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Issues involved: Appeal against order of CIT(A) regarding allowance of VSAT & Transaction charges u/s 40A(a)(ia) and mark to market loss in future & option.
Allowance of VSAT & Transaction charges: The ITAT Mumbai upheld the CIT(A)'s decision to allow VSAT & Transaction charges as deductible expenditures, citing precedents where it was established that Stock Exchanges do not provide technical services, and fees paid for facilities are not subject to TDS u/s 40(a)(ia). The ITAT emphasized that stock exchanges offer infrastructure for trading, not technical services, and the speed and efficiency of screen-based trading do not constitute technical services. The payment in question was deemed not a fee for technical services, and the order of the CIT(A) was confirmed based on previous decisions. TDS provisions: Referring to the case of Kotak securities ltd, the ITAT reiterated that stock exchanges do not provide managerial or technical consultancy services, and transaction fees are for using exchange facilities, not for services rendered. The provisions of section 194J were found not applicable, and there was no obligation to deduct tax at source. Consequently, the disallowance made u/s 40(a)(ia) was deleted, aligning with the previous Coordinate Bench decision. Mark to market loss in future & option: The ITAT upheld the CIT(A)'s decision to allow the mark to market loss in future & option as an allowable loss, following the principles established by the Hon'ble Supreme Court. The A.O.'s view that the loss in forward contracts is notional was countered by the CIT(A), who allowed the loss as an expenditure u/s 37(1) based on the Supreme Court judgment. The ITAT agreed that the notional loss in derivative transactions is a valid business loss and upheld the CIT(A)'s decision. Conclusion: The appeal of the Revenue was dismissed by the ITAT Mumbai, affirming the decisions of the CIT(A) regarding the allowance of VSAT & Transaction charges and mark to market loss in future & option. The ITAT found no reason to differ from the CIT(A)'s findings and rejected the Revenue's appeal.
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