MANALI TRADING & HOLDING P.LTD,MUMBAI vs. ITO (TDS) WD 2(3), MUMBAI

In both the captioned appeals a common issue arises, which relates to tax deductible at source on transaction charges paid to the stock exchange. In assessment year 2010-11 assessee paid transaction charges to BSE of Rs.20,577/- and Rs.9,54,604/- to NSE and in assessment year 2011-12 it paid transaction charges of Rs.7,87,976/- to NSE. As per the Revenue, the transaction charges paid to the stock exchanges were fee for technical services covered within the meaning of section 194J of the Act and thus, tax was required to be deducted at source accordingly. The Assessing Officer as well as the CIT(A) have referred to the judgment of the Hon'ble Bombay High Court in the case of CIT vs.Kotak Securities Ltd.(2011) 15 taxmann.com77(Bom) in support. Against such a decision, assessee is in further appeal before us.

At the time of hearing, it was an agreed position that the issue relating to the transaction charges paid to stock exchanges is now settled by the Hon'ble Supreme Court in the case of CIT vs. Kotak Securities Ltd. in Civil Appeal No.3141 of 2016 & Others dated 29/03/2016, whereby it has been held that having regard to the nature of payments which are indeed paid for facilities made by the stock exchanges, no tax is deductible at source under section 194J of the Act. Pertinently the decision of the Hon'ble Bombay High Court (supra) relied upon by the lower authorities has since been reversed by the Hon'ble Supreme Court and, therefore, we are unable to uphold the orders of the authorities below treating the assessee as an assessee in default for non-deduction of tax at source under section 194J of the Act, qua the transaction charges paid to stock exchanges.