Transaction Charges which the Member of Stock Exchange pays to it are towards ‘facilities’ provided by it, thus no TDS deductible
Civil Appeal No. 3141 of 2016
Bench: Justice Ranjan Gogoi; Justice Prafulla C. Pant
Case Brief: The present appeal is brought out of the impugned order passed by the High Court of Bombay. In the said impugned order the said High Court found holding that the transaction charges as paid by the member of the Bombay Stock Exchange to transact the business of Sale and Purchase of the Shares amounts to payment of a fee for ‘technical services’ rendered by the said Exchange, as such the provisions of section 194J of the Income- Tax Act, 1961 required the TDS deducible at sources on such payments. And in fact, the appellant- assessee as had not deducted the same, the entire amount paid to the Exchange as to transaction charges was not deducted in computing the income chargeable under the head of “profits and gains of business or profession” of the assessee. Assessee- company being feeling aggrieved of the decision of the High Court, came up with the appeal before this bench. Now the bench firstly observed that the said expression ‘technical services’ appearing in the Explanation 2 to clause (vii) to the Section 9 (1) of the Income- Tax Act and the bench decided to consider the actual meaning ascribed to this term. Further, bench observed that the ‘technical services’ along with ‘managerial and consultancy services’ would involve service rendered by human efforts. Moreover, now a day with the modern scientific and technological developments, the specific human element blur in an otherwise fully automated process by which such services may be provided. Also, such services would denote seeking of services to cater the special needs of the consumer/ users as may be felt necessary and the making of the same available by the service provider. The bench as such finally found that the high court’s view that the transaction charges paid to the Bombay Stock Exchange by its members are for ‘technical services’ rendered is not an appropriate view. However, as per the bench, such charges are in the nature of payments made for facilities provided by the Stock Exchange, as such no TDS is deductible under the provisions of Act.
Read the Judgement: C.I.T-4 Mumbai Vs. M/S Kotak Securities Ltd