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TMI Blog2009 (12) TMI 615X X X X Extracts X X X X X X X X Extracts X X X X ..... OS. 5996 AND 6327 (MUM.) OF 2008 - - - Dated:- 29-12-2009 - N.V. VASUDEVAN, B. RAMAKOTAIAH, JJ. S.C. Tiwari for the Appellant. Ms. Vandana Sagar for the Respondent. ORDER N.V. Vasudevan, Judicial Member. ITA No. 5996/Mum/08 is an appeal by the revenue while ITA No. 6327/Mum/08 is an appeal by the assessee. Both these appeals are directed against the order dated 25-7-2008 of learned CIT(A)-IV, Mumbai relating to assessment year 2005-06. 2. First, we shall take up for consideration appeal by the Revenue. 3. In first ground, the revenue has challenged the order of learned CIT(A), whereby learned CIT(A) directed the Assessing Officer to allow claim for depreciation on the value of BSE Card held by the assessee. The assessee is a Member of Bombay Stock Exchange and carrying on business of shares of stock brokers. The issue in this appeal by the revenue is as to whether the assessee is entitled to depreciation on BSE card. Learned CIT(A) allowed the claim of the assessee following the order of the ITAT, Mumbai, in assessee's own case in the earlier assessment years which in turn was based on the decision of ITAT, Mumbai in the case of Techno Shares Stocks L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The fact that a BSE card is a capital asset and liable for capital gains tax is irrelevant because section 32 does not allow depreciation on all capital assets but only on capital assets which fall in the enumerated categories. 4. In view of the above decision, Hon'ble Bombay High Court, the assessee is not entitled to claim deprecation on BSE card. We therefore reverse the order of learned CIT(A) and restore the order of the Assessing Officer. 5. Ground No. 2 raised by the revenue is with regard to the action of the learned CIT(A) in deleting the disallowance of VSAT charges and leaseline charges of Rs. 96,000. 6. The assessee is a company. It is engaged in the business of stock broking and is a member of BSE and NSE. As a member of BSE and NSE, the assessee had paid a sum of Rs. 96,000 as lease line charges, VSAT and data processing charges/transaction charges. Break up of the aforesaid sum is not found in the order of assessment. Nature of VSAT, leasline charges and transaction charges are as follows :- VSAT Charges :- Members of the stock exchanges trade (purchase and sell) on behalf of their clients. As a part of infrastructure provided to the members a trading system ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ices and therefore the assessee ought to have deducted tax at source on which payment. Since, the assessee had not deducted tax at source on such payment, the aforesaid sum claimed as deduction was disallowed by the Assessing Officer. According to the Assessing Officer, trading in stock exchange is carried on through computer terminals, which are connected to NSE and BSE and various stock brokers, who are members of various stock exchanges. VSAT activity enables the brokers over the length and breadth of the country to get connected with each other and do trading. VSAT and leasline are provided by the stock exchanges and they charge fees for doing so. Thus, it was not a case of providing a simple service for a fee. It was a payment of a fees of a technical services rendered. The assessee had relied on the decision of Hon'ble Madras High court in the case of Skycell Communications Ltd. v. Dy. CIT [2001] 251 ITR 53/119 Taxman 496; wherein it was held that payment of fee for use of a standard facility provided to all those willing to pay for it does not amount to the fee having been paid for technical services. The Assessing Officer distinguished the aforesaid decision by holding that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ultancy services. Further, I also find that decision of Madras High Court in the case of Skycell Communication Ltd. v. Dy. CIT [2001] 251 ITR 53 (Mad.) and other decisions cited by the appellant also support the appellant's view. Therefore I hold that the provisions of section 194J are not attracted on VSAT and lease line charges at Rs. 32,37,471. As a legal corollary of this finding, I also hold that no disallowance is to be made on this amount under section 40(a)(ia). In this way, the appellant gets relief on this limited point." Learned CIT(A) followed the aforesaid decision and held that the provisions of section 194J are not attracted to VSAT charges because those charges are not for providing any technical services but use to infrastructure facilities and therefore no disallowance can be made under section 40(a)(ia) of the Act. Aggrieved by the order of learned CIT(A), the revenue has preferred the present appeal before the Tribunal. 9. Before us, learned Departmental Representative reiterated the stand of the revenue as reflected in the order of the Assessing Officer. 10. We have considered the order of the Assessing Officer in this regard. We have heard the rival subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11. The Hon'ble Madras High Court in the case of Skycell Communications Ltd. (supra) had an occasion to examine the definition of "fees for technical services" in the context of payment of fees by a cellular/Mobile phone subscriber to the operator of the cellular/mobile phone facility. The following were its observations: "Thus while stating that 'technical service' would include managerial and consultancy service, the Legislature has not set out with precision as to what would constitute 'technical' service to render it 'technical service'. The meaning of the word 'technical' as given in the New Oxford Dictionary is adjective. 1 of or relating to a particular subject, art or craft or its techniques : technical terms (especially of a book or article) requiring special knowledge to be understood : a technical report. 2. of involving, or concerned with applied and industrial sciences : an important technical achievement. 3. resulting from mechanical failure : a technical fault. 4. according to a strict application or interpretation of the law or the rules : the arrest was a technical violation of the treaty. Having regard to the fact that the term is required to be understood in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f technical service to the customer for a fee. When a person decides to subscribe to a cellular telephone service in order to have the facility of being able to communicate with others, he does not contract to receive a technical service. What he does agree to is to pay for the use of the airtime for which he pays a charge. The fact that the telephone service provider has installed sophisticated technical equipment in the exchange to ensure connectivity to its subscriber, does not on that score, make it provision of a technical service to the subscriber. The subscriber is not concerned with the complexity of the equipment installed in the exchange, or the location of the base station. All that he wants is the facility of using the telephone when he wishes to, and being able to get connected to the person at the number to which he desires to be connected. What applies to cellular mobile telephone is also applicable in fixed telephone service. Neither service can be regarded as 'technical service' for the purpose of section 194J of the Act .. At the time the Income-tax Act was enacted in the year 1961, as also at the time when Explanation 2 to section 9(1)(vii) was introduced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... between the brokers and its customers. Stock Exchanges do not involve them in providing any technical services to any of its members. We are of the view that this ratio of Hon'ble Madras High court will apply to the facts of the present case. The Assessing Officer in coming to the conclusion that the payment was for fees for technical services has relied on the fact that the screen based trading is sophisticated method of trading. This by itself will not be sufficient to holding technical services being rendered. The Assessing Officer has also held that services are not available to the public at large but only to registered members, again this by itself will not make the services in question as technical services. Another reason given by the Assessing Officer is that speed at which transactions were completed and the ease with which transactions are done in screen based trading. This again is not relevant criteria for holding that the services rendered were technical services. Fact that the data provided on screen will provide better data for carrying out transaction will not again be sufficient to hold that technical services are being rendered. All the above features present in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es who are stock brokers had come up for consideration before the Tribunal in the case of Kotak Securities Ltd. (supra) and the Tribunal held as follows : "To call a payment as FTS it should have been paid in consideration for rendering by the recipient of payment of any (a) managerial service (b) technical or consultancy services. Stock exchanges merely provide facility for it's members to purchase and sell shares, securities etc. within the framework of it's bye laws. In the event of dispute if provides mechanism for settlement of disputes. It regulates conditions subject to which a person can be a member and when and in what circumstances membership can be transferred, cancelled, suspended etc. The exchange provides a place where the members meet and transact business. The transaction fee paid is on the basis of volume of transaction effected by a member. The stock exchanges do not render any managerial service nor do they render any technical consultancy service. The transaction fee is not paid in consideration of any service provided by the stock exchange. It is a payment for use of facilities provided by the stock exchange and such facilities are available for use by any m ..... X X X X Extracts X X X X X X X X Extracts X X X X
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