TaxTMI 
TaxTMI 
2009 (12) TMI 615
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....ITAT, Mumbai, in assessee's own case in the earlier assessment years which in turn was based on the decision of ITAT, Mumbai in the case of Techno Shares & Stocks Ltd. v. ITO [2006] 101 TTJ 349, holding that Depreciation on BSE Card has to be allowed as deduction. The revenue has filed present appeal challenging the order of learned CIT(A). The question as to whether deprecation can be claimed on BSE card has been considered by Hon'ble Bombay High Court in ITA No. 971 of 2006 & ITA No. 218 of 2007 in the case of Techno Shares & Stocks Ltd. (supra) Hon'ble Bombay High Court by its Judgment dated 11-9-2009 has held that depreciation under section 32 of the Act, cannot be allowed on stock exchange Membership card acquired by an assessee on or after 1-4-1998. Section 32(1)(ii), as amended with effect from 1-4-1998 allows depreciation on "intangible assets" being, inter alia, know-how, patents, copyrights, trade marks, licenses, franchises or any other business or commercial rights of similar nature acquired on or after 1-4-1998 owned by an assessee and used for the purpose of business. The question whether BSE membership rights will fall within the expression "licenses ... or any other....
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....re as follows :- VSAT Charges :- Members of the stock exchanges trade (purchase and sell) on behalf of their clients. As a part of infrastructure provided to the members a trading system, known as on screen trading is provided by stock exchanges. Such trading facilities are established by Stock exchanges to enable trading anywhere in the territory of India. Such trading systems are centralized to enable trading in various stock exchanges. Each stock exchange is connected to the member's workstations through appropriate communication network using a Very Small Aperture Terminal (VSAT) Network. Members will be connected to the central trading system through the hub of the VSAT network. Department of Telecommunications (DOT) has to issue a license for the installation and operation of private Closed User Group (CUG) VSAT network. All capital and revenue investments toward VSATs and central infrastructure will be met by concerned Stock Exchange. To allow the members the benefit of such of VSAT network, the stock exchanges charges fees from its members. Lease line Charges :-Stock exchanges also provide following information products :- Market data-equity, indices, market data-derivat....
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....ovided to all those willing to pay for it does not amount to the fee having been paid for technical services. The Assessing Officer distinguished the aforesaid decision by holding that the data provided through VSAT is not something which is not available to general public but is only available to members of stock exchange. According to the Assessing Officer, the facility provided by the stock exchange in the form of information was a technical information and not commercial information. According to the Assessing Officer, these services were specialized in nature. For all the above reasons, the Assessing Officer disallowed the claim of the assessee for deduction. 8. On appeal by the assessee, learned CIT(A) followed the order of learned CIT(A)-XV, Mumbai in the case of Kotak Securities Ltd. v. Addl. CIT [2008] 25 SOT 440 (Mum.) for assessment year 2005-06; wherein on the issue of deductibility of VSAT and leaseline charges, learned CIT(A) had deleted disallowance made by the Assessing Officer for the following reasons :- "From the bare reading of Explanation 2, it may be noted that fee for technical services has wide import in its meaning for the rendering any managerial, techni....
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....he stand of the revenue as reflected in the order of the Assessing Officer. 10. We have considered the order of the Assessing Officer in this regard. We have heard the rival submissions. The relevant provisions of law may be referred to for the purpose of clarity. "194-J Fees for professional or technical services.-(1) Any person, not being an individual or a Hindu undivided family, who is responsible for paying to a resident any sum by way of - (a) fees for professional services, or (b) fees for technical services, shall, at the time of credit of such sum to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to five per cent of such sum as income-tax on income comprised therein : Explanation : For the purposes of this section, - (a) 'professional services' means services rendered by a person in the course of carrying on legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or advertising or such other profession as is notified by the Board for....
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....4. according to a strict application or interpretation of the law or the rules : the arrest was a technical violation of the treaty. Having regard to the fact that the term is required to be understood in the context in which it is used, 'fees for technical services' could only be meant to cover such things technical as are capable of being provided by way of service for a fee. The popular meaning associated with 'technical' is 'involving or concerning applied and industrial science'. In the modern day world, almost every facet of one's life is linked to science and technology inasmuch as numerous things used or relied upon in every day life is the result of scientific and technological development. Every instrument or gadget that is used to make life easier is the result of scientific invention or development and involves the use of technology. On that score, every provider of every instrument or facility used by a person cannot be regarded as providing technical service. When a person hires a taxi to move from one place to another, he uses a product of science and technology, viz., an automobile. It cannot on that ground be said that the taxi driver who controls the vehicle, a....
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....ical service' for the purpose of section 194J of the Act........ .........At the time the Income-tax Act was enacted in the year 1961, as also at the time when Explanation 2 to section 9(1)(vii) was introduced by the Finance (No. 2) Act, with effect from April 1, 1977, the products of technology had not been in such wide use as they are today. Any construction of the provisions of the Act must be in the background of the realities of day-to-day life in which the products of technology play an important role in making life smoother and more convenient. Section 194J, as also Explanation 2 in section 9(1)(vii) of the Act were not intended to cover the charges paid by the average house-holder or consumer for utilising the products of modern technology, such as, use of the telephone fixed or mobile, the cable T.V., the internet, the automobile, the railway, the aeroplane, consumption of electrical energy, etc. Such facilities which when used by individuals are not capable of being regarded as technical service cannot become so when used by firms and companies. The facility remains the same whoever the subscriber may be - individual, firm or company. 'Technical service' referred in sec....
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..... Fact that the data provided on screen will provide better data for carrying out transaction will not again be sufficient to hold that technical services are being rendered. All the above features present in screen based trading saves time. This is the result of improved technology. That does not mean that stock exchange is providing technical services. Members of the stock exchange and the public at large are beneficiaries of these technical improvements. Stock exchanges are not the owner of this technology to provide them for a fee to prospective use. They are themselves consumers of the technology. We are therefore of the view that learned CIT(A) was right in holding that the payment in question is not fee for technical services rendered. We therefore confirmed the order of learned CIT(A) and dismiss this ground of the Revenue. 13. Ground No. 3 raised by the revenue is with regard to the action of the learned CIT(A) in deleting the addition on account penalty of Rs. 1,49,643. 14. On this issue, we find that in assessee's own case for assessment year 2004-05 in ITA No. 5141/Mum/06, this Tribunal remanded the matter to the Assessing Officer for fresh consideration making follow....