TMI Blog2013 (6) TMI 352X X X X Extracts X X X X X X X X Extracts X X X X ..... and consequently disallowance made by the AO u/s. 40(a)(ia) in respect of transaction charges cannot be sustained. This finding of the Hon’ble High Court in that case is on the basis of peculiar facts of that case. In the case at hand, those peculiar facts are missing. Being Revenue appeal allowed. - ITA No.328/Hyd/2012 - - - Dated:- 28-3-2013 - Chandra Poojari, AM and Asha Vijayaraghavan, JJ. For the Appellant : Smt Amisha S Gupt For the Respondent : Sri P Muralikrishna ORDER:- Per: Chandra Poojari: This appeal by the Revenue is directed against the order of the CIT(A)-III, Hyderabad dated 15.12.2011 for assessment year 2008-09. 2. The Revenue raised the following grounds: i) The learned CIT(A) has erred in facts and circumstances of the case for not considering the technical services provided by the NSDL and CDSL under the head of Settlement and Custody Fees as professional/technical services u/s. 194J. ii) The learned CIT(A) erred in facts and circumstances of the case by not sustaining the disallowances made by the AO u/s. 40(a)(ia) for failure to deduct TDS by the assessee-company on professional/technical services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8377; 1,39,78,121 shown as 'Settlement and Custody Fees', after holding that such payment was in the nature of professional services, under the provision of section 194J of the Act and the assessee was liable to deduct tax at source on the same. During the course of assessment proceedings, the assessee, while clarifying about such expenditure, has submitted that such payment were made to NSDL / CDSL for providing access to their data base. It was stated that such payment were not in nature of contract nor professional/ technical services. The assessee submitted before the CIT(A) that NSDL and CDSL, which are depositories. do not provide any professional service requiring intellectual or manual skills. On request made by them to the depositories to provide access to the data base maintained by them in respect of their client companies, those depositories provide access to the assessee to their data base and the assessee downloads the data electronically. It was stated that the depository has charged fee to the assessee, for providing access to the assessee to their data base. It is further stated that by providing access to the data base, the depository has not rendered any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Demat accounts, so that the debits from the accounts are not permitted; nomination facility for Demat accounts; services related to change of address; effecting transmission of securities; instructions to DP over internet through SEED-e facility, account monitoring facility over internet for clearing members through SPEED facility and other facilities viz., holding debt instruments in the same account, availing stock lending/borrowing facility, etc. 8. Thus, according to the DR the impugned sum paid by the assessee to NSDL/CDSL is nothing but for providing technical services and provisions of section 194J of the Act are applicable and if a person pays any sum as fee for technical services, it has to deduct tax at source on such payment, if a person fails to deduct tax at source which he was bound to deduct tax under any provisions of the Income-tax Act where he claims a deduction of any fees for technical services in computing his income and where he has not deducted TDS on such fees for technical services then no deduction of such expenditure will be allowed while computing the total income u/s/ 40(a)(ia) of the Act. According to the DR a sum of ₹ 1,39,78,171 cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting parties, namely, the buyer and the seller of the respective securities / derivatives. 2. Under the screen based BOLT system the entire trading system is managed and monitored right from the stage of providing the platform for the prospective buyers / sellers of the securities/ derivatives till the date the deal struck between the two parties are finally settled in all respects. The very object of establishing the stock exchanges is to regulate the transactions in securities and to prevent undesirable speculation in the transactions. To achieve this goal, the stock exchange continuously upgrades its BOLT system so that the transactions carried on through that system inspire confidence in the general public and that the transactions are settled smoothly and expeditiously. Thus, the entire trading in securities is managed by the Bombay Stock Exchange through the BOLT system provided by the stock exchange. 3. In other words, whatever be the measure for levying the transaction charges, the fact remains that the stock exchange regulates and manages the entire trading activities on the exchange till the transactions are finally settled. Unless the stock exchange constan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to deduct tax at source on the payments made by them for use of such facility. Further he relied on the judgement of Calcutta High Court in the case of CIT vs. Virgin Creations (ITAT No. 302 of 2011 (GA) 3200/2011 dated 23 November, 2011) wherein their Lordships relied on the judgement of Supreme Court in the case of R.B. Jodhamal Kuthialal vs. CIT (82 ITR 570) and observed that the provisions, which has inserted the remedy to make the provisions workable, requires to be treated with retrospective operation so that reasonable deduction can be given to the section as well, decided the issue whether section 40(a)(ia) having retrospective operation or not. 12. We have heard both the parties and perused the material on record. First of all the CIT(A) observed that there is no rendering of services to the assessee and he has only access to the data base for downloading the data electronically for which the assessee paid fees so that provisions of section 194J are not applicable. The same issue was subject matter of dispute before this Tribunal, Bombay Bench in the case of Kotak Securities Ltd. vs. Addl. CIT (124 TTJ 241) which was decided in favour of assessee. This matter trave ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the price of the securities offered to be sold or purchased the in-built system alerts and remedial measures are taken immediately so that no panic situation arises in the stock market. With a view to regulate the trading in securities, the stock exchange provides risk management and surveillance to the stock brokers to ensure the safety of the market. The surveillance function involves price monitoring, exposure of the members, rumour verification on a daily basis and take remedial actions like reduction of filters, imposition of special margin, transferring scrips on a trade to trade settlement basis, suspension of scrips / members, etc. These are some of the identified managerial services rendered by the stock exchange for which transaction charges are levied. 27) The fact that the BOLT system provided by the stock exchange has in-built automatic safeguards which automatically gives alert signal if the fluctuation in the prices of the securities exceed a particular limit prescribed by the stock exchange does not mean that the managerial services are not rendered, because, firstly, the in-built mechanism in the BOLT system itself is a part of the managerial service ren ..... X X X X Extracts X X X X X X X X Extracts X X X X
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