KHANDWALA SECURITIES LTD,MUMBAI vs. ITO TDS 2(2), MUMBAI

The only issue in this appeal of the assessee is against the order of the CIT (A) sustaining the order of the AO in holding the assessee in default and also charging interest u/s 201 (1) and 201 (1A) of the Act in respect to transaction charges and VSAT charges by holding the same as in the nature of fee for technical/professional services under the provisions of Section 194-J of the Act.

We have heard the rival contentions and gone through the facts and circumstances of the case. We find that the assessee has paid the following expenses:-

At the outset, the learned Counsel for the assessee stated that this issue of transaction charges paid to Stock Exchanges for facilitating is held to be not fee for technical services and the assessee is not liable to deduct TDS on such payment u/s 194- J of the Act as per the decision of the Hon’ble Supreme Court in the case of CIT Vs Kotak Securities Ltd. reported in (2016) 383 ITR 1 (SC) and according to him this issue is covered in favour of the assessee. The learned Counsel for the assessee in respect to VSAT charges also stated that the CIT (A) while adjudicating the appeal of the assessee against the assessment order passed u/s 143 (3) of the Act, disallowing the VSAT expenses for non-deduction of TDS and invoking the provisions of section 40(a) (ia) of the Act has given a finding that provisions of Section 194-J of the Act is not attracted to VSAT charges, He referred to Para 5.10 of the order of the CIT (A) in appeal No.CIT(A)-8/Cir.4/232/2010-11 dated 28-12-2011 in assesses own case for assessment year 2008-09 which reads as under:- “5.10 In view of the above decisions, I am of the opinion that the Stock Exchanges do not render any Managerial Services nor do they render any Technical Consultancy Services, as far as V-Sat and Lease Line charges are concerned. The payments made by the assessee of VSAT charges and Lease Line Charges are not in consideration of any service provided by the Stock Exchange but is a payment for use or facilities provided by the Stock Exchange which are available for use by any member. Therefore, these payments cannot be said to be fee paid in consideration of the Stock Exchange rendering any technical service to the assessee. The provisions of sec. 194J are thus not attracted. Therefore, there is no obligation on the part of the assessee to deduct the tax at source. Consequently, the provisions of sec. 40(a) (ia) are also not attracted. Accordingly, the addition on account of VSAT charge of Rs.39,600/- and lease line charges of Rs.30,000/- are deleted”. In view of the above, the learned Counsel for the assessee stated that both the issues are covered in favour of the assessee. The learned Sr. DR just relied on the orders of the lower authorities.

Considering the submissions of both the parties and the facts & circumstances of the present case, we find that both the issues of transaction charges and VSAT charges are covered by the decision of the Hon’ble Supreme Court rendered in the case of CIT Vs Kotak Securities Ltd. reported in (2016) 383 ITR 1 (SC) and also by the order of the CIT (A) in assessee’s own case for assessment year 2008-09 passed u/s 143 (3) of the Act dated 28-12-2011 respectively as discussed above. In terms of the above, we allow the appeal of the assessee.

In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 22/06/2016.