Case Law Details
RELEVANT PARAGRAPH
7. 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
(p) 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 the purposes of section 44AA or of this section;
(b) “fees for technical services” shall have the same meaning as in Explanation 2 to clause (vii) of sub-section (1) of section 9;
The provisions of Section 9( 1 Xvii) Explanation- 2 is as follows:
Explanation 2: For the purposes of this clause, “fees for technical services* means any consideration (including any lump sum consideration) for the rendering of any managerial, technical or consultancy services (including the provision of services of technical or other personnel) but does not include consideration for any construction, assembly, mining or like project undertaken by the recipient or consideration which would be income of the recipient chargeable under the head “Salaries”.
10. We have already given nature of VSAT charges and lease line charges, other charges, BOLT charges, Dem-at charges, paid by the assessed Stock exchanges as measure of providing infrastructure to its members installs VSAT, lease line facilities, BOLT Charges and Dem-at Charges to its members. Fees collected in this regard is nothing but fee paid for use of facilities provided by the stock exchange. Such facilities, are available for use by any member. Satellite based trading enables trading member to trade on exchange from their place of work across the country. Stock exchange has to get permission of Department of Telecommunication for installing and setting up VSAT or lease line system. Charges levied by the stock exchange on its members are for the purpose of recovery of its cost in providing these facilities to the members. Stock Exchanges 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 frame work 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 arc of the view that this ratio of Honourable 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 and the ease with which transactions are done in screen based trading. This again is not relevant criteria for holding that the services rendered were technical services. Pact that the data provided on screen will provide better data for carrying out transaction will not again be sufficient to hold that technical services arc 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 die view that learned CIT(A) was right in holding that the payment in question is not fee for technical services rendered. We therefore confirm the order of learned CIT(A) and dismiss this appeal of the Revenue.
Order has been pronounced on 9th Day of December, 2009.
Now in view of the series of judgments by Madras HC, and Mumbai ITAT in the case of Kotak Securities also, the department should not press for deduction and disallowance of expense rather should issue a clarification on the matter for uniform practice to be adopted by all the stock brokers and exchanges.