Appeal & Cross Objection Partly Allowed: VSAT Charges Deleted, Transaction Charges Remanded for Verification.

The appeal filed by the revenue and the cross objection filed by the assessee were partly allowed. The deletion of VSAT charges was upheld as they were reimbursements without an income element. However, the issue of transaction charges was remanded to the AO for verification following guidelines from the Bombay High Court. The addition under section 14A was reinstated as the assessee did not contest it.

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Issues Involved:
1. Deletion of disallowance towards VSAT and Transaction charges u/s 40(a)(ia).
2. Deletion of addition made u/s 14A r.w. Rule 8D.

Summary:

Issue 1: Deletion of Disallowance towards VSAT and Transaction Charges u/s 40(a)(ia)

The revenue challenged the deletion of disallowance of Rs. 1,56,850 towards VSAT charges and Rs. 8,03,564 towards Transaction charges made u/s 40(a)(ia) by the CIT(A), arguing that these were composite charges for professional and technical services rendered by the stock exchange, and the assessee failed to deduct TDS. The CIT(A) deleted these additions based on the Tribunal's earlier decision in the assessee's own case, which followed the ITAT's decision in M/s. Kotak Securities Ltd. vs. ACIT, holding that these payments were not for rendering technical services, hence TDS was not required. However, the Hon'ble Bombay High Court in CIT vs. Kotak Securities Ltd., 340 ITR 333 (Bom) later held that transaction charges constitute "fee for technical services" and are covered u/s 194J. The Tribunal, considering the decision in M/s. J.G. Shah Financial Consultants P. Ltd., restored the matter to the AO to verify the assessee's stand and pass orders in light of the guidelines laid down by the Bombay High Court. The deletion of VSAT charges was upheld as they were merely reimbursements to the stock exchange without any income element, thus no TDS was required.

Issue 2: Deletion of Addition u/s 14A r.w. Rule 8D

The revenue contested the deletion of Rs. 90,020 made u/s 14A r.w. Rule 8D by the CIT(A). The assessee did not press this ground, leading to the revenue's appeal being allowed on this issue, and the corresponding ground in the assessee's cross objection was dismissed.

Conclusion:

The appeal filed by the revenue and the cross objection filed by the assessee were partly allowed. The deletion of VSAT charges was upheld, while the issue of transaction charges was remanded to the AO for verification. The addition u/s 14A was reinstated as the assessee did not contest it. The order was pronounced in the open court on September 5, 2012.

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