Tds on annual subscription fee

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

30 May 2013 Respected sir,

we are paid annual subscription fee to STOCK EXCHANGE (MCX), whether TDS is applicable in this case or not.

if yes
in which section

CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)
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30 May 2013 In my view TDS not applicable in this case. Views of other experts also solicited.

CA.Vinita Gupta

CA.Vinita Gupta (Expert)
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30 May 2013 TDS is not applicable on Subscription

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Querist : Anonymous

Querist : Anonymous (Querist)

30 May 2013 replay by a my friend that annual subscription fee paid to stock exchange tds deduct u/s 194J

Please tell me accurate ans it's urgent.

CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)
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30 May 2013 TDS not applicable.

Citation: Kotak Securities Ltd. v. Addl.CIT (2008) 25 SOT 440 (Mum.)

Details:

For the relevant assessment year, the Assessing Officer invoked S. 40(a)(ia) in respect of transaction charges paid by the assessee-broker to the stock exchanges and disallowed the transaction charges paid on account of non-deduction of tax at source. The CIT(A) upheld the disallowance.

The Tribunal, relying on the decisions in the following cases, deleted the disallowance :

(a) Techno Shares & Stocks Ltd. v. ITO, [ITA No. 778 (Mum.) of 2004]

(b) Tata Warehouse Securities v. Dy. CIT, [ITA No. 6600 (Mum.) of 2004]

(c) Kandwalla Finance Ltd. [ITA No. 6986 (Mum.) of 2002]

(d) Manjesh J. Patel [ITA No. 3710 (Mum.) of 1997]

(e) Peninsular Capital Market Ltd. v. Asst. CIT, (2008) 19 SOT 421 (Cochin)

(f) Omprakash B. Salicha [ITA No. 11 (Mum.) of 2007, dated 12-3-2008]

(g) Skycell Communications Ltd. v. Dy. CIT, (2001) 251 ITR 53/119 Taxman 496 (Mad.)

The Tribunal noted as under :

(1) To call a payment as ‘fees for technical services’ it should have been paid in consideration of rendering by the recipient of payment of (a) Managerial Service or (b) Technical or Consultancy Service.

(2) The stock exchanges merely provide facility to its members to purchase and sell shares, securities, etc., within the framework of its bye-laws. In the event of dispute it provides for mechanism for settlement of dispute. It regulates conditions subject to which a person can be a member and as to when and in what circumstances membership can be transferred, cancelled, suspended, etc. The exchange provides for a place where the members can meet and transact business. The stock exchanges do not render any managerial service, nor do they render any technical consultancy service.

(3) The transaction fee paid is on the basis of volume of transaction effected by a member. The transaction fee is not paid in consideration of any service provided by the stock exchange. It is a payment for use of facilities provided by the stock exchange and such facilities are available for use by any member.

(4) Therefore, the transaction fee paid could not be said to be a fee paid in consideration of any technical services rendered by the stock exchange to the assessee. The provisions of S. 194J were, thus, not attracted.

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