TaxTMI 
TaxTMI 
2010 (2) TMI 910
X X X X Extracts X X X X
X X X X Extracts X X X X
....ansaction charges and Rs. 96,000 as VSAT. Nature of VSAT charges and transaction charges are 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 centralised 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. Transaction charges:- Charg....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ided 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 specialised in nature. For all the above reasons, the Assessing Officer disallowed the claim of the assessee for deduction. 5. 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 for assessment year 2005-06 wherein on the issue of deductibility of tax at source on transaction charges the Tribunal held that it was not a payment for any technical services rendered. Learned CIT(A) followed the aforesaid decision and held that the provisions of section 194 are not attracted to transaction and VSAT charges because those charges are not for providing any technical services but use to infrastructure facilities and, therefore, no disallowance can be made under section 40(a)(ia) of the Act. Aggrieved by the order of learned CIT(A), the revenue has preferred the present appeal before the Tribunal. 6. Before us, learned Departmental Representative reiterated the stand of the revenue as reflected in the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s a contract of employment and the employee renders technical service under a contract of employment then the payment of remuneration for such services are outside the purview of fees for technical services. 8. The Hon'ble Madras High Court in the case of Skycell Communications Ltd. (supra) had an occasion to examine the definition of 'fee for technical services' in the context of payment of fees by a cellular/Mobile phone subscriber to the operator of the cellular/mobile phone facility. The following were its observations:- "Thus, while stating that "technical service" would include managerial and consultancy service, the Legislature has not set out with precision as to what would constitute "technical" service to render it "technical service". The meaning of the word "technical" as given in the New Oxford Dictionary is adjective:- 1. of or relating to a particular subject, art or craft or its techniques : technical terms (especially of a book or article) requiring special knowledge to be understood : a technical report. 2. of involving, or concerned with applied and industrial sciences : an important technical achievement. 3. resu....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the power consumed and remit the same to the revenue." The Court finally concluded as follows:- "Installation and operation of sophisticated equipments with a view to earn income by allowing customers to avail of the benefit of the user of such equipment does not result in the provision of technical service to the customer for a fee. When a person decides to subscribe to a cellular telephone service in order to have the facility of being able to communicate with others, he does not contract to receive a technical service. What he does agree to is to pay for the use of the airtime for which he pays a charge. The fact that the telephone service provider has installed sophisticated technical equipment in the exchange to ensure connectivity to its subscriber, does not on that score, make it provision of a technical service to the subscriber. The subscriber is not concerned with the complexity of the equipment installed in the exchange, or the location of the base station. All that he wants is the facility of using the telephone when he wishes to, and being able to get connected to the person at the number to which he desires to be connected. What applies ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nges do not provide any technical services by installing VSAT network. It is the facility provided to its members, such payment cannot be said to be nature of fees for any technical services rendered. Stock Exchanges merely provide facilities for its members to purchase and sell shares within framework of its bylaws. It also provides for a mechanism for settlement of dispute between the brokers and its customers. Stock Exchanges do not involve them in providing any technical services to any of its members. We are of the view that this ratio of Hon'ble Madras High Court will apply to the facts of the present case. The Assessing Officer in coming to the conclusion that the payment was for fee for technical services has relied on the fact that the screen based trading is sophisticated method of trading. This by itself will not be sufficient to holding technical services being rendered. The Assessing Officer has also held that services are not available to the public at large but only to registered members, again this by itself will not make the services in question as technical services. Another reason given by the Assessing Officer is that speed at which transactions were completed a....