Fee Paid In Consideration Of The Stock Exchange Rendering Any Technical Services To The Assessee And Thus Provisions Of Section 194J Is Not Attracted, Consequen v. In View Of The Decision Of The Division Bench In The Case Of

asn IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO. 5290 OF 2010 The Commissioner of Income Tax-4. ..Appellant.Vs. M/s. Asit C Mehta InvestmentIntermediates Ltd. ...Respondent. Mr. Vimal Gupta for the Appellant.Ms. Aasifa Khan for the Respondent. CORAM: DR.D.Y. CHANDRACHUD & M.S.SANKLECHA, JJ. March 5, 2012. PC: The following questions of law arise in the appeal by the Revenue under Section 260 A of the Income Tax Act, 1961: 1 Whether on the facts and circumstances of the case and in law the Hon’ble Tribunal was justified in deleting the disallowance of Rs.4 lacs as bad debts claimed by the assessee; 2 Whether the Tribunal was justified in holding that the transaction fee paid could not be said to be a Appeal-5290 fee paid in consideration of the Stock Exchange rendering any technical services to the Assessee and thus provisions of Section 194J is not attracted, consequently the provision of Section 40(a) (ia) is also not attracted? 2 This Appeal arises from a decision of the Income Tax Appellate Tribunal dated 24 February 20120 for Assessment Year 2005-06. The learned Counsel appearing on behalf of the Revenue and the learned Counsel appearing on behalf of the Assessee are agreed that the first question is covered against the Revenue in view of the Judgment of this Court in Commissioner of Income Tax Act, Central II Vs. Shri. Shreyas S. Morakhia Income Tax Appeal No.89 of 2011 decided on 28 February 2012. In view of this agreed position, no substantial question of law would arise on the first question. As regards the second question, in the Judgment of the Division Bench of this Court in Commissioner of Income Tax Vs. Kotak Securities Ltd. [2012] –340 ITR 333 (Bombay), it has been held that the transaction charges paid by the assessee to the account of the stock exchange for rendering managerial services constitutes fees for technical services under Section 194(J) read with Explanation 2 to Section 9(1) (vii) of the Income Tax Appeal-5290 Act, 1961 and hence the assessee was liable to deduct tax before crediting the transaction charges to the account of the stock exchange. In that view of the matter, the appeal is admitted on the second question and is taken up for hearing and final disposal, by consent. 3 In view of the decision of the Division Bench in the case of Kotak Securities Ltd. (supra), the Tribunal was not correct in coming to the conclusion that the transaction charges did not fall within the meaning of Section 194(J). However, in the decision in Kotak SecuritiesLtd. the Division Bench observed as follows: “Accordingly, we hold that the transaction charges paid by the assessee to the stock exchange constitutes “fees for technical services” covered under section 194J of the Act and, therefore, the assessee was liable to deduct tax at source while crediting the transaction charges to the account of the stock exchange. However, since both the Revenue and the assessee were under the bona fide belief for nearly a decade that tax was not deductible at source on payment of transaction charges, no fault can be found with the assessee in not deducting the tax at source in the assessment year in question and consequently disallowance made by the Assessing Officer under section 40(a) (ia) of the Act in respect of the transaction charges cannot be sustained. We make it clear that we have arrived at the above conclusion in the peculiar facts of the present case, where both the Revenue and the assessee 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.” the assessment year in question and consequently disallowance made by the Assessing Officer under section 40(a) (ia) of the Act in respect of the transaction charges cannot be sustained. We make it clear that we have arrived at the above conclusion in the peculiar facts of the present case, where both the Revenue and the assessee 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.” 3 The appeal in the present case relates to the same assessment year, Assessment Year 2005-2006. Consequently, following the decision in Kotak Securities, we hold that for the assessment year in question no fault can be found with the assessee in not deducting the tax at source. The second question of law shall accordingly stand answered in the aforesaid terms. The Appeal is accordingly disposed of. No order as to costs. (DR.D.Y. CHANDRACHUD,J.) (M.S.SANKLECHA, J.) 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