TaxTMI 
TaxTMI 
TaxTMI 
2014 (2) TMI 224
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....sp; i. Dis-allowance u/s. 14(a)(i) r.w. rule 8D Rs. 6,28,950/-. ii. Dis-allowance u/s. 40(a)(i) Rs. 33,48,666/- on account of non-deduction of tax at source u/s. 195 on the payments made to M/s. Fund Quest a non-resident firm. iii. Dis-allowance u/s. 40(a)(ib) Rs. 85,929/- in respect of Securities Transaction Tax. iv. Capitalization of expenses on extension and renovation of building - the assessee had claimed an amount of Rs. 2,06,61,216/- on account of interior decoration, extension and renovation of the office premises as Revenue Expenditure. The Assessing Officer held the expenditure to be capital in nature and made addition of Rs. 1,85,95,094/- after allowing depreciation. v. Dis-allowance of excess depreciation on UPS. The assessee had claimed depreciation on UPS @ 60%, as applicable to computer hardware. The Assessing Officer allowed depreciation as applicable to Plant & Machinery i.e., 15%. The Assessing Officer made addition of Rs. 18,68,338/- after dis-allowing the excess depreciation. vi. Investment Management Fee Rs. 15,82,291/-.  ....
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.... the alternative claim of Appellant in treating the UPS as energy saving device and claiming depreciation at the rate of 80 per cent on the same. 6. The learned CIT (A) has erred in confirming the order of AO, in adding back an amount of Rs. 15,82,291/- as income of the Appellant based on Form 16A ignoring financial statements filed. 7. The learned CIT (A), has erred in upholding the order of the AO, in disallowing the commission and brokerage payments made amounting to Rs. 16,41,14,706/- to various distributors of Mutual Fund schemes by invoking provisions of section 40(a)(ia) of the Act and erred in concluding that the sum liable to Tax Deducted at Source ('TDS') under section 194J of the Act. 7.1 The learned CIT (A) erred in stating that distributors are involved in preparing prospectus, marketing and advertisement when no such services were actually received by the appellant. 7.2 The learned CIT (A) erred in stating that payment to distributors is not in the nature of commission or brokerage without appreciating the fact that payments made are based purely on the quantum of u....
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....not given any specific finding while rejecting the contentions of the assessee. The AR in support of his contentions on the issue, relied on the following decisions: 1. Maxopp Investment Ltd., Vs. CIT reported as 347 ITR272 (Del) 2. CIT Vs. Hero Cycles Ltd.,reported as 323 ITR 518 (P&H) 3. Avshesh Mercantile (P.) Ltd. v. Dy. CIT [2012] 54 SOT 19 (URO). 5. The ld. Counsel on ground No. 3 of the appeal submitted that an amount of Rs. 33,48,666/- was paid to M/s. Fund Quest for the services rendered abroad. M/s. Fund Quest does not have PE in India and the services rendered by them were advisory in nature. The Assessing Officer has erred in come into the conclusion that the payment is in the nature of 'Royalty'. The assessee had not obtained any certificate u/s. 197 of the Act as assessee had no doubt that the payment is for services and not in the nature of 'Royalty'. Since, the said amount is not taxable in India, the provisions of Section 195 are not applicable. 6. On the fourth ground of appeal relating to repair of lease-hold premises, the ld. Counsel for the assessee submitted that at Page 42 of the ....
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....red in coming to the conclusion that the assessee has understated the income received from the Trust. In support of his contentions, the ld. Counsel relied on the judgment of the Hon'ble Delhi High Court in the case of CIT v. Sudhir Sekhri in ITA Nos. 438/2010 and 460/2010 decided on 15-04-2010. 9. The seventh ground of appeal relates to the TDS on the brokerage paid to the distributors of the mutual fund schemes. The ld. Counsel submitted that the commission/brokerage paid to brokers for sale of various Mutual Funds are covered under the provisions of Section 194H. Such commissions paid to the brokers has been specifically excluded from tax deduction. The Assessing Officer has erred in applying the provisions of Section 194J relating to managerial and professional services. To support his contentions, the ld. Counsel relied on the judgment of the Hon'ble Bombay High Court in the case of CIT v. Kotak Securities reported as 3040 ITR 333 (Bom). 10. On the issue of re-computation of book profits u/s. 115JB the ld. Counsel submitted that the same will not be applicable in the present case as the net profit is higher than book profits computed under MAT provisions. 11. On the other h....
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....a of the companies which facilitates the assessee to make investment decisions. The information provided to the assessee by Fund Quest in the form of database is published information which is available in public domain. M/s. Fund Quest has merely compiled the information and transmitted the same to assessee. The authorities below termed the payments made by the assessee to M/s. Fund Quest for the services and data provided as 'Royalty'. We are of the considered opinion that such payments cannot be termed as 'Royalty' as defined under the provisions of the Act. The term 'Royalty' has been defined in Explanation (2) to Section 9, Sub-section (1), Clause (vi) which is re-produced here in below: Explanation 2. - For the purposes of this clause, "Royalty" means consideration (including any lump sum consideration but excluding any consideration which would be the income of the recipient chargeable under the head "Capital gains") for- (i) the transfer of all or any rights (including the granting of a licence) in respect of a patent, invention, model, design, secret formula or process or ....
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....nd partition etc., amounting to Rs. 2,06,61,216/- as revenue expenditure. The authorities below have held the same to be capital expenditure. The assessee has taken office building on lease for the period of three years with an option to extend with the consent of both parties. An Explanation 1 to Section 32(1) clearly spells out that where the business or provision of the assessee is carried on in a building not owned by him, in respect of which the assessee holds a lease or other rights of occupancy, any capital expenditure is incurred by the assessee for the purpose of the business or profession on the construction of any structure or doing of any work in or in relation to and by way of renovation or extension or improvement to the building, then the provisions of this clause shall apply as if the said structure or work is building owned by the assessee. However, the aforesaid provisions are applicable where new asset has come into existence. The assessee in support of his contentions has relied on the order of the co-ordinate bench of the Tribunal in the case of Sundaram BNP Paribas Asset Management Co. Ltd. (supra), the Tribunal in the aforesaid order has held as under:  ....
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....arious decisions of the Tribunal that depreciation @ 60% has to be provided on UPS treating it to be the part of computer. This issue has been decided by the Tribunal in the case of Haworth (India) (P.) Ltd. (supra) and Macawber Engg. Systems (India) (P.) Ltd. (supra) wherein it has been held that UPS is an integral part of the computer. This view has been consistently followed by the Tribunal in various other appeals. Accordingly, this ground of appeal of the assessee is allowed and the assessee is entitled to claim depreciation @ 60% on UPS. vi. The sixth ground of appeal of the assessee relates to Investment Management Fee. The case of the assessee is that the difference between the TDS and actual tax has occurred as the excess amount was invoiced to M/s. Sundaram Mutual Fund Trust (herein after referred to as 'the Trust') for whom the assessee is managing the funds. After audit of the accounts, the excess amount invoiced was reversed by the assessee. The trust made payments on daily accrual basis to the assessee after deduction of tax. Since excess amount was invoiced to the Trust, tax was deduced on the said excess amount at the time of payments, wher....
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....e does not include any payment made directly or indirectly on securities. The Revenue has termed the payments made to the brokers as Fees for Professional & Technical Services and held that the assessee was liable to deduct tax under the provisions of Section 194J. The provisions regarding deduction of tax at source on commission and brokerage are contained in Section 194H of the Act. The relevant extract of the section is reproduced herein below: 194H. Any person, not being an individual or a Hindu undivided family, who is responsible for paying, on or after the 1st day of June, 2001, to a resident, any income by way of commission (not being insurance commission referred to in section 194D) or brokerage, shall, at the time of credit of such income to the account of the payee or at the time of payment of such income in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rate of ten per cent : The terms commission and br....
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.... of aforesaid provisions of Section 194H and the definition of 'Securities' as defined under Securities Contract Regulation Act, it is clearly evident that securities include Mutual Funds and the provisions of Section 194H excludes commission or brokerage paid on securities. The authorities below have held that the assessee should have deducted tax on commission/brokerage u/s. 194J of the Act as the services rendered by the brokers are professional and/or technical services. 'Professional Services' are defined in Explanation(a) to Section 194J as under: Explanation. - (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 the purposes of section 44AA or of this section; A perusal of the above definition makes it abundantly clear that services rendered by Mutual Fund ....