TMI Blog2017 (8) TMI 714X X X X Extracts X X X X X X X X Extracts X X X X ..... line charges paid by the assessee to stock exchange are merely in the nature of reimbursement of the charges paid/payable by the stock exchange to the department of the telecommunication, and thus in the absence of any element of income involved in the said payments, the issue as regards deduction of tax at source on the same does not arise at all. We are of the considered view that in the backdrop of the aforesaid judgment of the Hon’ble Jurisdictional High Court in Income Tax Commissioner, Mumbai City-4 Vs. Angel Capital & Debit Market Ltd. [2014 (5) TMI 584 - BOMBAY HIGH COURT] the order of the CIT(A) treating the assessee as being in default u/s. 201(1)/201(1A) in respect of failure to deduct tax at source as regards the payments made towards lease line charges, cannot be sustained, and is thus set aside Assessee appeal allowed. - I.T.A. No.4106/Mum/2014 - - - Dated:- 21-6-2017 - SHRI R.C. SHARMA, AM AND SHRI RAVISH SOOD, JM For The Appellant : Shri Anuj Kisnadwala For The Respondent : Smt. Vinita J. Menon ORDER PER RAVISH SOOD, JUDICIAL MEMBER: The present appeal filed by the assessee is directed against the order passed by the CIT(A)-14 (T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00607) - Date of order - 5 September 2012] b) DCIT v. First Global Stockbroking Pvt. Ltd. (ITA No.8105/Mum/2010- Date of order 28 September 2012) c) Phoenix Share Stock Brokers P. Ltd. v. ITO [ ITA No.108/Mum/2012 - Order dated 24 July 2013] d) DCIT v. M/s Violent Arch Securities Pvt. Ltd. (ITA No.298/M/201 1 pronounced on 16 May 2013) e) ITO v. M/s indsec Securities Finance Ltd. (ITA No.916/M/2011 pronounced on 8 May 2013) f) Deputy CIT v. MIs. Lalkar Securities Pvt. Ltd. TA No.983/M/201 1 pronounced on 17 June 2013) ( iv) The Learned CIT(A) has erred in making alternative observation that the payments towards internet and communication charges may fall under the provisions of section 194-I of the Act. 2. Ground No. 2 - Applicability of TDS on payments towards lease line charges: 2.1 The learned CIT(A) has erred in law and on facts in holding that payments towards lease line charges are subject to TDS under section 194-I of the Act. 2.2 The learned CIT(A) has erred in not appreciating that the Hon'ble Delhi ITAT in the case of Hero Motocorp Ltd, V. ACIT (ITA No. 1980/Del/2012 pronounced on 11 June, 2013) has categori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cal services, therefore, the provisions of Section 194J stood excluded, while for in the absence of there being any leasing of the equipments which were used for providing of the aforementioned facilities, the payments made as regards the same also fell beyond the scope and gamut of Section 194I of the Act. 3. The A.O however not finding favour with the aforesaid contentions of the assessee, therein concluded that as the payments made by the assessee could safely be brought within the sweep of technical services , therefore the provisions of Section 194J were clearly attracted. The A.O on the basis of his aforesaid conviction thus treating the assessee as being in default for not having deducted tax at source as per the clear mandate of Sec. 194J, therein raised a demand towards tax and Interest in the hands of the assessee, as under:- Sr. No. Particulars Amount 1 Communication Charges:- (i) Tax u/s. 201(1) (ii) Interest u/s 201(1A) ₹ 32,439/- ₹ 19,139/- Total Rs.51,678/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n between rendering services by using technical knowledge and charging fees for technical services , and as the case of the assessee was covered by the former situation, therefore, the provisions of Section 194J were not attracted. 7. The CIT(A) after deliberating on the contentions of the assessee, therein observed that the provisions of Section 194J had been retrospectively amended with effect from 13.07.2006, as a result whereof the definition of the term Royalty was broadened, which as per Explanation 2 of Section 9(1)(vi) of the Act , was thus to be read as including the following:- i. Transmission by satellite including up-linking, amplification conversion for down-lining of any signal. ii. Transmission by cable. iii. Transmission by Optic Fibre. iv. Transmission by other means. The CIT(A) in the backdrop of his conviction that as the payments made by the assessee towards internet charges/bandwidth/VSAT charges etc., pursuant to the aforesaid retrospective amendment in Sec 9 had been brought within the sweep of the definition of the term royalty , therefore the assessee could safely be held to be liable for deduction of tax at sour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1(1A). 9. The assessee being aggrieved with the order of the CIT(A) had carried the matter in appeal before us. That at the very outset of the hearing of the appeal it was submitted by the ld. Authorized Representative (for short A.R ) for the assessee, that the internet and communication charges which were paid by the assessee, not being in the nature of rendering of specialized, exclusive and individual service, but rather were in the nature of payments made for provision of a facility, therefore, the same did not partake the color and character as that of fees for technical services , and thus were not liable to be subjected to any deduction of tax at source u/s. 194J of the Act . It was submitted by the ld. A.R. that the reliance placed by the CIT(A) on the judgment of the Hon ble High Court in the case of CIT Vs. Kotak Securities Ltd. (2012) 340 ITR 333 (Bom), therein holding that the transaction charges paid by an assessee to stock exchange falls within the four corners of fees for technical services u/s.194J, which thus rendered the assessee liable for deduction of tax at source while crediting such transactions to the stock exchange, had been reversed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ource, as the same are merely in the nature of payments which cannot be characterized as having been made for availing of any special, exclusive or customized services rendered to the user or consumer who may approach the service provider for such service. We find that the issue involved in the present case is squarely covered by the Judgment of the Hon ble Supreme Court in the case of CIT Vs. Kotak Securities Ltd. (2016) 383 ITR 1) (SC), wherein the Hon ble Apex Court had held as under:- 8. A reading of the very elaborate order of the Assessing Officer containing a lengthy discourse on the services made available by the Stock Exchange would go to show that apart 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 customised serv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to one or a section of the members of the Stock Exchange to deal with special situations faced by such 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 provided by the Stock Exchange, not being services specifically sought for by the user or the consumer. It is the aforesaid latter feature of a service rendered which is the essential hallmark of the expression technical services as appearing in Explanation 2 to Section 9(1)(vii) of the Act. 10. For the aforesaid reasons, we hold that the view taken by the Bombay High court that the transaction charges paid to the Bombay Stock Exchange by its members are for 'technical services' rendered is not an appropriate view. Such charges, really, are in the nature of payments made ..... 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