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2020 (12) TMI 1358 - ITAT MUMBAITDS u/s 194J - Disallowance of deduction claimed towards payment made to National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) for lease line charges/V–SAT and transaction charges - As per AO payment made to NSE and BSE is in the nature of fee for technical and managerial services requiring deduction of tax at source - Disallowance u/s 40(a)(ia) for non–deduction of tax at source - assessee objected to the proposed disallowance by stating that the payment made is not for availing technical or managerial services - whether the payment made by the assessee towards online trading service made available by NSE and BSE is in the nature of technical services? - HELD THAT:- As relying on Hon'ble Supreme Court in case of CIT Vs. Kotak Securities Ltd [2016 (3) TMI 1026 - SUPREME COURT] we hold that the payment made by the assessee towards lease line/V–SAT and transaction charges not being in the nature of fee for technical services will not be amenable to section 194J of the Act. Accordingly, we delete the disallowance made under section 40(a)(ia). Ground no.1, raised by the assessee is allowed. Disallowance of Security Transaction Tax (STT) u/s 43B(a) - assessee has not actually paid STT during the year under consideration, the Assessing Officer invoked the provisions of section 43B(a) of the Act and disallowed the deduction claimed - HELD THAT:- As section 101 r/w rule 6 and 7, requires ever recognized Stock Exchange and mutual fund to furnish prescribed return to pay STT to the credit of Central Government. Thus, on a conjoint reading of the aforesaid provisions, it is very much clear that the liability to pay STT is on the Stock Exchanges. Assessee is merely acting as an agent of the Stock Exchanges for collecting STT from the buyers and sellers of the shares while facilitating those transactions as a broker. Thus, it is very much clear that the liability to pay STT is not on the assessee. As evident, the assessee has not debited the STT to the Profit & Loss Account. Rather, he has shown it as a Balance Sheet item under the head Liability. That being the case, the liability of STT which the assessee is merely a custodian of, cannot be treated as liability of the nature coming within the ambit of section 43B(a) of the Act. The decisions relied upon by assessee also supports this view. Accordingly, we direct the deletion of disallowance made under section 43B(a) of the Act. These grounds are allowed. TP adjustment on brokerage commission - adjustment relates to brokerage commission charged to the AE for providing broking services - TPO has made the disputed adjustment by applying the commission charged to non–AE @ 0.28% as CUP - HELD THAT:- On a perusal of the decision of the Tribunal in assessment year 2013–14, [2020 (12) TMI 1051 - ITAT MUMBAI] we find that the disputed issue on which the Tribunal has restored back the issue to the AO/TPO relating to arm's length price adjustment of intra group services. It is very much clear from the reading of the said order, wherein, it has been discussed that while the assessee had determined the arm's length price of intra group service applying TNMM, TPO, though, had applied CUP, however, ultimately he had determined the arm's length price by estimating the cost of employee on man–hour basis. Therefore, it is very much clear that the issue dealt with and decided by the Tribunal in assessment year 2013–14 is not similar to the issue with which we are presently concerned. Rather, on appreciation of relevant facts, we are of the view that the issue arising in these grounds is squarely covered by the decision of the Tribunal in assessment year 2011–12 as reproduced above. In view of the aforesaid, we delete the addition made by the Assessing Officer. The grounds raised are allowed. TP Adjustment on the brand fee - HELD THAT:- As decided in own case 2002–03 [2013 (11) TMI 927 - ITAT MUMBAI] expenditure incurred by the assessee on royalty and business development could not be considered as excessive compared to the comparable parties. CIT(A) has also applied the TNMM method for benchmarking international transactions. There are 29 comparables selected details of which have already been given earlier which gave an average margin of -5.5% and, in case, loss making companies were excluded, the average margin came to 16.06% whereas in case of the assessee the margin declared was 57.58%. CIT(A) has therefore held that no TP adjustment is required to be made in case of the assessee with which, on the facts of case, we fully agree. We, therefore, see no infirmity in the order of CIT(A) in deleting the addition made and the same is therefore, upheld - Thus we delete the addition made on account of transfer pricing adjustment. This ground is allowed. Non–grant of credit of TDS - HELD THAT:- We direct the AO to consider the claim of the assessee by verifying the material on record and allow credit for TDS as per law. Levy of dividend distribution tax (DDT) - HELD THAT:- The submission of assessee that the assessee has already paid the DDT, we direct the Assessing Officer to verify assessee’s claim of payment of DTT and decide the issue accordingly. The ground raised by the assessee is allowed for statistical purposes.
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