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2011 (3) TMI 896 - AT - Income TaxDisallowance - BSE Card - The entire case of the AO is on the premise that in the event of sale of the shares which the assessee acquired on Corporatization and demutualization of BSE as a Company, the assessee would take the benefit of the provisions of section 55(2)(ab) of the Act and claim the cost of acquisition at the price at which the assessee originally paid for acquiring BSE Card ignoring the depreciation on the BSE Card which the assessee availed from the period of acquisition of the BSE Card till exchange of shares for the BSE Card. - the assessee has sold 6386 shares of BSE Ltd. out of 10000 shares of BEE Ltd., which it had got on Corporatization and demutualization of the BSE as a limited company - While computing capital gain on such transfer the assessee calculated its cost of acquisition on the basis of the written down value and Re.1 which had paid per share at the time of issue of shares by BSE Ltd - With regard to the remaining shares of BSE Ltd. which the assessee holds the question of computation of capital gain would continue to be the same basis on which the assessee has computed capital gain in A.Y 2008-9. In view of the above we are of the view that the CIT(A) was justified in deleting the addition made by the AO - Decided in favour of assessee. Provision of section 41(1) and 38(iv) of the Income Tax Act - Non-deduction of tax at source in respect of payment to lease line charges by the assessee to the stock exchange whether lease line charges is in the nature of fees for professional and technical services rendered and as to whether provisions of section 194J of the Act would apply and consequently disallowance could be made for non deduction of tax at source under section 40(a)(ia) of the Act could be made - held that - lease line charges are not in the nature of fees for technical services rendered so as to attract the provisions of section 194J of the Act - Do not find any infirmity in the order of the CIT(A) deleting the addition made by the AO - Decided in favour of assessee.
Issues:
1. Disallowance of protective addition on BSE Card. 2. Non-deduction of tax at source on lease line charges. Issue 1: Disallowance of protective addition on BSE Card: The appeal was filed by the revenue against the CIT(A)'s order regarding the disallowance of Rs. 1,09,75,494 made on account of protective addition on BSE Card for assessment year 2006-07. The assessee, a stockbroking company, claimed depreciation on the BSE Card till A.Y. 2005-06. The BSE Card was converted into shares of BSE Ltd. due to corporatization and demutualization. The AO contended that if the assessee sells the shares, it would claim the cost of acquisition at the original price of the BSE Card, leading to a benefit received by the assessee. The AO made a protective addition of Rs. 1,09,75,494 based on this premise. However, the CIT(A) held that the assessee's conduct in selling shares in A.Y. 2008-09 did not indicate a double benefit as feared by the AO. The CIT(A) deleted the protective addition, stating it was unjustified. The Tribunal upheld the CIT(A)'s decision, emphasizing that the AO's apprehension was unfounded as the assessee had not taken the cost of BSE shares at the original cost of the BSE Card. Issue 2: Non-deduction of tax at source on lease line charges: The second issue involved non-deduction of tax at source on lease line charges paid by the assessee to the stock exchange. The AO treated the charges as fees for professional and technical services, requiring tax deduction at source under section 40(a)(ia) of the Act. However, the CIT(A) ruled that lease line charges did not fall under fees for technical services and deleted the addition made by the AO. The Tribunal noted that a similar issue had been decided in a previous case where it was held that lease line charges were not fees for technical services under section 194J of the Act. Consequently, the Tribunal dismissed the revenue's appeal, affirming the CIT(A)'s decision to delete the addition. In conclusion, the Tribunal dismissed the revenue's appeal on both issues, upholding the CIT(A)'s decisions in favor of the assessee.
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