TaxTMI 
TaxTMI 
2013 (7) TMI 259
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....2.1 The only issue arising in this appeal is in respect of the exigiblity to deduction of tax at source u/s.194J of the Act on VSAT charges, transaction charges and lease line charges, paid by the assessee, a share and stock broker, to the National Stock Exchange (NSE) and, consequently, the validity of the disallowance u/s.40(a)(ia); the assessee having admittedly not deducted any tax at source on the said charges, allowed/paid for the current year at Rs.6,79,868/-. While the basis of the disallowance by the Assessing Officer (A.O.) is that the said payments were only, in terms of Explanation to section 9, `fees for technical services', liable to deduction of tax at source u/s.194J, so that section 40(a)(ia) stood attracted on no tax havin....
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....2005. Consequently, the assessee-respondent was exonerated from the consequences of the application of the section for that year; it deducting tax w.e.f. the immediately succeeding year, i.e., AY 2006-07. In the instant case, though the assessment year under reference is A.Y. 2006-07, this is for the first time that such a view has been taken by the Revenue in its case. Accordingly, applying the ratio of the said decision, the disallowance would not stand for the current year. 4. We have heard the parties, and perused the material on record, as well as the case law referred to by the parties in their arguments. In our view, each assessee could possibly claim for any year as being the 'first' year for which the provision of sec. 40(a)(....
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....cision by the hon'ble Bombay High Court in the case of Kotak Securities Ltd. (supra) stands rendered on 21.10.2011, and it is a fact that prior thereto, the consistent and the predominant, if not the overall view, including by the hon'ble high court in the case of Skycell Communication Ltd. (supra), was in favour of non-deduction of tax on such payments. The Revenue has not brought a single decision taking a different or contrary view to our notice, i.e., prior to the decision by the hon'ble jurisdictional high court in Kotak Securities Ltd. (supra). In fact, as far as we are informed, this position continues to date as far as the territorial jurisdiction of the hon'ble Madras High Court is concerned, and stands modified, as far as the stat....
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....e said payments after deduction of tax, so as to eschew the said burden or liability to tax. It is inconceivable that the stock exchanges are not filing their returns of income or not disclosing the impugned sums in their accounts, which are in fact for most part transmitted by them to the entities providing the corresponding services, i.e., the service providers. The payment thereto is thus by the respective stock exchange, and which in turn stands reimbursed in its respect by its individual members, as it is for their ultimate benefit that the services stand availed of or secured by the Exchanges. This also forms the reason for approving non-deduction of tax at source on the payment of lease line and VSAT charges by them to the stock exch....
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.... the year of payment of TDS. The Revenue has not been able to rebut the assessee's claim that the current year is the first year for which such action has been taken by the Revenue in its case, which we observe to have been much prior to the decision in the case of Kotak Securities Ltd. (supra), so that the assessee was only acting as it had been in the past, over which s. 194J has been on the statute. Grounds for the invocation of the doctrine of 'legitimate expectation' thus exist. Surely, going by the said decision, s. 194J does not get any more legitimacy on the co-option of sec. 40(a)(ia) on the statute. At the same time, without doubt, a continued stand by the assessee for a subsequent year/s would however imply that it has chosen ....