2016 (11) TMI 881 - AT - Income Tax

Tribunal allows appeals for 2009-10 and 2010-11, disallows depreciation, lease line charges under ITA

The appeals for the assessment years 2009-10 and 2010-11 were allowed by the Tribunal. Disallowance of depreciation on membership rights and lease line ... Depreciation on stock exchange membership cards - Held that:- As relying on M/s Techno Shares & Stocks Ltd. Versus The Commissioner of Income Tax IV [2010 (9) TMI 6 - SUPREME COURT OF INDIA] stock exchange membership cards are eligible for depreciation under section 32 of the Act being in the nature of intangible asset. Respectfully following the decision from the Coordinate Bench that too in the case of assessee itself for Assessment year 2007-08, we allow the impugned ground raised before us, thus, this ground is decided in favour of the assessee. Disallowance of lease line charges under section 40(a)(ia) - non deduction of tds - Held that:- V-SAT and lease line charges cannot be considered as rendering of technical services, hence, provisions of section 40(a)(ia) are not applicable. See Kotak Mahindra Securities (2008 (8) TMI 592 - ITAT MUMBAI) and Angel Broking (2009 (12) TMI 498 - ITAT MUMBAI ) allowed the claim of the assessee . This issue is also covered by the decision of the Hon'ble A.Y.08-09 M/s.. Angel Commodities Broking P. Ltd. [2013 (7) TMI 1043 - ITAT MUMBAI ] - Decided in favour of the assessee. Issues Involved:1. Disallowance of depreciation on membership rights.2. Disallowance of lease line charges under section 40(a)(ia) of the Income Tax Act.Detailed Analysis:1. Disallowance of Depreciation on Membership Rights:The first issue pertains to the disallowance of depreciation on membership rights amounting to Rs. 80,156 for the assessment year 2009-10. The assessee's counsel argued that this issue is covered in favor of the assessee by a previous order of the Tribunal dated 07/05/2014 in the assessee's own case for the assessment year 2007-08. The Tribunal had earlier considered the decision of the Hon'ble Supreme Court in the case of Techno Shares and Stocks Ltd. (327 ITR 323), which held that stock exchange membership cards are eligible for depreciation under section 32 of the Income Tax Act as intangible assets.The Tribunal noted that the assessee had paid non-refundable admission fees for acquiring trading rights in Multi Commodity Exchange Ltd., which was treated as capital expenditure eligible for depreciation. The Tribunal directed the A.O. to delete the disallowance made on account of the assessee’s claim for depreciation on membership rights. This decision was applied to the ground raised for assessment year 2010-11 as well, thereby allowing the assessee's appeal on this ground for both assessment years.2. Disallowance of Lease Line Charges under Section 40(a)(ia):The second issue involves the disallowance of lease line charges amounting to Rs. 2,45,179 under section 40(a)(ia) of the Income Tax Act. The assessee's counsel referenced the decision of the Hon'ble Jurisdictional High Court in the case of CIT vs. Angel Capital & Debit Market Ltd. (ITA No. 475/2011), which was consented to by the DR. The Tribunal for the assessment year 2008-09 in the case of Dy. CIT vs. M/s. Angel Commodities (ITA No. 7026/Mum/2011) had considered the issue and held that VSAT and lease line charges do not constitute technical services, hence, provisions of section 40(a)(ia) were not applicable.The Hon'ble Apex Court in the case of CIT vs. M/s. Kotak Securities Ltd. (Civil Appeal No. 3141/2016) further deliberated on the issue and held that transaction charges paid to the Bombay Stock Exchange are not fees for technical services but rather payments for facilities provided by the Stock Exchange. Therefore, no TDS on such payments would be deductible under Section 194J of the Act.The Tribunal, following the decisions of the Hon'ble High Court and the Apex Court, allowed the assessee's appeal on this ground for both assessment years, concluding that lease line charges do not attract TDS provisions under section 40(a)(ia).Conclusion:Both appeals of the assessee for the assessment years 2009-10 and 2010-11 were allowed. The Tribunal directed the deletion of disallowances made on account of depreciation on membership rights and lease line charges under section 40(a)(ia), following the relevant judicial precedents and legal principles.