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TMI Blog2016 (9) TMI 637X X X X Extracts X X X X X X X X Extracts X X X X ..... uld be scaled down and some estimate disallowance should be made, having regard to the nature of expenditure debited and the exempt income earned at ₹ 2,95,450/-. Accordingly, we hold that 10% of the dividend income would be reasonable for allocating the indirect expenditure for the earning of exempt income. Such an estimate is purely on the facts and circumstances of the case. Thus, grounds with regard to disallowance under section 14A are treated as partly allowed. Disallowance on account of transaction charges paid to stock-exchange by invoking of the provisions of section 40(a)(ia) - Held that:- The payments made to the stockexchange is not in the nature of ‘technical services’ but for facilities provided by the stock-exchange and accordingly, no TDS is deductible under section 194J. Assessee was not required to deduct TDS on such payment and accordingly, no disallowance under section 40(a)(ia) is called for. - ITA No. : 50/Mum/2013 - - - Dated:- 1-8-2016 - SHRI B R BASKARAN, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER For The Appellant : Shri Bhupendra Karkhanis For The Respondent : Shri A Ramchandran PER AMIT SHUKLA, JM: The aforesa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to deduct tax at source u/s 194J of the Income Tax Act, 1961 and invoking the provision of section 40(a)(ia) of the Income Tax Act., 1961 which is wrong and contrary to the provisions of Income Tax Act, 1916 and Rules made thereunder . 2. The brief facts qua the issue raised vide ground No.1(a) to 1(d) are that, the assessee has shown exempt income of ₹ 2,95,450/- on account of dividend income. The Ld. Assessing Officer noted that, the assessee has not allocated any expenses towards earning of the exempt income and accordingly, he required the assessee to show cause as to why the disallowance under section 14A should not be made. In response, the assessee submitted that, interest paid is mainly for loans taken for fixed assets and working capital; and in the earlier year, that is, in the AY 2007-08, the Ld. CIT(A) has deleted the interest expenses. The Ld. AO relying upon the decision of Special Bench in the case of Daga Capital Management P Ltd. computed the disallowance at ₹ 8,88,154/-; which comprised of disallowance of interest of ₹ 7,09,975/- under Rule 8D(2)(ii); and indirect expenditure of ₹ 1,78,179/- under Rule 8D(2)(iii). 3. The Ld. CIT(A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .6711/Mum/2011 confirmed by Bombay High Court In ITA No.1131 of 2013 2 CCI ltd vs JCIT ITA No.351/2011 (Karnataka High Court) 3 Fiduciary Shares Stock (P) Ltd v ACIT IT Appeal No. 321/Mum/2013 4 Devkant Synthetics (India (P.) Ltd. ITA No.s 2663 to 2665/M/2015 5 Interglobe Enterprises Ltd. v. DCIT ITA 1580/Del/2013 ITA 1362 1032/Del/2013 6 CIT v Oriental Structural Engineers Pvt Ltd. 216 Taxman.92 7 Garware Wall Ropes Ltd. v Addl.CIT ITA No.5408/Mum/2012 5. On the other hand, Ld. DR strongly relied upon the order of the CIT(A). 6. After considering the rival submissions and on perusal of the impugned orders, we find that so far as disallowance of interest expenditure is concerned under Rule 8D(2)(ii), we find that, at the time of making the investment, the assessee had huge surplus/own funds available which far exceeded the investment made, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the stock-exchange and accordingly, no TDS is deductible under section 194J. The relevant observation and finding of the Hon ble Supreme Court in this regard is as under:- 6. What meaning should be ascribed to the word technical services appearing in Explanation 2 to clause (vii) to Section 9(1) of the Act is the moot question. In Commissioners of Income-Tax Vs. Bharti Cellular Ltd.[1] this Court has observed as follows: Right from 1979, various judgments of the High Courts and Tribunals have taken the view that the words technical services have got to be read in the narrower sense by applying the rule of noscitur a sociis, particularly, because the words technical services in section 9(1)(vii) read with Explanation 2 comes in between the words managerial and consultancy services . 7. Managerial and consultancy services and, therefore, necessarily technical services , would obviously involve services rendered by human efforts. This has been the consistent view taken by the courts including this Court in Bharti Cellular Ltd. (supra). However, it cannot be lost sight of that modern day scientific and technological developments may tend to blur the spe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... member of the Stock Exchange is necessarily required to avail of to carry out trading in securities in the Stock Exchange. The view taken by the High Court that a member of the Stock Exchange has an option of trading through an alternative mode is not correct. A member who wants to conduct his daily business in the Stock Exchange has no option but to avail of such services. Each and every transaction by a member involves the use of the services provided by the Stock Exchange for which a member is compulsorily required to pay an additional charge (based on the transaction value) over and above the charges for the membership in the Stock Exchange. The above features of the services provided by the Stock Exchange would make the same a kind of a facility provided by the Stock Exchange for transacting business rather than a technical service provided to one or a section of the members of the Stock Exchange to deal with special situations faced by such a member(s) or the special needs of such member(s) in the conduct of business in the Stock Exchange. In other words, there is no exclusivity to the services rendered by the Stock Exchange and each and every member has to necessarily avail ..... X X X X Extracts X X X X X X X X Extracts X X X X
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