2012 (2) TMI 636 - AT - Income Tax

Summary

Issues involved: The judgment involves the disallowance of transaction charges and VSAT and leaseline charges by the Assessing Officer (AO) under section 40(a)(ia) for assessment years 2006-07 and 2007-08.

Disallowance of VSAT and Leaseline Charges:
The High Court held that VSAT and Leaseline charges paid by the assessee to the Stock Exchange were reimbursement of charges paid by the Stock Exchange to the Department of Telecommunication, devoid of any income element, and thus not subject to tax deduction at source. The Tribunal upheld the CIT(A)'s deletion of the disallowance under section 40(a)(ia) based on this decision.

Disallowance of Transaction Charges:
The High Court ruled that transaction charges levied by the Stock Exchange for managerial services rendered, such as risk management and surveillance, were subject to tax deduction at source under section 194J. The AO's disallowance of transaction charges was deemed justified. However, the Tribunal noted the High Court's decision in a similar case where the assessee had a bona fide belief that tax was not deductible at source under section 194J. As the facts in the present case needed verification, the issue was remanded to the AO for further examination in line with the High Court's guidelines.

Conclusion:
The Tribunal partly allowed the Revenue's appeals, upholding the disallowance of transaction charges but remanding the issue for further verification. The disallowance of VSAT and Leaseline charges was not upheld based on the High Court's decision.