2013 (12) TMI 136 - AT - Income Tax

The TPO has taken wrong segment of comparable company (Crisil Ltd) and in fact the correct segment should have been research and information services - The TPO in his show cause notice has also taken this particular segment information which disclosed the operating margin at 9.20% - The learned Commissioner (Appeals) has rightly appreciated the information and has held that the TPO has taken a wrong segment for the purpose of comparing the margins and if the correct segment is taken into consideration then its operating margin can be considered as comparable - The segmental information of Crisil Ltd. has rightly been included in the set of comparables for the purpose of comparability analysis by the learned Commissioner (Appeals) - As per the proviso to section 92C(2) - Such a benefit cannot be given in view of the retrospective amendment by insertion of sub -section 2A in section 92C - In any case /-5% is not a standard deduction which is to be given on the arithmetic mean - When the variation between the arm s length price so determined and the price at which internal transaction has actually been undertaken does not exceeds 5% than only the benefit of tolerance range of /-5% is to be given The CIT(A) was incorrect on this view Partly allowed in favour of Revenue - Decided in favour of assessee. Leased line charges V-sat charges Held that - Following Kotak Securities Ltd. v/s ADIT 2009 25 SOT 440 2008 (8) TMI 592 - ITAT MUMBAI - V-SAT charges and transaction charges cannot be held to be rendering of technical services and accordingly cannot be considered to be covered under section 194J - The TDS is not required on the payment of V-SAT charges and lease line charges Decided against Revenue. Interest paid to SEBI Held that - Following ACIT v/s Bulls and Bears Portfolios Ltd. 2011 (1) TMI 1056 - ITAT DELHI 48 SOT 0527 - The interest paid to the SEBI for registration fees is a fee which is allowable as deduction in terms of the provisions of section 43B and would be allowable when such an interest is paid as per the SEBI (Interest Liability Scheme) 2004 Decided against Revenue. Penalty to stock exchange Held that - Following assessee s own case for the assessment year 2000-01 - The payments are in the nature of processing fees for bad/short delivery wrong claim for the corporate benefit late reporting delayed settlement of IT trades margin shortage charges etc - The charges are computed based on the penalty points calculated based on default and find their mention in the statement issued by NSCCL as processing charges the charges so levied as penalty is found to be compensatory in nature - Such penalty payment has been held to be compensatory in nature The decision of CIT(A) is justified and confirmed Decided against Revenue. Securities transaction tax Held that - The appellant has deducted higher amount of STT than it was required to deduct from its FII client - The excess amount so retained by the appellant has been treated by the appellant as his income in the subsequent i.e. A.Y. 08-09. Such treatment of excess deduction in the A.Y. 08-09 clearly gives the nature of such deductions as income - Such excess deduction done by the appellant cannot be considered to be as per the prescribed charging of SIT and as such if the amount is not refunded back to the clients from whom such deduction is made then the same should be offered to tax in the year when such excess deduction has taken place - STT payable for the assessment years 2005-06 and 2006-07 have been offered for tax for the subsequent years The issue was restored for fresh decision.

Issues Involved:
1. Transfer Pricing Adjustment
2. Disallowance under Section 40(a)(ia)
3. Addition of Interest Paid to SEBI
4. Disallowance of Penalty Paid to Stock Exchange
5. Addition on Account of Security Transaction Tax (STT) Collected

Issue-wise Detailed Analysis:

1. Transfer Pricing Adjustment:
The assessee, a part of UBS Group, provided marketing and support services to UBS AG, Hong Kong. The Transfer Pricing Officer (TPO) made an upward adjustment of Rs. 1,42,37,587 based on a fresh set of comparables. The assessee contested the inclusion of four comparables: ICDS Securities Ltd., Sumedha Fiscal Services Ltd., Ajcon Global Services Ltd., and Epic Energy Ltd., citing reasons such as abnormal profits, different business activities, and turnover filters. The Tribunal agreed with the assessee, excluding these comparables from the final set. The Tribunal also upheld the inclusion of Crisil Ltd. by the Commissioner (Appeals), as the correct segment was "research and information services." The Tribunal reversed the benefit of +/- 5% given by the Commissioner (Appeals), citing the retrospective amendment in section 92C.

2. Disallowance under Section 40(a)(ia):
The Revenue challenged the deletion of disallowance of Rs. 1,86,67,243 for non-deduction of TDS on lease line charges, V-SAT charges, and transaction charges. The Tribunal upheld the deletion, referencing the decisions in Kotak Securities Ltd. and Angel Capital and Debit Market Ltd., which held that such charges are not "fees for technical services" and thus not subject to TDS under section 194J. The Tribunal also noted that the Revenue had accepted non-deduction of TDS in earlier years, supporting the assessee's bonafide belief.

3. Addition of Interest Paid to SEBI:
The Revenue challenged the deletion of addition of Rs. 1,55,059 paid to SEBI as interest for earlier years. The Tribunal upheld the deletion, referencing multiple Tribunal decisions that held such payments as allowable under section 43B in the year of payment. The Tribunal agreed that the interest paid under SEBI's Interest Liability Regulation Scheme 2004 is deductible in the year of payment.

4. Disallowance of Penalty Paid to Stock Exchange:
The Revenue challenged the deletion of disallowance of Rs. 26,70,310 on account of penalties paid to the stock exchange. The Tribunal upheld the deletion, agreeing with the Commissioner (Appeals) that such penalties were compensatory in nature and not for infraction of law. The Tribunal noted that similar penalties were allowed in the assessee's own case for the assessment year 2000-01.

5. Addition on Account of Security Transaction Tax (STT) Collected:
The assessee challenged the addition of Rs. 6,26,417 on account of STT collected from clients. The Tribunal directed the Assessing Officer to verify the assessee's contention that the amount was offered for tax in subsequent years to avoid double taxation. The Tribunal restored the issue to the Assessing Officer for fresh adjudication.

Separate Judgments Delivered:
The judgment was delivered as a consolidated order, and no separate judgments by different judges were mentioned.

Conclusion:
The Tribunal provided a comprehensive analysis of each issue, upholding some of the Commissioner (Appeals)'s decisions and reversing others. The Tribunal's decisions were based on detailed examination of facts, financial data, and relevant legal precedents, ensuring that the final outcomes were in accordance with the law.

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