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2016 (10) TMI 203 - ITAT MUMBAI

2016 (10) TMI 203 - ITAT MUMBAI - TM - TDS u/s 194J - assessee in default on account of non deduction of tax at source u/s 194J on the amount of transaction charges paid by the assessee to National Stock Exchange of India (in short, NSE) - Held that:- Services provided by the stock exchange to the assessee does not fall in the category of “technical services” as has been envisaged in section 194J and, therefore, respectfully following the judgement of Kotak Securities Ltd Vs CIT (2016 (3) TMI 10 .....

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eals) [hereinafter called CIT(A)] dt 18-08-2014 passed against the order u/s 201(1) / 201(1A) dt 31-03-2012 for A.Y. 2010-11 on the following grounds : Ground I a) The Commissioner of Income-tax (Appeals) - 14, Mumbai, [herein after referred to as 0T (A)"] has erred in confirming the penalty levied by the Assessing Officer [herein after referred to as "AO"] u/s 201(1)/201(1A) of the Act without appreciating merits of the case. b) The CIT (A) should have appreciated that the appell .....

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nge for payment of transaction charges such activity cannot be in the nature of any professional fees as defined in Explanation 2 to section 9(1)(vii) of the Act. Also it is evident from the specific observation given by Hon'ble Jurisdictional High Court that even the High Court that the stock brokers and revenue department were under the bonafide belief that the transaction charges would not constitute professional fees and, therefore, no fault could be found with the assessee for non deduc .....

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assessee in default on account of non deduction of tax at source u/s 194J on the amount of transaction charges paid by the assessee to National Stock Exchange of India (in short, NSE). 3. During the course of hearing, it was submitted by the Ld. Counsel that the Ld.CIT(A) decided this issue against the assessee by relying upon the judgement of Hon ble Bombay High Court in the case of Kotak Securities Ltd 340 ITR 333 (Bom) wherein it was held that the transaction charges paid to NSE was on accoun .....

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and they did not constitute technical service or managerial service and, therefore, there was no liability to deduct tax at source on such payment u/s 194J r.w.s 9(i)(ii). 4. Per contra, the Ld.DR supported the orders passed by the lower authorities, submissions made by both the sides as well as judgements placed before us. 5. It is noted that undoubtedly, the Ld.CIT(A) decided this issue against the assessee relying upon the judgement of Hon ble Bombay High Court in the case of Kotak Securitie .....

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d order in a batch of appeals reported as Kotak Securities Ltd Vs CIT 383 ITR 1 (SC). The Hon ble Supreme Court has analysed the provisions of section 194J as well as 9(i)(vii) and based on the conclusion that transaction charges did not constitute fee for technical or managerial services. Relevant observations of Hon ble Supreme Court are reproduced hereunder, for the sake of reference:- A reading of the very elaborate order of the Assessing Officer containing a lengthy discourse on the service .....

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that is entered into. There is nothing special, exclusive or customised service that is rendered by the stock exchange. "Technical services" like "Managerial and consultancy service" would denote seeking of services to cater to the special needs of the consumer user as may be felt necessary and the making of the same available by the service provider. It is the above feature that would distinguish or identify a service provided from a facility offered. While the former is sp .....

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d come within the ambit of the expression "technical services" appearing in Explanation 2 to section 9(1)(vii) of the Act. In the absence of the above distinguishing feature, service, though rendered, would be merely in the nature of a facility offered or available which would not be covered by the aforesaid provision of the Act. There is yet another aspect of the matter which, in our considered view, would require a specific notice. The service made available by the Bombay Stock Excha .....

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o avail of such services. Each and every transaction by a member involves the use of the services provided by the stock exchange for which a member is compulsorily required to pay an additional charge (based on the transaction value) over and above the charges for the membership in the stock exchange. The above features of the services provided by the stock exchange would make the same a kind of a facility provided by the stock exchange for transacting business rather than a technical service pr .....

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