2010 (9) TMI 1164 - AT - Income Tax

Summary

Issues involved: Appeal by revenue u/s 143(3) for AY 2006-07 - Disallowance of expenses u/s 40(a)(ia) - Allowance of rebate u/s 88E for "futures & options profit".

Disallowance of expenses u/s 40(a)(ia): The Assessing Officer disallowed expenses of Rs. 10,25,597 under section 40(a)(ia) as fees for technical services, requiring tax deduction u/s 194J. However, CIT(A) ruled in favor of the assessee based on a Tribunal order stating stock exchange did not provide technical services, hence charges not tax deductible u/s 194J. Tribunal confirmed CIT(A)'s order, citing the previous Tribunal order supporting the assessee.

Allowance of rebate u/s 88E for "futures & options profit": The assessee claimed a rebate of Rs. 1,32,54,476 u/s 88E for securities transaction tax paid on F & O profits. The Assessing Officer excluded Rs. 37,74,593 profit from F & O open positions, reducing the rebate claimed. CIT(A) disagreed, stating that if income tax was paid on F & O profits, rebate u/s 88E should be allowed. Tribunal agreed with CIT(A) in principle but directed factual verification on whether STT was paid on F & O open positions and if profits were included in assessable business profits. The department's appeal was partly allowed, with the issue sent back to the Assessing Officer for verification.