Case Law Details

Case Name : DCIT Vs Sonal Shares & Stock Brokers Pvt. Ltd. (ITAT Mumbai)
Appeal Number : ITA No. 744/Mum/09
Date of Judgement/Order : 23/02/2010
Related Assessment Year :

RELEVANT PARAGRAPH

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. Sucfa trading systems are centralised to enable trading in various stock exchanges. Each stock exchange is connected to the member% 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:- Charges levied by the Stock Exchanges on its members based an the volume of the transactions done by the members on its online trading system.

9. We have already given nature of VSAT charges and transaction charges paid by the assessee. Stock exchanges as measure of providing infrastructure to its members provide VSAT facilities to its members to enable screen based trading in shares A Fees collected in this regard is nothing but fee paid of 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 in nature of fees far 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 are 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 m screen based trading. This again is not relevant criteria for holding that the services rendered were technical services. Fact that the data provided on screen will provide better data for carrying out transaction will not again be sufficient to hold that technical services are being rendered. All the above features present in screen based trading saves time. Thus 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. As far as transaction charges paid to stock exchange are concerned, the decision of the Mumbai ITAT in the case of Stock Securities (supra) relied Upon by the learned CIT(A) supports the plea of the Assessee. We are therefore of the view that learned C1T(A) was night in holding that the payment in question is not fee for technical services rendered.

NF

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