2013 (10) TMI 279 - AT - Income Tax

Disallowance under Section 40(a)(ia) due to non deduction of TDS - whether application only on the amount due as on 31st March - Transaction charges paid to BSE and NSE Held that - Reliance has been placed on the judgment in the case of CIT vs. Sikander Khan Tunvar 2013 (5) TMI 457 - GUJARAT HIGH COURT , wherein it has been held that section 40(a)(ia) would cover not only to the amounts which are payable as on 31st March of a particular year but also which are payable at any time during the year of course as long as the other requirements of the said provision exist - Assessing Officer, was justified a making the disallowance Decided in favor of Revenue.

Summary

Issues Involved:
1. Disallowance of transaction charges under Section 40(a)(ia) of the Income Tax Act.
2. Disallowance under Section 14A of the Act for earning dividend income.

Analysis:

Issue 1: Disallowance of transaction charges under Section 40(a)(ia) of the Income Tax Act:
The appeal was filed by the Revenue against the order of CIT(A)-III for the assessment year 2009-10. The Revenue challenged the deletion of disallowance of Rs. 72,86,348/- under Section 40(a)(ia) concerning transaction charges paid to BSE and NSE. The Assessing Officer found that the Assessee did not deduct TDS on the transaction charges paid to the stock exchanges. The Assessee argued that the payment was for facilities provided by the exchanges and not for technical or managerial services, hence TDS was not applicable. However, the Assessing Officer disagreed, citing the requirement to deduct TDS under Section 194J. The CIT(A) partially upheld the disallowance, stating that TDS should have been deducted on the transaction charges. The Revenue appealed, arguing that the decision of the Special Bench in the case of Merilyn Shipping was no longer valid in light of the Guj. H.C. decision in the case of Sikander Khan Tunvar. The Tribunal upheld the Assessing Officer's order based on the Guj. H.C. judgment, rejecting the reliance on the Special Bench decision.

Issue 2: Disallowance under Section 14A of the Act for earning dividend income:
The Assessee's appeal in the CO contested the disallowance of Rs. 17,221/- under Section 14A for earning dividend income of Rs. 39,988/-. The Assessing Officer applied Rule 8D of I.T. Rules to calculate the disallowance, considering the Assessee's banker's involvement in investing activities generating exempt income. The Assessee's claim that the dividend income pertained to excess balance parked in mutual funds over the weekend was disregarded. The Tribunal found no reason to interfere with the Assessing Officer's decision, upholding the disallowance under Section 14A.

In conclusion, the Tribunal allowed the Revenue's appeal regarding the disallowance of transaction charges and dismissed the Assessee's CO concerning the disallowance under Section 14A.