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2016 (10) TMI 496 - ITAT HYDERABAD

2016 (10) TMI 496 - ITAT HYDERABAD - TMI - TDS u/s 194J - TDS on ‘settlement and custody’ fees paid to NSDL/CDSL - human intervention - Held that:- There is no human element and services are fully automated. Moreover, there is no exclusivity and the NSDL/CDSL renders service to many other clients. Since the facts are similar to the facts in the case of Kotak Securities Ltd [2016 (3) TMI 1026 - SUPREME COURT ], we are of the opinion that ‘settlement and custody’ fees paid to NSDL/CDSL are not cov .....

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301/HYD/2014 - Dated:- 5-10-2016 - Shri D. Manmohan, Vice President And Shri B. Ramakotaiah, Accountant Member For Assessee : Shri P. Murali Krishna, AR For Revenue : Shri A. Sitarama Rao, DR ORDER Per B. Ramakotaiah, A. M. This is an appeal by assessee against the order of the Commissioner of Income Tax (Appeals)-III, Hyderabad dated 15-04-2014 for the AY. 2007-08. 2. Briefly stated, assessee is a company engaged in the business of Registrar and Share Transfer Agent. It has filed its return of .....

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essee had debited the aforementioned amount under the head Settlement and Custody Fees . Assessee explained that it was a registrar to issue of shares. On allotment of shares in public issue, it requests the NSDL/CDSL to credit the shares to the account of the respective shareholders. This act of crediting of shares to the respective shareholders account is technically known as corporate action . Further, the listed companies in the stock exchange are interested to know the precise movement of t .....

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le and subsequently there was no applicability of Section 40(a)(ia) in the case of assessee. The AO disagreed with the same and held that provisions of section 194J were attracted. Since assessee had not deducted tax, the expenditure of ₹ 1,76,25,313/- was disallowed u/s. 40(a)(ia) of the Act. 4. Before the Ld. CIT(A) it was argued that the aforementioned addition for the AY. 2008-09 had been confirmed in appeal by the CIT(A) and also by the Hon'ble ITAT, Hyderabad. However, a Miscella .....

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e no such professional or technical services, accordingly, it was requested by assessee that the addition be deleted and the order of the Hon'ble ITAT confirming the same addition should not be considered as binding. 5. However, Ld. CIT(A) did not agree and confirmed the action of AO by stating as under: 4.3 I have seen carefully the facts, the evidence and I have also gone through the orders of the Hon'ble CIT(A) and the Hon'ble ITAT for the assessment year 2008-09 referred to supra .....

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is reproduced below:- 14. We may mention herein that we might have committed an error of judgement in wrongly applying/interpreting the judgement of the Bombay High Court as mentioned on the matter, bu the assessee is free to explore the remedy available under the law . 15. In the result, MA filed by the assessee is dismissed . 4.4 A plain reading of the above para only indicates that the honourable ITAT has expressed its view stating that the order of the honourable Bombay High Court in the cas .....

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ssue is fully applicable and binding. Respectfully following the order of the honourable ITAT, I hold that the appellant was bound to deduct taxes and not having done so section 40(a)(ia) fully applies and I find no reason to interfere with the addition made by the assessing officer . 6. Before us, Ld. Counsel submitted that the order of ITAT in earlier year has relied on the decision of Hon'ble Bombay High Court in the case of Kotak Securities Ltd., Vs. Addl. CIT [124 TTJ 214] (supra) which .....

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followed the principles laid down by the Hon'ble Bombay High Court in the above said case in an earlier year. The Hon'ble Supreme Court has reversed the directions of the Hon'ble Bombay High Court in the above referred judgment. Hon'ble Supreme Court has held as under: 7. Managerial and consultancy services and, therefore, necessarily technical services , would obviously involve services rendered by human efforts. This has been the consistent view taken by the courts including th .....

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t from facilities of a faceless screen based transaction, a constant upgradation of the services made available and surveillance of the essential parameters connected with the trade including those of a particular/ single transaction that would lead credence to its authenticity is provided for by the Stock Exchange. All such services, fully automated, are available to all members of the stock exchange in respect of every transaction that is entered into. There is nothing special, exclusive or cu .....

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is available to all and would therefore stand out in distinction to the former. The service provided by the Stock Exchange for which transaction charges are paid fails to satisfy the aforesaid test of specialized, exclusive and individual requirement of the user or consumer who may approach the service provider for such assistance/service. It is only service of the above kind that, according to us, should come within the ambit of the expression technical services appearing in Explanation 2 of Se .....

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- assessee are common services that every member of the Stock Exchange is necessarily required to avail of to carry out trading in securities in the Stock Exchange. The view taken by the High Court that a member of the Stock Exchange has an option of trading through an alternative mode is not correct. A member who wants to conduct his daily business in the Stock Exchange has no option but to avail of such services. Each and every transaction by a member involves the use of the services provided .....

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ch a member(s) or the special needs of such member(s) in the conduct of business in the Stock Exchange. In other words, there is no exclusivity to the services rendered by the Stock Exchange and each and every member has to necessarily avail of such services in the normal course of trading in securities in the Stock Exchange. Such services, therefore, would undoubtedly be appropriate to be termed as facilities provided by the Stock Exchange on payment and does not amount to technical services pr .....

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