TMI Blog2017 (1) TMI 1751X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee right from the insertion of section 194J in the year 1995 till 2005 proceeded on the footing that the assessee is not liable to deduct tax at source and in fact immediately after the assessment year in question, i.e., from the assessment year 2006-07 the assessee has been deducting tax at source while crediting the transaction charges to the account of the stock exchange. We also find that the issue is covered by the decision of ITAT, Bangalore bench in the case of IDS Software Solutions (India) (P) Ltd. [ 2009 (1) TMI 363 - ITAT BANGALORE-A] wherein the facts discussed as regards to where the assessee entered into a secondment agreement with a US Company and obtained the services of an employee and the question arose whether the reimbursement by the assessee to the US Company of the salary paid by the US Company was chargeable to tax as - fees for technical services. As held that though the US Co was the employer in a legal sense but since the services of the employee had been seconded to the assessee and since the assessee was to reimburse the emoluments and it controlled the services of the employee, it was the assessee which for all practical purposes was the em ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce. - ITA NO. 53/Mum/2015, ITA NO.658/Mum/2015 - - - Dated:- 16-1-2017 - SHRI C.N. PRASAD, JM AND SHRI RAJESH KUMAR, AM For the Assessee : Shri P P Jayaraman For the Revenue : Shri G Nantha Kumar ORDER PER RAJESH KUMAR, A. M: These cross appeals are directed against the order dated 10-11-2014 passed by the ld. CIT(A)-21, Mumbai. These appeals for the sake of convenience are clubbed together, heard together and are being disposed of in this consolidated order. We will first take up ITA No.658/Mum/2015:- 2. The issue raised in the first ground of appeal is against the deletion of ₹ 1,68,49,000/- by the ld.CIT(A) under section 40(a)(ia) of the Income Tax Act, 1961 (hereinafter called the Act) on the ground that no TDS has been deduced by the assessee. 3. At the outset, the ld.AR brought to our attention that the identical issue has been decided by the Co-ordinate Bench of the Tribunal in assessee s own case in ITA No. 1945/Mum/2013 (AY: 2009-10), dated 15.04.2016 4. Brief facts of the case are that the AO during the course of assessment proceedings noticed that the assessee has charged to the profit and loss account ₹ 168.49 lakhs on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not with the Mahanagar Gas C0.Ltd. Similar issue has arisen in the case of IDSoI1DS Software Solutions (India) Pvt Ltd. vs. ITO (International Taxation), ITAT Bangalore 'A' Bench (2009) 122 TTJ 410 (Bang) wherein it was held as under : Salary paid by US companu under secondment agreement to managing director who was appointed by US company and seconded to its Indian subsidiary having already suffered tax at source, reimbursement of said salary by assessee to IDS need not suffer tax, at source In this instant case also salary to the secondment employee was paid by the BG and its reimbursement by Mahanagar Gas Co. Ltd. to without any mark up. 'BG for the payment of salary to secondment employee had also deducted tax at source and paid to the Departtment.This is similar to the case mentioned above. Further to it in the case of CIT V/s Kotak Securities Ltd. Appeal 3111 of 2009 the Hon ble Bombay High Court held as under : Held, the present case, the assessee had bona fide reason to believe that the tax was not deductible at source under section 194J of the Act and, therefore, the Assessing Officer was not justified in invoking section 40(a)(ia) of the Act and d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 40(a)(ia), as explained in the Central Board of Direct Taxes Circular No. 5, dated July 15, 2005-See [2005] 276 ITR (St.) 151 ), is to augment compliance with the TDS provisions in the case of residents and curb bogus payments. Moreover, though section 194J was inserted with effect from July 1, 1995, till the assessment year in question that is the assessment year 2005-06 both the Revenue and the assessee proceeded on the footing that section 194J was not applicable to the payment of transaction charges and accordingly, during the period from 1995 to 2005 neither the assessee has deducted tax at source while crediting the transaction charges to the account of the stock exchange nor the Revenue has raised any objection or initiated any proceedings for not deducting the tax at source. In these circumstances, if both the parties for nearly a decade proceeded on the footing that section 194J is not attracted, then in the assessment year in question, no fault can be found with the assessee in not deducting the tax at source under section 194J of the Act and consequently, no action could be taken under section 40(a)(ia) of the Act. It is relevant to note that from the assessment year 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to where the assessee entered into a ‗secondment agreement with a US Company and obtained the services of an employee and the question arose whether the reimbursement by the assessee to the US Company of the salary paid by the US Company was chargeable to tax as ―fees for technical services‖ . It was held that though the US Co was the employer in a legal sense but since the services of the employee had been seconded to the assessee and since the assessee was to reimburse the emoluments and it controlled the services of the employee, it was the assessee which for all practical purposes was the employer. Accordingly, the salary reimbursed to the US Co was not chargeable to tax. Though the person deputed by the US Co was a technical person, the consideration paid under the secondment agreement was not ―fees for technical services‖ because the fact that the seconded employee was responsible and subservient to the payer (assessee) and was required to also act as officer or authorized signatory or nominee of the assessee made it inconsistent with an agreement for providing technical services. In view of the above facts and circumstances, we dismiss this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The only issue raised in all the grounds of appeal is against the upholding the order of the AO confirming the disallowance made u/s 14A which was calculated by taking the entire financial expense including bank charges for disallowance under s. 14A of the Act whereas the assessee pleaded that for the purpose of disallowance u/s 14A only interest is to be taken and not bank charges. 13. The brief facts of the case are that during the course of assessment proceedings, the AO noted that the assessee has earned exempt income of ₹ 4.27 crores which was claimed as exempt and also suo mottu disallowed ₹ 52.13 lakhs as expenses attributable to the earning of the said income. The AO, however was not satisfied with the claim of the assessee and accordingly invoked the provisions of section 14A r.w.rule 8D and re-calculated the disallowance of ₹ 10.47 lakhs apart from the suo motto disallowance. 14. During the appellate proceedings before the first appellate authority, the ld.CIT(A) also dismissed the appeal of the assessee after rejecting the contentions of the assessee by observing and holding as under : . 6.1 The facts of the case were that the A.O. had disal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as part of the interest expenses for the purpose of working out the disallowance u/s 14A r.w.r.8D(2)(ii)of the Rules thereby making additional disallowance of ₹ 10,47,000/-which is over and above the assessee s suo-mottu disallowance of ₹ 52.13 lakhs being expenditure for earning the exempt income by the assessee. It was submitted before us by the ld.AR that the bank charges were deducted by the banks for the various transactions/collections of money entered into in the ordinary course of business and in no way constituted the part of interest expenses as per the provisions of section 2(28A) of the Act. A perusal of provision of section 2(28A) reveals that the interest includes only interest payable on the money borrowed and included any service fees or other charges in respect of money borrowed. For the sake of better understanding, we reproduce the provisions of section 2(28A) of the Act. : (28A) interest means interest payable in any manner in respect of any moneys borrowed or debt incurred (including a deposit, claim or other similar right or obligation) and includes any service fee or other charge in respect of the moneys borrowed or debt incurred or in resp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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