TMI Blog2012 (8) TMI 393X X X X Extracts X X X X X X X X Extracts X X X X ..... ether such bona fide was entertained in the earlier assessment, we remit issue back to file of AO with a direction to decide ‘bona fides of contention’ in this regard and to decide the issue afresh in the spirit of law in case of Kotak Securities (2011 (10) TMI 24 - BOMBAY HIGH COURT) - Decided in favor of Revenue for statistical purposes. - ITA No. 6436/M/2010 - - - Dated:- 15-6-2012 - SHRI G.E. VEERABHADRAPPA, AND SHRI S.S.GODARA, JJ. Appellant by: Shri P.C. Mourya Respondent by: Shri Deepak P Tikekar Y.M. Agarwala ORDER PER S.S. GODARA, JM: In this appeal, Revenue has challenged order dated 28.6.2011 passed by CIT (A), for Assessment Year 2007-08. 2. The issue raised in appeal is in the following grounds:- 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in holding that no tax is required to be deducted under the provisions of Chapter XVIIB of the I.T. Act on the payments made by the assessee to the stock exchanges on account of VSAT charges. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in holding that no tax is required to be deducted under the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome of the assessee. 6. In appeal, the CIT(A) has accepted assessee s contention by observing that: I have carefully considered the above facts and find that the issue is squarely covered in favour of the appellant by the aforesaid decision of Hon'ble ITAT, Mumbai. In the case of CIT vs. Angel Broking Ltd. (2010) 35 SOT 457 (Mum) it was held that VSAT BOLT, Leased line, Demat facilities provided by Stock exchange is not in the nature of technical services. Mere collection of fee for use of standard facility provided to all those willing to pay for it does not amount to the fee having been received for technical services. Such payments are not liable to any TDS and provisions of section 40(a)(ia) are not applicable. Followed Skycell Communications Ltd. vs DCIT (2001) 251 ITR 53 (Mad). Accordingly, respectfully following the above decisions, the addition made is deleted. 7. Before us, the Ld. DR has submitted that the service in question i.e. VSAT charges paid by assessee to the stock exchange are technical services being in the nature of technical expertise. To buttress his submission, he has placed reliance on A.O. s findings qua this issue (supra) of VSAT and transac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... educting TDS. Before AO, assessee submitted that, Transaction charges are levied by the respective Stock Exchanges on every trade executed through terminal on their platform during the year. It is applicable on every buy as well as sell transaction. When a broker is not active in business he is not charged any transaction charges. In other words, a member who is not active and who does not undertake any business transaction is not required to make any payment. The stock exchange collects transaction charges to meet their administrative and other expenses. There is no contractual obligation between the exchange and the member broker. In case of a contractual obligation, a member broker is required to pay some charges as standing charges. A person, who does not undertake any transaction, is not required to pay any charges. Further, the stock exchanges do not render any managerial service or any technical consultancy service. Transaction charges are paid for the usage of facilities. They collect it, for the transactions undertaken to meet their administrative expenses of the exchange. To call a payment as a fee for technical services, it should have been paid in considera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hereinabove (supra), Ld. AR has submitted that the decision of Mumbai ITAT in case of Kotak Securities (2009) 25 SOT 440 has been upheld by Hon'ble Mumbai High Court reported as 340 ITR 332. 15. Besides this, Ld. AR has also produced before us copy of Mumbai ITAT decision in case of ACIT v/s. DIGC Ltd. dated 03.02.2012 wherein, the Coordinate Bench has followed decision of Kotak Securities (supra). 16. Qua this ground as well, we have given our thoughtful consideration. Undisputedly, the assessee has not deducted TDS on transaction charges paid to stock exchange because in its opinion, the payment was not in lieu of service . Whereas the A.O. has rejected its version, the CIT(A) has accepted assessee s appeal. 17. The matter went up to the Hon'ble High Court in Kotak Securities (supra) case itself. We see that while deciding the issue on merits in Revenue s favour, benefit has been given to assessee concerned. The ratio of the judgement reads as under : In the result, we hold that when the stock exchanges are established under the Securities Contracts (Regulation) Act, 1956, with a view to prevent undesirable transactions in securities by regulating the business of de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Revenue that on account of the failure on the part of the assessee to deduct tax at source, the Revenue has suffered presumably because, the stock exchange has discharged its tax liability for the assessment year in question. In any event, in the facts of the present case, in view of the undisputed decade old practice, the assessee had bona fide reason to believe that the tax was not deductible at source under section 194J of the Act and, therefore, the Assessing Officer was not justified in invoking section 40(a)(ia) of the Act and disallowing the business expenditure by way of transaction charges incurred by the assessee. Accordingly, we hold that the transaction charges paid by the assessee to the stock exchange constitute "fees for technical services" covered under section 194J of the Act and, therefore, the assessee was liable to deduct tax at source while crediting the transaction charges to the account of the stock exchange. However, since both the Revenue and the assessee were under the bona fide belief for nearly a decade that tax was not deductible at source on payment of transaction charges, no fault can be found with the assessee in not deducting the tax at sour ..... X X X X Extracts X X X X X X X X Extracts X X X X
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