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Issues involved: Appeal against deletion of expenses like VSAT, Leaseline, and Transaction charges u/s 194J and 194C of the I.T. Act for Assessment Year 2006-07.
Summary: The Revenue appealed against the deletion of expenses by the Learned CIT(A) regarding VSAT, Leaseline, and Transaction charges. The assessee argued that these charges were reimbursement payments for infrastructure and trading facilities provided by the Stock Exchange, not for technical services. The ITAT Mumbai Bench decision in a similar case supported the view that Stock Exchanges do not provide technical or managerial services, and the fees paid by members are not for technical services. The Tribunal upheld the CIT(A)'s decision, stating that the charges were for use of facilities, not technical services, and therefore not subject to TDS. The Tribunal also ruled in favor of the assessee regarding transaction charges, following a Mumbai Tribunal decision that transaction fees were for using Stock Exchange facilities, not for technical or managerial services. Consequently, the disallowance of expenses was deleted u/s 40(a)(ia), and the Revenue's appeal was dismissed. The judgment emphasized that payments to Stock Exchanges were for using facilities, not for technical services, as Stock Exchanges do not provide technical or managerial services to members. The Tribunal interpreted the provisions of s. 194J strictly, stating that there was no clear obligation to deduct tax at source for transaction fees. Therefore, the provisions of s. 40(a)(ia) were not applicable, and the disallowance was deleted based on the Kotak Securities case. The decision highlighted that transaction fees were for facility use, not technical or managerial services, and thus not subject to TDS. Following the Kotak Securities case, the disallowance of expenses was deleted u/s 40(a)(ia). In conclusion, the Tribunal upheld the CIT(A)'s decision to delete the expenses, as the charges were for using Stock Exchange facilities, not for technical services. The judgment clarified that transaction fees were not for technical or managerial services, based on the Kotak Securities case, and therefore not subject to TDS. The appeal filed by the Revenue was dismissed based on these findings.
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