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TMI Blog2010 (12) TMI 822X X X X Extracts X X X X X X X X Extracts X X X X ..... plied - Therefore set aside the order of CIT(A) and restore the matter to the file of AO for passing a fresh order after necessary examination and after allowing opportunity of hearing to the assessee. Transaction charges - The issue raised is therefore covered in case of Kotak Securities Ltd. vs Addl. CIT (2011 -TMI - 206641 - Bombay High Court) and respectfully following the same we hold that the transaction charges paid were not for any technical services and therefore provisions of section 194J were not applicable and no tax was required to be deducted and no disallowance under section 40(a)(ia) is called for - Decided in favour of assessee. Depository charges paid to the Stock Holding Corporation of India - Held that:- the transactio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld not be disallowed. The assessee explained that the investments in shares had been made in the earlier years on long term basis and there was no specific or direct cost actually incurred for earning the income. It was also submitted that the investments were made out of own funds. The AO however observed that the assessee had utilized the infrastructure available along with employees while making the investments. He therefore did not accept the plea that no expenditure had been incurred. He estimated the expenditure incurred for earning the dividend income at 5% of the gross dividend and accordingly disallowed sums of Rs.31,350/- and Rs.28,800/- respectively for the two years. In appeal CIT(A) held that disallowance had to be made as per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rges. The AO noted that the assessee had incurred expenditure of Rs.28,68,732/- towards stock exchange transaction charges on which no tax was deducted at source. AO asked the assessee to explain as to why the transaction charges should not be considered as fees for technical services which meant rendering of any managerial, technical or consultancy services and since no tax had been deducted at source why expenditure should not be disallowed under the provisions of section 40(a)(ia). The assessee submitted that the expenditure was not for rendering of any service but for utilization of the facilities and therefore no disallowance could be made. AO however did not accept the explanation and observed that the Stock Exchanges provide an effic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of tribunal in case of Kotak Securities Ltd. vs Addl. CIT (124 TTJ 241). The Learned DR on the other hand placed reliance on the findings given by the authorities below. 3.2 We have perused the records and considered the rival contentions carefully. The dispute is regarding disallowance of transaction charges paid by the assessee who is a member of the stock exchange, to the stock exchange. Members undertake share transactions only through the stock exchanges with the trading facility provided by the exchange. The transaction charges are paid as a fixed percentage of the transaction value. The issue is whether such charges could be considered as fees for technical services and thus liable for TDS and disallowance under section 40(a)(ia) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owed the depository charges of Rs.7,16,267/- presumably on the same reasoning as in case of transaction charges although no specific reasons have been given. In appeal the assessee submitted that depository charges were paid by the assessee in respect of transaction of shares from the demat account. It was like transaction in a bank account. There were no managerial, technical or professional services involved. It was mandatory for the assessee to maintain the demat account for holding of shares. The depository charges were the expenses incurred for business and have therefore to be allowed. CIT(A) however held that depository charges were akin to transactional charges. These charges were not for maintaining demat accounts but were for maki ..... X X X X Extracts X X X X X X X X Extracts X X X X
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