9911796707
TMI Blog2012 (8) TMI 393X X X X Extracts X X X X X X X X Extracts X X X X ..... in its 'return' filed on 30.10.2007, the assessee declared income of Rs.1,72,42,845/- derived from the business of "dealing in share broking". The assessee in its profit and loss account, had debited certain payments under different heads as expenses. The Assessing Officer found from assessee's details that it had not deducted TDS under the head 'VSAT charges' of Rs.4,47,855/-. 4. In explanation, the assessee submitted that : "VSAT are inclusive of bandwidth charges which BSE and NSE charges us for providing recurring bandwidth to the end VSAT user. Bandwidth allows transmission of data from broker's office to the end user and vice-versa. Transaction of data is made through the VSAT's and we are paying for the usage. AT no stage the stock exchanges have provided any technical services. In view of the above para, we have not deducted any tax on the payments made to them during the year. However, we place our reliance on the judgement delivered by the ITAT D Bench, Mumbai in the case of Pacific Internet (India) Pvt. Ltd. vs. ITO TDS. For your ready reference we are enclosing herewith the extract of the judgement." 5. The A.O. in assessment order negated the assessee' s pleas by h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... technical services or not; is no more res integra as Hon'ble Bombay High Court in the case of ITO v/s. Angel Capital in ITA No. 475/11 decided on 28.07.2011 has held that the said 'service' is not 'technical' in nature, affirming the view by the ITAT. 9. Further, AR has also argued that Hon'ble Jurisdictional High Court has again followed the law laid down in Angel Broking (supra) in their order dated 14.10.2011 (ITA No. 4117/10 CIT v/s. Stock Trading Co.) which is also placed on record. 10. We have gone through the case law of Angel Capital (supra) wherein, their lordships have been pleased to hold that VSAT expenses are not technical service's payments. In this regard, we deem it appropriate to reproduce the substantial questions of law as well as ratio decidendi as follows:- "(A) Whether on the facts and in the circumstances of the case and in law the Hon'ble Tribunal was justified in holding that VSAT and Lease Line charges paid to the Stock Exchange by the Assessee Company were allowable as a deduction from taxable Income even though the Assessee Company had failed to deduct TDS thereon?" The question of law has been answered as under : "As regards first two questi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urities etc. within the framework any bye laws. In fact, the stock exchange is a place where numbers can meet and transact business. The transaction fees paid is on the basis of volume of transaction effected by a member. No amount is payable, if no transaction is undertaken. The transaction fees is not paid in consideration of any service provided by the stock exchange. It is a payment for the use of facilities provided by the stock exchange and such facilities are available for the use by any member. We rely on the judgement of Kotak Securities Ltd. which was delivered by the ITAT Mumbai Bench 'A' on August 26, 2008 pertaining to the A.Y. 2005-06" The A.O. rejected assessee's explanation in view of following observations: "The above submission of the assessee has been considered, however, the judgement passed by the Hon. ITAT has not attained finality. Hence, the amount of Rs.8,21,754/- claimed as expenditure under the head 'VSAT Charges', whereon the provisions of TDS are applicable is disallowed u/s.40(a)(ia) of the Act and added back to the total income of the assessee. 12. In appeal, the Ld. CIT(A) has accepted assessee's prayer and held that : "I have carefully conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hanges. Therefore, in the facts of the present case, the transaction charges were paid by the assessee to the stock exchange for rendering the managerial services which constitutes fees for technical services under section 194J read with Explanation 2 to section 9(1)(vii) of the Act and hence the assessee was liable to deduct tax at source before crediting the transaction charges to the account of the stock exchange. The question then to be considered is whether the Assessing Officer was justified in invoking section 40(a)(ia) of the Act and disallowing the entire business expenses incurred on account of transaction charges on the ground that the assessee has failed to deduct tax at source under section 194J of the Act ? The object of introducing section 40(a)(ia), as explained in the Central Board of Direct Taxes Circular No. 5, dated July 15, 2005-See [2005] 276 ITR (St.) 151), is to augment compliance with the TDS provisions in the case of residents and curb bogus payments. Moreover, though section 194J was inserted with effect from July 1, 1995, till the assessment year in question that is the assessment year 2005-06 both the Revenue and the assessee proceeded on the footing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e make it clear that we have arrived at the above conclusion in the peculiar facts of the present case, where both the Revenue and the assessee right from the insertion of section 194J in the year 1995 till 2005 proceeded on the footing that the assessee is not liable to deduct tax at source and in fact immediately after the assessment year in question, i.e., from the assessment year 2006-07 the assessee has been deducting tax at source while crediting the transaction charges to the account of the stock exchange. The question raised in the appeal is answered accordingly and the appeal is disposed off in the above terms with no order as to costs." 18. Similarly, coming to DICGC case (supra), we find that the Ld. Coordinate Bench after taking note consideration Kotak Securities case law (as above) has been pleased to hold as under :- "The second part of the argument is that the Hon'ble Bombay High Court in the case of CIT vs. Kotak Securities Ltd. [supra] has observed in para-31 that both the parties has proceeded on the footing that tax was not deducible u/s.194J for the last 10 years, therefore, provisions of sec.40[a][ia] could not be invoked. It was contended that in the last ..... X X X X Extracts X X X X X X X X Extracts X X X X
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