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2016 (1) TMI 349 - ITAT MUMBAI

2016 (1) TMI 349 - ITAT MUMBAI - TMI - TDS u/s 194J - transaction charges paid to Stock Exchanges on which TDS was not deducted - assessee contended that it was under bona-fide belief TDS was not deductible and no disallowance be made u/s 40(1)(ia) - Held that:- no tax on the transaction charges paid/allowed by the assessee to the stock exchange shall require being deducted for tax at source u/s 194J of the Act where the assessee is able to show that tax on the same has been paid by the payee, i .....

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lant : Shri N C Jain For The Respondent : Shri Ganesh Bare ORDER Per Joginder Singh, Judicial Member.: This appeal is by the Assessee directed against the Order of the Commissioner of Income Tax (Appeals)-8, Mumbai, ( CIT(A) for short) dated 08.11.2013 for the assessment year 2010-11 .The Assessee has raised following grounds of appeals. a) The learned CIT(A) erred in confirming the disallowance of ₹ 37,77,626 made under section 40(a)(ia) of the Act basing his decision on the pronouncement .....

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the provision of Section 194J and 40(1)(ia) are two distinct and independent provisions and application of the TDS provision does not necessary involve application of disallowance provision u/s 40(1)(ia) . By holding the provisions of Section 40(1)(ia) not applicable to assessment year 2005-06 which was the year before them, the Hon ble Court gave legal cognizance and relevance to the existence of reasonable cause in making disallowance under the section. d) The learned CIT(A) failed to take not .....

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) failed to appreciate that the issue was highly contentious and was decided by the ITAT in assessee s favour which constituted a reasonable cause for not deducting tax at source. Existence of such dispute has been accepted by Hon ble Bombay High Court as reasonable cause justifying non-deduction of tax and consequent non-application of Section 40(1)(ia). 2. The assessee company is a wholly owned subsidiary of IDBI Bank Limited , engaged in fully integrated financial services provider viz Invest .....

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ompany explained that there is no requirement to deduct TDS on transaction charges payable to Stock exchange. The assessee relied upon the decision of Tribunal in ITA No 1955/Mum/08 in Kotak Securities Limited v. Addl. CIT wherein such services were held to be not technical in nature and there is no requirement to deduct TDS. 4. The Assessing Officer observed that the afore-stated decision of the Tribunal is over-ruled by Hon ble Bombay High Court . The Assessing Officer relied upon the decision .....

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disallowing the expenses so claim on account of transaction charges payable to stock exchanges for failure of the assessee to deduct TDS u/s 194 J of the Act. 5. Aggrieved , The assessee filed first appeal with CIT(A) and contended that the assessee was under bona-fide belief that no TDS is to be deducted u/s 194 J as the transaction charges payable by the assessee does not constitute the fees for technical services which view has been approved by Tribunal in Kotak Securities Limited (supra) and .....

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8 will hold the field that transaction charges does not constitute fees for technical services . The ld. CIT(A) respectfully following jurisdictional High Court in Kotak Securities(supra) upheld the decision of the assessing officer and confirmed the addition. 6. Aggrieved, the assessee is in appeal before us. The assessee reiterated its submissions and contended that the assessee was under bona-fide belief that no TDS is to be deducted u/s 194 J as the transaction charges payable by the assesse .....

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not deductible on these payments and no disallowance be made as during the financial year view held by Tribunal Mumbai in ITA No 1955/Mum/08 will hold the field that the transaction charges does not constitute fees for technical services . The assessee also contended that Tribunal has given relief to the assessee in its appeal for assessment year 2008-09 in ITA no. 618/Mum/2012 dated 18th February 2015 and also for assessment year 2009-10 in ITA no. 1404/Mum/2013 dated 08th May 2015, and hence .....

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er, the Hon ble Bombay High Court in Kotak Securities Limited in ITA No. 3111/2009 dated 21.10.2011 (for assessment year 2005-06) held that these transaction charges payable to stock exchanges constitute fees for technical services , and are covered u/s 194J of the Act, and hence TDS is to be deducted. The Hon ble Bombay High Court also held that since last decade, i.e., 1995 (when Section 194J was introduced in the Act) to 2005 (till the impugned assessment year), both the Revenue and the asses .....

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tely succeeding year onwards, the assessee, i.e., Kotak Securities Ltd., had duly discharged the tax liability by deducting TDS u/s 194J on these transaction charges. 9. We further observe that the Tribunal for assessment years 2008-09 and 2009-10 has given the assessee relief on the ground that the Tribunal in Kotak Securities Ltd. (supra) has taken a view that these transaction charges do not constitute fees for technical services and TDS is not deductible u/s194J of the Act, which view of the .....

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6 and the subsequent years. The Hon ble High Court has held that transaction charges paid to a stock exchange by its brokers is fees for technical charges, liable to TDS u/s. 194J of the Act. The Hon ble High Court further observing the matter to be disputed since long, i.e., between the assessee and the Department, drew an exception for A.Y. 2005-06, further noting that the assessee in that case had from the succeeding year, i.e. A.Y. 2006-07, itself deposited the tax, while inferring that for .....

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