TaxTMI 
TaxTMI 
2017 (8) TMI 714
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.... within the def init ion of 'Royal ty' as per Explanation 2 to section 9(1) (vi) of the income tax Act, 1961 ( ' the Act' ) and subject to TDS under section 194J of the Act. The learned CIT(A) ought to have appreciated the following: (i) The following case laws cited by the appel lant before the learned CIT(A) were pronounced af ter the amendment in the def inition of royal ty vide Finance Act 2012, wherein it has been held that payments pertaining to standard facil ity provided by the service provider should not be subject to TDS: a) Decision of the Hon'ble Delhi ITAT in the case of Hero MotoCorp Ltd. v. ACIT (ITA No. 1980/Del/2012 pronounced on 11 June 2013) b) Decision of the Hon'ble Mumbai Tribunal in the case of ACIT v. Twenty First Century Shares & Securities Ltd. [2013] (39 taxmann.com 176) (ii) The appel lant has already deducted tax under section 194J / 194C of the Act, wherever applicable, in respect of payment towards communication charges, except payments towards VSAT connectivity charges. (iii) The Hon'ble Mumbai ITAT in the following cases has observed that the decision of the Hon'ble Bombay ....
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.... in the business of stock broking and depository participants. That during the course of the survey proceedings as certain discrepancies emerged in respect of deduction of tax at source by the assessee, therefore, a show cause notice (SCN) u/ss. 201(1) and 201(1A) was issued to the assessee, calling upon it to put forth an explanation as regards defaults in respect of deduction of tax at source in respect of the following payments:- Sr. No. Particulars Amount 1 Communication charges Rs. 5,78,240/- 2 Internet Expenses Rs. 7,69,505/- 3 Lease line Charges Rs. 8,71,531/- The assessee in response to the SCN issued by the A.O submitted that as no service element was involved in respect of internet and communication charges paid by it, therefore, the provisions of Section 194J were not attracted. The assessee in respect of his aforesaid submissions relied on the judgment of the Hon'ble High Court of Madras in the case of Skycell Communication Ltd. & Ors. Vs. DCIT (2001) 251 ITR 53 (Mad). It was further submitted by the assessee that as it was neither in possession, nor control of the equipments which were used for providing internet and communication....
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.... the assessee, therein being of the view that the latter had failed to comply with the mandate of Sec. 194I and not deducted tax at source in respect of the payments made towards lease line charges, thus treated the assessee as being in default and raised a demand U/ss. 201(1)/201(1A), as under:- Sr. No. Particulars Amount 1 Lease Line Charges:- (i) Tax u/s. 201(1) (ii) Interest u/s. 201(1A) Rs. 90,799/- Rs. 53,571/- Total Rs.1,44,370/- 5. The assessee being aggrieved with the order of the A.O carried the matter in appeal before the CIT(A). The submissions of the assessee and the view taken by the CIT(A) in respect of the issues under consideration, are briefly culled out as under:- (A) Internet and Communication Charges:- 6. That the assessee submitted before the CIT(A) that as the payments made towards internet and communication charges were not in the nature of payments made towards fees for technical services, therefore no tax was deducted at source as regards the same. The assessee in order to drive home its aforesaid contention, therein submitted that there was a fine distinction between rendering services by using technical knowledg....
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....ces/connectivity for transmission of voice/data facility provided by the vendors, and not for use of any asset involved in provision of such facility/service covered in section 194I. That is was averred before the CIT(A) that in light of the very nature of payment, the assessee was under no obligation to deduct tax at source under the aforesaid statutory provision, viz. Sec. 194I. The CIT(A) however not being in agreement with the contention of the assessee held that the assessee was liable to deduct tax at source as per Explanation 1 of Sec. 194I, which the latter had failed to do. Alternatively, it was further observed by the CIT(A) that as per the retrospective amendment in the definition of 'royalty' with effect from 13.07.2006, the payments made by the assessee towards lease line charges were liable to be subjected to deduction of tax at source u/s. 194J. The CIT(A) thus in light of his aforesaid observations upheld the order of the A.O treating the assessee as being in default and sustained the demand of Rs. 90,799/-raised towards 'tax' u/s 201(1) and Rs. 53,571/- towards 'Interest' u/s. 201(1A). 9. The assessee being aggrieved with the order of the CIT(A) had carried the ....
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....lowing case:- (i) Income Tax Commissioner, Mumbai City-4 Vs. Angel Capital & Debit Market Ltd. [ITA (L) No. 475 of 2011, dated 28.07.2011](Bom) (ii) CIT-4, Vs. M/s. The Stock and Bond Trading Company Ltd. (ITA No. 4177 of 2010, dated 14.10.2011)(Bom) The ld. A.R relying on the aforesaid judicial pronouncements therein submitted that as held by the Hon'ble Jurisdictional High Court, the assessee was not liable for deduction of tax at source in respect of the lease line charges, and thus could not be held as being in default u/s. 201(1)/201(1A) of the 'Act'. The ld. D.R on the other hand did not controvert the aforesaid contentions so raised before us. 11. We have heard the Authorized Representatives for both the parties, perused the orders of the lower authorities and the material produced before us. We have given a thoughtful consideration to the issue involved in the present case and find substantial force in the contentions raised by the ld. A.R before us. We find that the internet and communication charges are not liable for deduction of any tax at source, as the same are merely in the nature of payments which cannot be characterized as having been made f....
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....ould require a specific notice. The service made available by the Bombay Stock Exchange [BSE Online Trading (BOLT) System] for which the charges in question had been paid by the appellant - assessee are common services that every member of the Stock Exchange is necessarily required to avail of to carry out trading in securities in the Stock Exchange. The view taken by the High Court that a member of the Stock Exchange has an option of trading through an alternative mode is not correct. A member who wants to conduct his daily business in the Stock Exchange has no option but to avail of such services. Each and every transaction by a member involves the use of the services provided by the Stock Exchange for which a member is compulsorily required to pay an additional charge (based on the transaction value) over and above the charges for the membership in the Stock Exchange. The above features of the services provided by the Stock Exchange would make the same a kind of a facility provided by the Stock Exchange for transacting business rather than a technical service provided to one or a section of the members of the Stock Exchange to deal with special situations faced by such a member(....