on sale and purchase of unit is above the dividend declared, the loss to the extent of Rs. 71,41,420 has to be disallowed in this year. - the appeal filed by the assessee is allowed in part and the appeal filed by the Revenue is also allowed in part.
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