Case Law Details

Case Name : Sundaram Asset Management Co. Ltd. Vs Deputy Commissioner of Income Tax (ITAT Chennai)
Appeal Number : I.T.A. No. 1774/Mds/2012
Date of Judgement/Order : 19/07/2013
Related Assessment Year : 2008- 09
Courts : All ITAT (5028) ITAT Chennai (226)

Some of the investments made by the assessee are short term. Since assessee is paying capital gains tax on short term investments, the provisions of Rule 8D will not apply on them. The Assessing Officer is directed to re¬compute dis-allowance u/s. 14A r.w.r. 8D after excluding short term investments. This ground of appeal of the assessee is partly allowed in the aforesaid terms.

 INCOME TAX APPELLATE TRIBUNAL ‘C’ BENCH : CHENNAI

[BEFORE Dr. O.K.NARAYANAN, VICE PRESIDENT AND

SHRI VIKAS AWASTHY, JUDICIAL MEMBER]

I.T.A. No. 1774/Mds/2012 – Assessment year : 2008-09

Sundaram Asset Management Co. Ltd.

Vs

Deputy Commissioner of Income Tax

Date of Hearing : 29-05-2013

Date of Pronouncement : 19-07-2013

O R D E R

PER VIKAS AWASTHY, JUDICIAL MEMBER

The appeal has been filed by the assessee against the order of the Commissioner of Income Tax(Appeals)-XII, Chennai dated 03-07-2012 relevant to the Assessment Year (AY) 2008-09.

2. The assessee is engaged in the business of asset management. For the AY. 2008-09, the assessee filed its return of income on 26-09-2008 declaring its total income as Rs. 20,86,48,690/- under normal provisions and Rs. 26,12,06,395/- u/s. 11 5JB (MAT provisions) of the Income Tax Act, 1961 (herein after referred to as ‘the Act’). The case of the assessee was selected for scrutiny and notice u/s. 143(2) was issued to the assessee on 12-08-2009. The Assessing Officer vide assessment order dated 24-11-2010 made additions/dis-allowances in the income returned by the assessee on following counts:

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/- .

vii. Dis-allowance u/s. 40(a)(ia) Rs. 16,41,14,706/- on payments made to the mutual fund distributors.

Apart from the above additions, the Assessing Officer re-computed book profit under MAT provisions u/s. 115JB and made addition of Rs. 6,28,950/- u/s. 14A and Rs. 61,50,220/- on account of Long Term Capital Gains. Aggrieved against the assessment order, the assessee preferred an appeal before the CIT(Appeals)-Chennai. The CIT(Appeals) vide impugned order dt. 03-07-2012 dismissed and appeal of the assessee.

3. Now, the assessee has come in second appeal before the Tribunal impugning the order of the CIT(Appeals)-XII, Chennai. The grounds stated in the Appeal are as under:

1. The order of the learned Commissioner of Income-tax(Appeals) [‘CIT (Appeals)’], to the extent prejudicial to the Appellant, is contrary to law, facts, and circumstances of the case.

2. The learned CIT (A) has erred in confirming the dis allowance made by the Assessing Officer (‘AO’) of Rs. 6,28,950/- by invoking the provisions of section 14A of the Income-tax Act (‘the Act’) ignoring the fact that the Appellant had not incurred any expenditure for earning dividend income.

3. The learned CIT (A) has erred in confirming the dis allowance made by the AO towards payment of Rs. 33,48,666/- made to Fund quest by invoking the provisions of section 40(a)(i) of the Act and stating that the payment is in the nature of royalty failing within the ambit of provisions of section 9 of the act.

4. The learned CIT (A) has erred in upholding the order of the AO in treating the payment of Rs. 1,85,95,094/- towards renovation of existing lease building as a capital expenditure ignoring the fact that the expenditure has neither resulted in any structural change to the building nor in the creation of new capital asset.

4.1 The learned CIT (A) has erred in not following the principles laid down in the decision of the Hon’ble Chennai ITAT in the Appellant’s own case for the Assessment Year (‘AY’) – 2006-07.

5. The learned CIT (A) erred in confirming the order of AO in not treating UPS as part of computers and adding back Rs. 18,68,338/- on account of excess depreciation claim.

5.1 The learned CIT (A) erred in rejecting the alternative claim of Appellant in treating the UPS as energy saving device and claiming depreciation at the rate of 80 percent 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 units sold, irrespective of level of efforts of the distributors.

7.3 The learned CIT (A) ought to have appreciated the fact that the services rendered by the distributors do not fall within the scope of definitions of professional or technical services.

7.4 The learned CIT (A) ought to have appreciated that the commission and brokerage paid fall within the ambit of provisions of section 194H that specifically excludes payments towards purchase/sale of securities.

7.5 The learned CIT (A) ought to have appreciated the fact that the action of the learned AO is in contravention to the circular No. 720 dated 30-08-1995, where the Board has clarified that the payment for any sum shall be liable to deduction of tax under only one section.

7.6 The learned CIT (A) ought to have appreciated the fact that the learned AO erred in relying on the information displayed in the website of a third party who is in the business of Register and Transfer Agent.

8. The learned CIT (A) has erred in confirming the action of AO, in computing the minimum alternate tax under section 115JB, by adding a sum of Rs. 6,28,950/- under section 14A of the Act.

9. The learned CIT (A) has erred in remanding back the issue to the AO to examine the computation of book profit without adjudicating on the issue himself.

10. On the facts and circumstances of the case, the learned CIT (A) was not justified and erred in not deleting interest levied under section 234B and 234D of the Act as the same is bad in law.

4. Shri R. Parthasarathy, Advocate with Shri Sumeet Khurana, Chartered Accountant appearing on behalf of the assessee submitted that during the relevant assessment year, the assessee had not incurred any expenses in earning dividend income. The assessee being asset management company has thorough knowledge and understanding of Mutual Funds by virtue of its business operations. The assessee had not taken any funds bearing interest, therefore, the assessee has not incurred any interest cost. The ld. Counsel for the assessee further submitted that provisions of Rule 8D will not apply to short term investments, as the capital gain arising there from is taxable. The ld. Counsel contended that the authorities below have 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 ITR 272 (Del)

2. CIT Vs. Hero Cycles Ltd., reported as 323 ITR 518 (P&H)

3. Avshesh Mercantile Pvt. Ltd., Vs. DCIT in ITA No. 5779/Mum/2006 decided on 13-06-2012.

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 Paper Book, the details of the expenditure have been given. The expenditure relates to demolition, painting work, floor work, partition, plumbing, false ceiling, storage, molder work, electrical work and AC Ducting. The lease period of building is three years with the option to renew thereafter. As, the premises is being used for office purpose, the nature of the expenditure is Revenue. The Assessing Officer has dis-allowed an amount of Rs. 1,85,95,094/- out of the total expenditure of Rs. 2,06,61,216/-. The ld. AR in order to support his contentions has relied on the order of the co-ordinate bench of the Tribunal in the case of M/s. Sundaram BNP Paribas Asset Management Company Ltd., Vs. ACIT in ITA No. 518/Mds/2010 decided on 7th January, 2011.

7. On the fifth ground of appeal relating to depreciation on UPS at 60% as applicable to computers, the ld. Counsel submitted that UPS is integral part of the computer system, without which the computers will not be fully operational. Thus, the depreciation as applicable in the case of computers should be allowed to the assessee. To support his submissions, the Counsel relied on the following decisions:

i. DCIT Vs. Data craft India Ltd., reported as 9 ITR (Trib) 712 (Mum-SB);

ii. Haworth (I) P. Ltd., Vs. DCIT in ITA No. 534 1/Del/2010 decided on 29-04-2011.

iii. Maca wber Engineering Systems (India) P. Ltd., Vs. ACIT reported as 19 ITR (Trib) 302 (Mum)

8. On the issue of addition made on the basis of TDS Certificates, the ld. Counsel submitted that the assessee is managing the funds of Sundaram Mutual Fund Trust. For the services rendered, assessee receives management fee from the Trust. The fee is calculated at a specific rate on the quantum of assets managed and before making the payment, the Trust deducts tax at source. Tax is deducted at source on the daily accruals of fee payable by the Trust to the assessee. Subsequently, it transpired that excess amount was credited to the assessee. The excess amount was reversed by the assessee on the basis of audit. Therefore, the difference of Rs. 15,82,291/- is the amount reversed by the assessee after audit of the accounts. This difference in the TDS has occurred on account of the amount reversed by the assessee, therefore, the excess TDS deducted by the trust has to be adjusted. The Assessing Officer has erred 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 Vs. Sudhir Sekhri in ITA No. 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 1 94H. Such commissions paid to the brokers has been specifically excluded from tax deduction. The Assessing Officer has erred in applying the provisions of Section 1 94J 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 Vs. Kotak Securities reported as 3040 ITR 333 (Bom).

10. On the issue of re-computation of book profits u/s. 11 5JB 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 hand, Shri T.N. Betgiri, appearing on behalf of the Revenue strongly supported the order of CIT(Appeals) and prayed for the dismissal of the appeal of the assessee.

12. We have heard the submissions made by the representatives of both the sides. We have also perused the orders of the authorities below as well as the decisions cited by the ld. AR for the assessee. Our issue-wise findings on the grounds raised by the assessee are as under:

i. Ground Nos. 1 & 9 are general in nature and therefore are not taken up for adjudication.

ii. Ground No.2 is with regard to dis-allowance u/s. 14A r.w.r. 8D; The contentions of the AR is that the assessee has not incurred any expenditure to earn dividends and hence the authorities below are un-justified in making addition under the provisions of rule 14A r.w.r. 8D. We are of the considered opinion that in view of the order of the Tribunal in the case of Cheminvest Ltd., Vs. ITO reported as 124 TTJ 577 (Del) (SB) wherein it has been held that if the expenditure is incurred in relation to income which does not form part of total income it has to suffer dis¬allowance irrespective of the fact whether any income is earned by the assessee or not. Section 14A does not envisage any such exception. Thus, in view of the observations made in the Special Bench of the Tribunal, dis-allowance has to be made u/s. 14A r.w.r. 8D. It is an admitted fact that the assessee has made investments. Some of the investments made by the assessee are short term. Since assessee is paying capital gains tax on short term investments, the provisions of Rule 8D will not apply on them. The Assessing Officer is directed to re¬compute dis-allowance u/s. 14A r.w.r. 8D after excluding short term investments. This ground of appeal of the assessee is partly allowed in the aforesaid terms.

iii. The third ground in the appeal relates to dis-allowance u/s. 40(a)(ia). The assessee is into investment business. The assessee has entered into an agreement with M/s. Fund Quest (France) on 13-07-2007, to provide investment advice for the investments to be carried outside India. M/s. Fund Quest has been providing advisory services. For the services rendered, the assessee paid fee in accordance with mutual agreement. In the course of providing advisory services, M/s. Fund Quest is providing certain data 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 license) in respect of a patent, invention, model, design, secret formula or process or trade mark or similar property ;

(ii) the imparting of any information concerning the working of, or the use of, a patent, invention, model, design, secret formula or process or trade mark or similar property ;

(iii) the use of any patent, invention, model, design, secret formula or process or trade mark or similar property ;

(iv) the imparting of any information concerning technical, industrial, commercial or scientific knowledge, experience or skill ;

[(iva) the use or right to use any industrial, commercial or scientific equipment but not including the amounts referred to in section 44BB;]

(v) the transfer of all or any rights (including the granting of a license) in respect of any copyright, literary, artistic or scientific work including films or video tapes for use in connection with television or tapes for use in connection with radio broadcasting, but not including consideration for the sale, distribution or exhibition of cinematographic films ; or

(vi) the rendering of any services in connection with the activities referred to in sub-clauses (i) to [(iv), (iva) and](v).

Thus, a perusal of the term of ‘Royalty’ as defined in the Act shows that it does not include any information provided in the course of advisory services. We do not agree with the findings of the CIT(Appeals) on the issue. Since, payments made to M/s. Fund Quest are not in the nature of ‘Royalty’ and the services were rendered abroad, no part of income had accrued or arisen in India. The assessee is not liable to deduct tax at source on the payments so made. The findings of the CIT(Appeals) on this issue are set aside and this ground of appeal of the assessee is allowed.

iv. The fourth ground of appeal of the assessee relates to repairs of lease-hold premises. The assessee has placed on record at Page No. 42 of the Paper Book, the nature of work carried out by the assessee in the leased office premises. The assessee has claimed the expenditure on civil work which includes demolition, painting, flooring and 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 M/s. Sundaram BNP Paribas Asset Management Company Ltd., Vs. ACIT (supra), the Tribunal in the aforesaid order has held as under:

5. We have considered the rival submissions. A perusal of the break up of the expenses which have been disallowed clearly shows that the expenditures are on the interior decorations and creation of the office atmosphere. The expenditure has not resulted in any building coming into existence nor has the existing building been modified or the structure altered. As the existing building has not been altered and there is no change to its structure as a result of the expenditure incurred by the assessee, it cannot be said that the expenditure incurred by the assessee is in the capital field. Further a perusal of the expenditure clearly shows that it is in the revenue field. In the circumstances we are of the view that the expenditure on the repairs and maintenance in the form of electrical fittings, electrification, cabinet, work station, partition, cupboard, stand etc. are liable to be treated as a revenue expenditure. In the circumstances, the orders of the learned CIT(A) and the Assessing Officer are reversed on this issue and the Assessing Officer is directed to grant the assessee the claim of revenue expenditure in regard to the said expenditure. Consequently, the depreciation as allowed by the Assessing Officer on the said expenditure which has been capitalized would stand reversed.

Whether the expenditure incurred on renovation of a building is capital or revenue, is a question of fact. The same has to be decided on the facts of each case. We find that the facts of the case of the assessee are similar to the one adjudicated by the Tribunal mentioned above. The civil work relates to the interior decoration and creation of the office atmosphere. Respectfully following the decision of the co-ordinate bench of the Tribunal, this ground of appeal of the assessee is allowed and the expenditure incurred by the assessee in modifying the interiors of a building into office are held to be revenue in nature.

v. The fifth ground of appeal of the assessee relates to the issue of depreciation on UPS: The assessee has claimed depreciation on UPS @ 60% treating the same as part of computer. On the other hand, the Assessing Officer has considered the UPS at par with Plant & Machinery and restricted the depreciation to 15%. It has been repeatedly held in various 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 (I) P. Ltd., (supra) and Maca wber Engineering 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, whereas the tax liability of the assessee is on the net amount after adjustment. The CIT(Appeals) has held that the assessee is following mercantile system of accounting. As and when it raises an invoice, the same was accepted by the Trust. Thus, the income stands accrued to the assessee in the year in which the said invoice is raised and acknowledged in a particular assessment year. The income received against those invoices have to be assessed in that particular assessment year. Any subsequent re-conciliation resulting in revision or reversal entry in the subsequent assessment year will not have bearing on the income accrued in the previous year.

It is a well settled law that the assessee should not be taxed twice for the same income or taxed for the income which has not accrued to him. It is evident from records and the impugned order that certain reversal entries were made to adjust the excess payments. It is also an admitted fact that tax has been paid on such excess payments. The income which has not accrued to the assessee is not liable to be taxed. In the instant case, the assessee had raised invoices to the Trust for Rs. 85,83,43,545/- (including service tax). Whereas the amount actually accounted in the books was Rs. 85,67,61 ,254/- (including service tax). There was net different of Rs. 15,82,291/- after adjustments which Assessing Officer brought to tax. The error was discovered during audit which was rectified. By the time the excess amount was reversed, Form 1 6A was issued. However, the Trust has issued confirmation letter regarding excess accrual. It is apparent from records that tax was deducted on excess invoicing which was reversed. In our considered opinion, the addition made is unjustified. The case of the assessee is squarely covered by the judgment of the Hon’ble Delhi High Court in the case of Sudhir Sekhri (supra) wherein similar view was taken by the Hon’ble High Court in the facts of that case. This ground of appeal of the assessee is accordingly allowed.

vii. The seventh ground of appeal relates to payments made to mutual fund distributors amounting to Rs. 16,41,14,706/- dis-allowed u/s. 40(a)(ia). The assessee had not deducted tax at source on the payment of the brokerage/commission paid to the mutual fund distributors on the ground that commission and brokerage 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 brokerage and securities are defined in Explanation to Section 194H. the same are extracted herein under:

Explanation –

i) “commission or brokerage” includes any payment received or receivable, directly or indirectly, by a person acting on behalf of another person for services rendered (not being professional services) or for any services in the course of buying or selling of goods or in relation to any transaction relating to any asset, valuable article or thing, not being securities”;

ii) xxxxxxxxxxxxxxxxxxxx

(iii) the expression “securities” shall have the meaning assigned to it in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) ;

(iv) where any income is credited to any account, whether called “Suspense account” or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly.]

Section 2(h) of the Securities Contracts (Regulation) Act, 1956 defines securities as :

“2(h) “securities” include—

(i) shares, scrips, stocks, bonds, debentures, debenture stock or other marketable securities of a like nature in or of any incorporated company or other body corporate;

(ia) derivative;

(ib) units or any other instrument issued by any collective investment scheme to the investors in such schemes;

(ic) security receipt as defined in clause (zg) of section 2 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act,2002;

(id) units or any other such instrument issued to the investors under any mutual fund scheme;

(ie) xxxxxx”

From the perusal of aforesaid provisions of Section 1 94H 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 1 94H 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 brokers do not fall within the term ‘Professional Services’. The services of Mutual Fund brokers cannot be termed as technical services as well, as the brokers do not require any special qualification in the field of law, engineering, accountancy or technical consultancy. Even an ordinary graduate from humanities group can be a broker. The brokers do not provide any technical know-how either, thus services rendered by them cannot be termed as technical services.

We do not concur with the findings of CIT(Appeals) on the issue for the aforesaid reasons. Accordingly, this ground of appeal of the assessee is allowed.

viii. The next ground of appeal relates to re-computation of books profits u/s. 115JB. The ld. Counsel for the assessee has stated that since the net profit under normal computation is higher than book profits computed u/s. 115JB, therefore, this ground of appeal has become academic. The ld. DR has not controverted the statement made by the Counsel of the assessee. This ground of appeal is dismissed accordingly.

ix. The last effective ground of appeal relates to deleting of interest u/s. 234B & 234D of the Act. Since levy of interest u/s. u/s. 234B & 234D is consequential in nature, this ground of appeal of the assessee is dismissed.

Accordingly, the appeal of the assessee is partly allowed in the aforesaid terms.

Order pronounced on Friday, the 19th July, 2013 at Chennai.

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