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2010 (12) TMI 822 - ITAT, MUMBAIDisallowance - Expenditure u/S 14A - Expenditure on earning of dividend income which was exempt from tax - As per the Hon'ble High Court of Mumbai recently in case of Godrej and Boyce Manufacturing Co. Ltd. (2010 -TMI - 78448 - BOMBAY HIGH COURT) have held that Rule 8D would apply only from assessment year 2008-09 - Hon'ble High Court also held that in respect of the earlier years disallowance of expenditure whether direct or indirect has to be computed on a reasonable basis after allowing opportunity of hearing to the assessee - The assessment years involved in the present appeals are A.Y. 2005-06 and 2006-07 - Therefore rule 8D cannot be applied - Therefore set aside the order of CIT(A) and restore the matter to the file of AO for passing a fresh order after necessary examination and after allowing opportunity of hearing to the assessee. Transaction charges - The issue raised is therefore covered in case of Kotak Securities Ltd. vs Addl. CIT (2011 -TMI - 206641 - Bombay High Court) and respectfully following the same we hold that the transaction charges paid were not for any technical services and therefore provisions of section 194J were not applicable and no tax was required to be deducted and no disallowance under section 40(a)(ia) is called for - Decided in favour of assessee. Depository charges paid to the Stock Holding Corporation of India - Held that:- the transaction charges are not the fees for technical services and therefore on this ground also the depository charges cannot be considered as payment for technical services - The provisions of section 194J will not therefore be applicable in respect of such payments and no disallowances can be made u/s 40(a)(ia) for failure to deduct tax at source - Decided in favour of assessee.
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