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2016 (10) TMI 891 - ITAT MUMBAI

2016 (10) TMI 891 - ITAT MUMBAI - TMI - Disallowance u/s 14A - Held that:- Following the decision of the Coordinate Bench of this Tribunal in the assessee’s own case for A.Y. 2009-10 we set aside the order of the learned CIT(A) and restore the issue of re-working the disallowance under section 14A r.w. Rule 8D of the I.T. Rules, to the file of the AO to verify the contention of the assessee that the investments made by it in group concerns, foreign entities , the income of which is exigible to t .....

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that the transaction charges paid by the assessee to BSE and NSE as a member is in the nature of payments made for facilities provided by the Stock Exchange and therefore no TDS on such payment would be deductible under section 194C/194J of the Act. The orders of the authorities below making disallowance under section 40(a)(ia) for non-deduction of tax on such payment of transaction charges are accordingly reversed - ITA No. 1243/Mum/2014 - Dated:- 5-10-2016 - Shri Jason P. Boaz, Accountant Mem .....

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ter setting off business loss of ₹ 2,01,95,300/-. Book Profits under section 115JB of the Act was computed at ₹ 1,28,29,061/-. The return was processed under section 143(1) of the Income Tax Act, 1961 (in short, 'the Act') and the case was subsequently taken up for scrutiny. The assessment was completed under section 143(3) of the Act vide order dated 12.12.2012, wherein the income of the assessee under normal provisions was determined at ₹ 64,58,213/- in view of the fo .....

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.2013 for A.Y. 2010-11, the assessee has preferred this appeal raising the following grounds: - 1. The Ld. CIT(Appeals)-8 has erred in confirming the disallowance of an amount of ₹ 4,90,318/- u/s 14A of the l.T. Act made by the Ld. Assessing Officer. This disallowance is against the law and facts of the case and may please be deleted. 2. The Ld. CIT(Appeals)-8 has erred in confirming the disallowance of an amount of ₹ 9,18,509/- u/s 40(a)(ia) of the Act made by the Ld. Assessing Offi .....

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Officer may please be deleted. 4. The Appellant craves leave to add, amend, modify or alter the ground at the time of hearing. The effective ground of appeal are at Sr.Nos. 1 to 3 (supra). 4. Ground No. 1: Disallowance under section 14A r.w.s. Rule 8D 4.1 In this ground, the assessee contends that the learned CIT(A) erred in confirming the disallowance of ₹ 4,90,318/- under section 14A r.w. Rule 8D of the I.T. Rules. It is submitted by the learned counsel for the assessee that the very sa .....

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erns which are foreign entities, the income from which investments are taxable as income of the assessee. It is submitted that the factual situation being the same in the year under consideration, the matter of re-working the disallowance under section 14A r.w. Rule 8D be restored back to the file of the AO for verification of assessee s claim. 4.2 Per contra, the learned D.R. for Revenue placed reliance on the orders of the authorities below. 4.3.1 We have heard the rival contentions and peruse .....

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on the first and last day of the previous year under consideration. According to the learned A.R., the assessee had made certain strategic investments in shares of group concerns which are foreign entities, the income from which are exigible to tax as income of the assessee, i.e. First Global (UK) Ltd. and FG Market Inc. and submitted that to this extent at least, the investments therein should be excluded from the total investments while computing the disallowance under section 14A r.w. Rule 8 .....

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2;% of the average of the value of investment, income from which does not or shall not form part of total income. Therefore, the investment out of which income is taxable, cannot be included for the purpose of computation of disallowance. In this view of the situation, we restore this issue to the file of AO with a direction to verify such contention of the assessee and grant appropriate relief. This ground is considered to be partly allowed for statistical purposes in the manner aforesaid. 4.3. .....

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(iii), which is in respect ½% of the average value of investment, the income of which does not form part of total income. We hold and direct accordingly. Ground No. 1 of assessee s appeal is treated as partly allowed for statistical purposes as indicated above. 5. Ground No. 2 - Disallowance under section 40(a)(ia) 5.1 In this ground, the assessee assails the order of the learned CIT(A) in confirming the disallowance of ₹ 9,18,509/- under section 40(a)(ia) of the Act made by the AO .....

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provided by the Stock Exchange and therefore no TDS on such payments would be deductible under section 194C or 194J of the Act. 5.2 Per contra, the learned D.R. supported the impugned order of the learned CIT(A) on this issue. 5.3.1 We have heard the rival contentions and perused and carefully considered the material on record; including the judicial pronouncements cited. The facts of the matter on this issue are that in the period under consideration, the assessee paid transaction charges amou .....

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Apex Court in the case of Kotak Securities Ltd. (2016) 383 ITR 1 (SC) and the Hon'ble Apex Court held that transaction charges paid to Bombay Stock Exchange by its members are not for technical services rendered but are payments made for facilities provided by the Stock Exchange and therefore no TDS was deductible on such payments under section 194J/194C of the Act. In its order at paras 8 to 10, the Hon'ble Apex Court has held as under: - 8. A reading of the very elaborate order of the .....

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ll members of the stock exchange in respect of every transaction 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/identify a ser .....

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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 Section 9(1)(vii) of the Act. In the absence of the above distinguishing feature, service, though rendered, would be mere in the nature of a facility offered or available which would not be covered by the aforesaid provision of the Act. 9. There is yet another aspect of the matter which, in our considered view, would require a specific .....

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s 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 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 f .....

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