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Income Tax Appellate Tribunal, BENCH “C”,MUMBAI
Before: SHRI R.C.SHARMA & SHRI PAWAN SINGH
Assessee by : Ms. Neha Paranjpe (AR) Revenue by : Shri R.A. Dahyani (DR) Date of hearing : 11.08.2016 Date of Pronouncement : 21.10.2016 O R D E R
PER PAWAN SINGH, JM:
This appeal u/s 253 of the Income-tax Act(‘Act’) is directed by the assessee against the order of CIT(A)-14, Mumbai dated 08.08.2014 for Assessment Year (AY) 2010-11. The assessee has raised following grounds of appeal:
1. The Learned Commissioner of Income Tax (Appeals) erred in confirming the TDS liabilities of Rs. 25535/- on account of TDS u/s 194J of Rs. 18776/- and interest u/s. 201(1A) of Rs. 6759/- thereon totaling to Rs. 25535/-
2. The Learned Commissioner of Income Tax (Appeals) failed to consider the statement of facts wherein it is clearly mentioned by the appellant that TDS provisions under Chapter XVII B are not applicable to the assessee's case, as the assessee been Individual and not governed by the provisions u/s. 44AB of the Income Tax Act 1961.
2. The brief facts of the case are that the assessee is a member of Multi Commodity Exchange of India Ltd. The assessee is engaged in the business of commodity broker. The AO noticed that the assessee has not has not deducted Tax Deducted at Source (TDS) on payment on account of transaction charges paid to Multi Commodity Exchange amounting to Rs. 2,16,786/- in accordance with the provisions of section 194 of the Act. The AO observed that the charges payable to exchange on account of service provided by it with regard to transaction are in the nature of technical/mechanical services within the meaning of fees for technical services. For non deduction of tax the AO treated the assessee in default in term of section 201(1) non-deduction of TDS on technical/managerial fees. The AO calculated the liability of tax along with interest on payment of such transaction charges at Rs. 22,329/- on account of tax @ 10.3% u/s 201(1) and Rs. 8033/- on account of interest u/s 201(1A) @ 1%, thus, the total liability was worked out at Rs. 30,367/-. Aggrieved by the order of AO, the assessee filed appeal before the CIT(A) wherein the order of AO was sustained. Hence, this appeal is filed before us.
We have heard the ld. Authorized Representative (AR) of the assessee and ld. Departmental Representative (DR) for the Revenue and perused the material available on record. The Ld. AR of the assessee argued that his case is covered by the decision of Hon’ble Supreme Court in CIT vs. Kotak Securities Ltd. reported vide (2016) 67 taxmann.com 356 (SC). On the other hand, the ld. DR for the Revenue supported the order of authorities below.
We have considered the rival contention of the parties and gone through the orders of authorities below. The Hon’ble Apex Court examined the applicability of section 194J with regard to managerial and consultancy charges payable to stock exchange and held that the charges paid by assessee are for common services and that every member of stock exchange is necessary required to avail and to carry out trading in securities in stock exchange and the payment made to such facilities provided by stock exchange does not falls in the category of “technical services”, holding as under: “9. There is yet another aspect of the matter which, in our considered view, would require a specific notice. The service made available by the Bombay Stock Exchange [BSE Online Trading (BOLT) System] for which the charges in question had been paid by the appellant-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 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 for transacting business rather than a technical service provided 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.
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 for facilities provided by the Stock Exchange. No TDS on such payments would, therefore, be deductible under Section 194J of the Act.”
In view of the above legal discussion, the payments made by assessee do not fall within the definition of fees for technical services. Thus, the order made by AO u/s 201 and 201(1a) of the Act is set-aside.
In the result, appeal of the assessee is allowed. Order pronounced in the open court on this 21st October, 2016.