DESTIMONEY SECURITIES P.LTD, MUMBAI V. ITO(TDS) (OSD) 1(3), MUMBAI

ITA 4106/MUM/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0081 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-06-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2007-2008
• Appeal Filed On: 05-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VINITA J MENON
• Keywords: Retrospective amendment; Non-deduction of tax
• Section: 194C; 201(1)

Judgement Text

P A G E | 1 IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI R.C. SHARMA , AM AND SHRI RAVISH SOOD, JM ./ I.T.A . NO. 4106 /MUM/2014 ( / ASS ESSMENT YEAR: 2007 - 08) DESTIMONEY SECURITIES PVT. LTD. 203, PHOENIX TOWERS, B - WING, 2 ND FLOOR, OFF. GANPAT RAO KADAM MARG, LOWER PAREL (WEST), MUMBAI - 400 013 / VS. THE INCOME TAX OFFICER (TDS)(OSD) - 1(3) 8 TH FLOOR, ROOM NO. 811, SMT. K.G MITTAL AYURVEDIC HOSPITAL BUILDING, CHARNI ROAD (WEST) , MUMBAI - 400 002 ./ ./ PAN/GIR NO. AACCD2614A ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI ANUJ KIS N A D WALA / RESPONDENT BY : SMT. VINITA J. MENON / DATE OF HEARING : 06/04 /2017 / DATE OF PRONOUNCEMENT : 21 /06/2017 / O R D E R PER RAVISH SOOD, JUDICIAL MEMBER: THE PRESENT APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) - 14 (TDS) , MUMBAI, DATED 12.03.2014, WHICH IN ITSELF ARISES FROM THE ORDER PASSED BY THE A. O U/SS. 201 AND P A G E | 2 201(1A), DATED 31.03.2011. THE ASSESSEE ASSAILING THE ORDER OF THE CIT(A) HAD RAISED FOLLOWING G ROU NDS OF APPEAL BEFORE US: - THE FOLLOWING GROUNDS OF APPEAL ARE DISTINCT AND SEPARATE WITHOUT PREJUDICE TO EACH OTHER: 1. GROUND NO. 1 - APPLICABILITY OF TAX DEDUCTIO N AT SOURCE ( TDS') ON PAYMENTS TOWARDS I NTERNET & COMMUNICATION CHARGES: THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 14, MUMBAI ['THE LEARNED CIT(A)'] HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT PAYMENTS TOWARDS INTERNET E COMMUNICATION CHARGES FALL WITHIN THE DEFINIT I ON OF 'ROYALTY' 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 APPELLANT BEFORE THE LEARNED CIT(A) WERE PRONOUNCED AFTER THE A MENDMENT IN THE DEFINITION OF ROYALTY VIDE FINANCE ACT 2012, WHEREIN IT HAS BEEN HELD THAT PAYMENTS PERTAINING TO STANDARD FACILITY PROVIDED BY THE SERVICE PROVIDER SHOULD NOT BE SUBJECT TO TDS: A) DECISION OF THE HON'BLE DELHI ITAT IN THE CASE OF HERO MOT OCORP LTD. V. ACIT (IT A 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 APPELLANT 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 FOLLO WING CASES HAS OBSERVED THAT THE D ECISION OF THE HON'BLE BOMBAY HIGH COURT IN CIT V. KOTAK SECURITIES LTD. [2012] (340 ITR 333)(BOM ) RELIED ON BY THE LEARNED CIT(A) IS APPLICABLE ONLY TO THE TRANSACTION CHARGES PAID TO STOCK EXCHANGES AND WITH RESPECT TO APPLICABILITY OF TDS ON INTERN ET & LEASE LINE CHARGES, DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF DCIT Y. ANGEL BROKING LTD. [2010](3 ITR 294)(BOM) SHOULD BE APPLICABLE WHEREIN IT HAS BEEN HELD THAT TDS SHOULD NOT BE APPLICABLE ON INTERNET & LEASE LINE CHARGES: A) M/S. PARAG PARIKH FINANCIAL ADVISORY V ITO [ITA NO.8190/MUM/2010 (AY 2006 07) - DATE OF ORDER - 5 SEPTEMBER 2012] B) DCIT V. FIRST GLOBAL STOCKBROKING PVT. LTD. (ITA P A G E | 3 NO.8105/MUM/2010 - DATE OF ORDER 28 SEPTEMBER 2012) C) PHOENIX SHARE & STOCK BROKERS P. LTD. V. ITO [ ITA NO.108/MUM/2012 - ORDER DATED 24 JULY 2013] D) DCIT V. M/S VIOLENT ARCH SECURITIES PVT. LTD. (ITA NO.298/M/201 1 PRONOUNCED ON 16 MAY 2013) E) ITO V. M/S INDSEC SECURITIES & FINANCE LTD. (ITA NO.916/M/2011 PRONOUNCED ON 8 MAY 2013) F) DEPUTY CIT V. MIS. LALKAR SECURITIES PVT. LTD. TA NO.983/M/201 1 PRONOUNCED ON 17 JUNE 2013) (IV) THE LEARNED CIT(A) HAS ERRED IN MAKING ALTERNATIVE OBSERVATION TH A T THE PAYMENTS TOWARDS INTERNET AND COMMUNICATION CHARGES MAY FALL UNDER THE PROVISIONS OF SECTION 194 - I OF TH E ACT . 2. GROUND NO. 2 - APPLICABILITY OF TDS ON PAYMENTS TOWAR DS LEASE LINE CHARGES: 2.1 THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN HOLD ING THAT PAYMENTS TOWARDS LEASE LINE CHARGES ARE SUBJECT TO TDS UNDER SECTION 194 - I OF THE ACT. 2.2 THE LEARNED CIT(A) HAS ERRED IN NOT APPRECIATING THAT THE HON'BLE DELHI ITAT IN THE CASE OF HERO MOTOCORP LTD, V. ACIT (ITA NO. 1980/DEL/2012 PRONOUNCED ON 11 JUNE, 2013) HAS CATEGORICALLY HELD THAT PROVISIONS OF SECTION 194 - I DO NOT APPLY TO PAYMENTS TOWARDS LEASE LINE CHARGES. 2.3 THE LEARNED CIT(A) HAS ERRED IN MAKING ALTERNATIVE OBSERVATION THAT THE PAYMENTS TOWARDS LEASE TINE CHARGES MAY FALL UNDER THE PROVISIONS OF SECTION 194 - J OF THE ACT. THE APPELLANT CRAVES LEAVE TO ADD TO AND/OR TO AMEND AND/ OR TO MODIFY AND/OR TO CANCEL ANY ONE OR MORE GROUNDS OF APPEAL AT ANY TIME BEFORE OR AT THE TIME OF HEARING. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT SURVEY PROCEEDINGS U/S 1 3 3A OF THE ACT WERE CARRIED OUT AT THE BUSINESS PREMISES OF THE ASSESSEE COMPANY WH ICH IS ENGAGED 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 T AX 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 PAY MENTS: - P A G E | 4 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 PROVISION S OF SECTION 194J WERE NOT ATTRACT ED . THE ASSESSEE IN RESPECT OF HIS AFORESAID SUBMISSIONS RELIED ON THE JUDGMENT OF THE HONBLE 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 FACILITIES, THEREFORE THERE WAS A CLEAR ABSENCE OF THE ELEMENT OF LEASING OF EQUIPMENTS , AS A FALL OUT OF WHICH THE APPLICABILITY OF THE PROVISIONS OF SECTION 194I STOOD CLEARLY EXCLU DED. THUS IN A NUTSHELL , IT WAS SUBMITTED BY THE ASSESSEE THAT AS THE PAYMENTS TOWARDS INTERNET BILLS OR COMMUNICATION CHARGES COULD NOT BE CATEGORIZED AS PAYMENTS MADE TOWARDS TECHNICAL SERVICES, THEREFORE, THE PROVISIONS OF SECTION 194J STOOD EXCLUDED, W HILE FOR IN THE ABSENCE OF THERE BEING ANY LEASING OF THE EQUIPMENTS WHICH WERE USED FOR PROVIDING OF THE AFOREMENTIONED FACILITIES , THE PAYMENTS MADE AS REGARDS THE SAME ALSO FELL BEYOND THE SCOPE AND GAMUT OF SECTION 194I OF THE ACT. 3. THE A.O HOWEVER NOT FINDING FAVOUR WITH THE AFORESAID CONTENTION S OF THE ASSESSEE , THEREIN CONCLUDED THAT AS THE PAYMENTS MADE BY THE ASSESSEE COULD SAFELY BE BROUGHT WITHIN THE SWEEP OF TECHNICAL SERVICES , THEREFORE THE PROVISION S OF SECTION 194J WERE CLEARLY ATTRACTED . THE A.O ON THE BASIS OF HIS AFORESAID CONVICTION THUS TREATING THE ASSESSEE AS BEING IN DEFAULT FOR NOT HAVING DEDUCTED TAX AT P A G E | 5 SOURCE AS PER THE CLEAR MANDATE OF SEC. 194J , THEREIN RAISED A DEMAND TOWARDS TAX AND INTEREST IN THE HANDS OF THE ASSESSEE , AS UNDER: - SR. NO. PARTICULARS AMOUNT 1 COMMUNICATION CHARGES: - (I) TAX U /S. 201(1) (II) INTEREST U/S 201(1A) RS. 32, 4 39/ - RS. 19 ,1 39/ - TOTAL RS.51, 6 78/ - 2 INTERNET CHARGES: - (I) TAX U/S. 201(1) (II) INTEREST U/S. 201(1A) RS.43,169/ - RS.25,470/ - TOTAL RS.68,639/ - 4. THE A.O FURTHER CALLED UPON THE ASSESSEE TO EXPLAIN AS TO WHY IT MAY NOT BE TREATED AS BEING IN DEFAULT FOR FAILING TO DEDUCT TAX AT SOURCE IN RESPECT OF PAYMENTS MADE TOWARDS L EASE LINE CHARGES , WHICH AS PER THE A.O BEING IN THE NATURE OF PAYMENTS MADE FOR HIRING/LEASE OF TECHNICAL SERVICES WERE THUS COVERED BY THE DEFINITION OF THE TERM RENT CONTEMPLATED IN THE E XPLANATION TO S ECTION 194I. THE ASSESSEE SUBMITTED BEFORE THE A.O THAT AS THE LEASE LINE CHARGES COULD NOT BE CATEGORIZED AS PAYMENTS MADE TOWARDS RENT FOR HIRING/LEASE OF TECHNICAL SERVICES, THEREFORE THE PROVISIONS OF SECTION 194I STOOD CLEARLY EXCLUDED , AND THUS THE ASSESSEE HAD RIGHTLY NOT SUBJECTED THE PAYMENTS MADE AS REG ARDS THE SAME TO ANY DEDUCT ION OF TAX AT SOURCE UNDER THE SAID STATUTORY PROVISION. THE A.O HOWEVER NOT BEING PERSUADED TO ACCEPT THE AFORESAID SUBMISSIONS OF THE ASSESSEE , THEREIN BEING OF THE VIEW THAT THE LATTER HAD FAIL ED TO COMPLY WITH THE MANDATE OF SEC. 194I AND NOT DEDUCT ED TAX AT SOURCE IN RESPECT OF THE PAYMENTS MADE TOWARDS LEASE LINE CHARGES , THUS TREAT ED THE ASSESSEE P A G E | 6 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 ISSUE S 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 RENDE RING SERVICES BY USING TECHNICAL KNOWLEDGE AND CHARGING FEES FOR TECHNICAL SERVICES , AND AS THE CASE OF THE ASSESSEE WAS COVERED BY THE FORMER SITUATION, THEREFORE, THE PROVISIONS OF SECTION 194J WERE NOT ATTRACT ED . 7. THE CIT(A) AFTER DELIBERATING ON TH E CONTENTIONS OF THE ASSESSE E, THEREIN OBSERVED THAT THE PROVISIONS OF SECTION 194J HAD BEEN RETROSPECTIVELY AMENDED WITH EFFECT FROM 13.07.2006, AS A RESULT WHEREOF THE DEFINITION OF THE TERM ROYALTY WAS BROADENED, WHICH AS P A G E | 7 PER E XPLANATION 2 OF SECTION 9(1)(VI) OF THE ACT , WAS THUS TO BE READ AS INCLUDING THE FOLLOWING: - I . TRANSMISSION BY SATELLITE INCLUDING UP - LINKING, AMPLIFICATION CONVERSION FOR DOWN - LINING OF ANY SIGNAL . II. TRANSMISSION BY CABLE. III. TRANSMISSION BY OPTIC FIBRE. IV. TRANSMISSION BY OTHER MEANS. THE CIT(A) IN THE BACKDROP OF HIS CONVICTION THAT AS THE PAYMENTS MADE BY THE ASSESSEE TOWARDS INTERNET CHARGES/BANDWIDTH/VSAT CHARGES ETC., PURSUANT TO THE AFORESAID RETROSPECTIVE AMENDMENT IN SEC 9 HAD BEEN BROUGHT WITHIN THE SWEEP OF THE DEFINITION OF THE TERM ROYALTY , THEREFORE THE ASSESSEE COULD SAFELY BE HELD TO BE LIABLE FOR DEDUCT ION OF TAX AT SOURCE IN RESPECT OF THE AF ORESAID PAYMENTS. ALTERNATIVELY , IT WAS FURTHER HELD BY THE CIT(A) THAT AS THE USE OF BROADBAND/INTERNET WAS IN THE NATURE OF PROVIDING A RIGHT TO USE LEAS ED EQUIPMENTS, THEREFORE THE PROVISIONS OF SECTION 194I STOOD ATTRACTED. TH E CIT(A) IN SUPPORT OF HIS AFORESAID VIEW RELIED ON THE JUDGMENT OF THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF CIT VS. KOTAK SECURITIES PVT. LTD. ( 2012) 340 ITR 333 (BOM) , WHEREIN IT WAS HELD THAT AS TRANSACTIONS CHARGES PAID BY THE ASSESSEE TO THE STOCK EXCHANGE CONSTITUTED FEES FOR TECHNICAL SERVICES U/S. 194J , THEREFORE THE ASSESSEE WAS LIABLE FOR DEDUCTION OF TAX AT SOURCE WHILE CREDITING THE TRANSACTION CHARGES TO THE ACCOUNT OF THE STOCK EXCHANGE. THE CIT(A) IN THE BACKDROP OF HIS AFORESAID OB SERVATIONS UPHELD THE ORDER OF THE A.O TREATING THE ASSESSEE AS BEING IN DEFAULT , AND RESULTANTLY SUSTAIN ED THE DEMAND OF RS.75,608/ - RAISED TOWARDS TAX U/S 201(1) AND INTEREST RS.44,609/ - U/S. 201(1A). P A G E | 8 (B) LEASE LINE CHARGES: - 8. THAT THE ASSESSEE SUBMITTED BEFORE THE CIT(A) THAT THE LEASE LINE CHARGES WERE PAID TO THE INTERNET SERVICE PROVIDER FOR FASTER INTERNET ACCESS THROUGH ONE DEDICATED LEASE LINE , AND AS SUCH THE PAYMENT HAD BEEN MADE FOR USE OF TELECOMMUNICATION SERVICES/CO NNECTIVITY 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 PAYME NT, 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 SOURC E AS PER E XPLANATION 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 ASSESS EE 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.9 0,799/ - 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 MATTER IN APPEAL BEFORE US. THAT AT THE VERY OUTSET OF THE HEARING OF THE APPEAL IT WAS SUBMITTED BY THE LD. AUTHORIZED REPRESENTATIVE (FOR SHORT A.R ) FOR THE ASSESSEE, THAT THE INTERNET AND COMMUNICATION CHARGES WHICH WERE PAID BY THE ASSESSEE , NOT BEING IN THE NATURE OF RENDERI NG OF SPECIALIZED, EXCLUSIVE AND INDIVIDUAL SERVICE, BUT RATHER WERE IN THE NATURE OF PAYMENTS MADE FOR PROVISION OF A P A G E | 9 FACILITY, THEREFORE , THE SAME DID NOT PARTAKE THE COLOR AND CHARACTER AS THAT OF FEES FOR TECHNICAL SERVICES, AND THUS WERE NOT LIABLE TO BE SUBJECTED TO ANY DEDUCTION OF TAX AT SOURCE U/S. 194J OF THE ACT . IT WAS SUBMITTED BY THE LD. A.R. THAT THE RELIANCE PLACED BY THE CIT(A) ON THE JUDGMENT OF THE HONBLE HIGH COURT IN THE CASE OF CIT VS. KOTAK SECURITIES LTD. (2012) 340 ITR 333 (BOM ), THEREIN HOLDING THAT THE TRANSACTION CHARGES PAID BY AN ASSESSEE TO STOCK EXCHANGE FALLS WITHIN THE FOUR CORNERS OF FEES FOR TECHNICAL SERVICES U/S.194J, WHICH THUS RENDERED THE ASSESSEE LIABLE FOR DEDUCTION OF TAX AT SOURCE WHILE CREDITING SUCH TRANS ACTION S TO THE STOCK EXCHANGE, HAD BEEN REVERSED BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. KOTAK SECURITIES LTD. (2016) 383 ITR 1(SC). IT WAS SUBMITTED BY THE LD. A.R. THAT THE HONBLE APEX COURT IN THE CASE OF KOTAK SECURITIES LTD. (SUPRA) HAD CLARIFIED THAT AS THE PAYMENTS MADE BY THE ASSESSEE TOWARDS INTERNET AND COMMUNICATION CHARGES WERE NOT IN THE NATURE OF PAYMENTS MADE FOR ANY EXCLUSIVE OR CUSTOMIZED SERVICES , BUT RATHER FOR A FACILITY WHICH WAS AVAILABLE TO ALL, THEREFORE THE SAME CO ULD NOT BE TERMED AS TECHNICAL SERVICES, AND THUS THE ASSESSEE COULD NOT TO BE FASTENED WITH ANY LIABILITY FOR DEDUCT ION OF TAX AT SOURCE IN RESPECT OF SUCH PAYMENTS U/S. 194J . PER CONTRA, THE LD. D.R. RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 10 . THE LD. A.R FURTHER ADVERTING TO THE ISSUE PERTAINING TO PAYMENTS MADE BY THE ASSESSEE TOWARDS LEASE LINE CHARGES THEREIN SUBMITTED THAT THE SAID PAYMENTS WERE MERELY IN THE NATURE OF REIMBURSEMENT OF CHARGES PAID/PAYABLE BY STOCK EXCHANGE TO THE DEPARTME NT OF TELECOMMUNICATION, AND AS SUCH IN THE ABSENCE OF ANY ELEMENT OF INCOME INVOLVED THEREIN, THE ASSESSEE COULD NOT BE SADDLED WITH ANY LIABILITY FOR DEDUCTION OF TAX AT SOURCE AS REGARDS THE SAME. THE LD. A.R IN SUPPORT OF HIS AFORESAID CONTENTIONS RELIED ON THE JUDGMENT S OF THE HONBLE HIGH COURT OF BOMBAY PASSED IN THE FOLLOWING CASE: - P A G E | 10 (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 B O ND TRADING COMPANY LTD. (ITA NO. 4177 OF 2010, DATED 14.10.2011) (BOM) THE LD. A.R RELYING ON THE AFORESAID JUDICIAL PRONOUNCEMENT S THEREIN SUBMITTED THAT AS HELD BY THE HONBLE JURISDICTIONAL HIGH CO URT , 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 CONTENTION S SO RAISED BEFORE US. 11 . WE HAVE HEARD THE AUTHORIZED REPRESENTATIVE S 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 P RESENT 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 FOR AVAILING OF ANY SPECIAL, EXCLUSIVE OR CUSTOMIZED SERVICES RENDERED TO THE USER OR CONSUMER WHO MAY APPROACH THE SERVICE PROVIDER FOR SUCH SERVICE . WE FIND THAT THE ISSUE INVOLVED IN THE PRESENT CASE IS SQUARELY COV ERED BY THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. KOTAK SECURITIES LTD. (2016) 383 ITR 1) (SC), WHEREIN THE HONBLE APEX COURT HAD HELD AS UNDER: - 8. A READING OF THE VERY ELABORATE ORDER OF THE ASSESSING OFFICER CONTAINING A LENGTHY DISCOURSE ON THE SERVICES MADE AVAILABLE BY THE STOCK EXCHANGE WOULD GO TO SHOW THAT APART FROM FACILITIES OF A FACELESS SCREEN BASED TRANSACTION, A CONSTANT UPGRADATION OF THE SERVICES MADE P A G E | 11 AVAILABLE AND SURVEILLANCE OF THE ESSENTIAL PARAMETERS CONNECTED WITH THE TRADE INCLUDING THOSE OF A PARTICULAR/ SINGLE TRANSACTION THAT WOULD LEAD CREDENCE TO ITS AUTHENTICITY IS PROVIDED FOR BY THE STOCK EXCHANGE. ALL SUCH SERVICES, FU LLY AUTOMATED, ARE AVAILABLE TO ALL MEMBERS OF THE STOCK EXCHANGE IN RESPECT OF EVERY TRANSACTION THAT IS ENTERED INTO. THERE IS NOTHING SPECIAL, EXCLUSIVE OR CUSTOMISED SERVICE THAT IS RENDERED BY THE STOCK EXCHANGE. TECHNICAL SERVICES LIKE MANAGERIAL AND CONSULTANCY SERVICE WOULD DENOTE SEEKING OF SERVICES TO CATER TO THE SPECIAL NEEDS OF THE CONSUMER/USER AS MAY BE FELT NECESSARY AND THE MAKING OF THE SAME AVAILABLE BY THE SERVICE PROVIDER. IT IS THE ABOVE FEATURE THAT WOULD DISTINGUISH/IDENTIFY A SE RVICE PROVIDED FROM A FACILITY OFFERED. WHILE THE FORMER IS SPECIAL AND EXCLUSIVE TO THE SEEKER OF THE SERVICE, THE LATTER, EVEN IF TERMED AS A SERVICE, IS AVAILABLE TO ALL AND WOULD THEREFORE STAND OUT IN DISTINCTION TO THE FORMER. THE SERVICE PROVIDED BY THE STOCK EXCHANGE FOR WHICH TRANSACTION CHARGES ARE PAID FAILS TO SATISFY THE AFORESAID TEST OF SPECIALIZED, EXCLUSIVE AND INDIVIDUAL REQUIREMENT OF THE USER OR CONSUMER WHO MAY APPROACH THE SERVICE PROVIDER FOR SUCH ASSISTANCE/SERVICE. IT IS ONLY SERVIC E OF THE ABOVE KIND THAT, ACCORDING TO US, SHOULD COME WITHIN THE AMBIT OF THE EXPRESSION TECHNICAL SERVICES APPEARING IN EXPLANATION 2 OF SECTION 9(1)(VII) OF THE ACT. IN THE ABSENCE OF THE ABOVE DISTINGUISHING FEATURE, SERVICE, THOUGH RENDERED, WOULD B E MERE IN THE NATURE OF A FACILITY OFFERED OR AVAILABLE WHICH WOULD NOT BE COVERED BY THE AFORESAID PROVISION OF THE ACT. 9. THERE IS YET ANOTHER ASPECT OF THE MATTER WHICH, IN OUR CONSIDERED VIEW, WOULD REQUIRE A SPECIFIC NOTICE. THE SERVICE MADE AVAILABL E 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 TRADI NG 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 A BOVE 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 PR OVIDED TO ONE OR A SECTION OF THE MEMBERS OF THE STOCK EXCHANGE TO DEAL WITH SPECIAL SITUATIONS FACED BY SUCH A MEMBER(S) OR THE SPECIAL NEEDS OF SUCH MEMBER(S) IN THE CONDUCT OF BUSINESS IN THE STOCK EXCHANGE. IN OTHER WORDS, THERE IS NO EXCLUSIVITY TO TH E SERVICES RENDERED BY THE STOCK EXCHANGE AND EACH AND EVERY MEMBER HAS TO NECESSARILY AVAIL OF SUCH SERVICES IN THE NORMAL COURSE OF TRADING IN SECURITIES IN THE STOCK EXCHANGE. SUCH SERVICES, THEREFORE, WOULD UNDOUBTEDLY BE APPROPRIATE TO BE TERMED AS FA CILITIES PROVIDED BY THE STOCK EXCHANGE ON PAYMENT P A G E | 12 AND DOES NOT AMOUNT TO TECHNICAL SERVICES PROVIDED BY THE STOCK EXCHANGE, NOT BEING SERVICES SPECIFICALLY SOUGHT FOR BY THE USER OR THE CONSUMER. IT IS THE AFORESAID LATTER FEATURE OF A SERVICE RENDERED WHICH IS THE ESSENTIAL HALLMARK OF THE EXPRESSION TECHNICAL SERVICES AS APPEARING IN EXPLANATION 2 TO SECTION 9(1)(VII) OF THE ACT. 10. FOR THE AFORESAID REASONS, WE HOLD THAT THE VIEW TAKEN BY THE BOMBAY HIGH COURT THAT THE TRANSACTION CHARGES PAID TO T HE BOMBAY STOCK EXCHANGE BY ITS MEMBERS ARE FOR 'TECHNICAL SERVICES' RENDERED IS NOT AN APPROPRIATE VIEW. SUCH CHARGES, REALLY, ARE IN THE NATURE OF PAYMENTS MADE FOR FACILITIES PROVIDED BY THE STOCK EXCHANGE. NO TDS ON SUCH PAYMENTS WOULD, THEREFORE, BE D EDUCTIBLE UNDER SECTION 194J OF THE ACT. WE THUS IN LIGHT OF THE AFORESAID SETTLED POSITION OF LAW SO LAID DOWN BY THE HONBLE APEX COURT, THEREFORE SET ASIDE THE ORDER OF THE CIT(A) HOLDING THE ASSESSEE AS BEING IN DEFAULT U/SS . 201(1)/201(1A) FOR FAILING TO DEDUCT TAX AT SOURCE ON PAYMENTS MADE TOWARDS INTERNET AND COMMUNICATION CHARGES. THE GROUND OF APPEAL NO. 1 RAISED BY THE ASSESSEE BEFORE US IS ALLOWED. 1 2 . WE NOW TAKE UP THE ISSUE AS REGARDS THE LIABILITY OF THE ASSESSEE T O DEDUCT TAX AT SOURCE ON PAYMENTS TOWARDS LEASE LINE CHARGES. WE FIND THAT THE ISSUE INVOLVED HEREIN IS NO MORE RES INTEGRA , AS THE SAME IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE JUDGMENT OF THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF: - (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 B O ND TRADING COMPANY LTD. (ITA NO. 4177 OF 2010, DATED 14.10.2011) (BOM). WE FIND THAT T HE HONBLE JURISDICTIONAL HIGH COURT IN THE AFORESAID JUDGMENTS HAD CLEARLY HELD THAT VSAT AND LEASE LINE CHARGES PAID BY THE ASSESSEE TO STOCK EXCHANGE ARE MERELY IN THE NATURE OF P A G E | 13 REIMBURSEMENT OF THE CHARGES PAID/PAYABLE BY THE STOCK EXCHANGE TO THE DEPARTM ENT OF THE TELECOMMUNICATION , AND THUS IN THE ABSENCE OF ANY ELEMENT OF INCOME INVOLVED IN THE SAID PAYMENTS , THE ISSUE AS REGARDS DEDUCTION OF TAX AT SOURCE ON THE SAME DOES NOT ARISE AT ALL. WE ARE OF THE CONSIDERED VIEW THAT IN THE BACKDROP OF THE AFORE SAID JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT , THE ORDER OF THE CIT(A) TREATING THE ASSESSEE AS BEING IN DEFAULT U/S. 201(1)/201(1A) IN RESPECT OF FAILURE TO DEDUCT TAX AT SOURCE AS REGARDS THE PAYMENTS MADE TOWARDS LEASE LINE CHARGES , CANNOT BE S USTAINED, AND IS THUS SET ASIDE. THE GROUND OF APPEAL NO. 2 RAISED BY THE ASSESSEE BEFORE US IS ALLOWED. 11. THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 /06/2017 SD/ - SD/ - (R.C. S HARMA ) (R AVISH SOOD ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; 21 .06.2017 PS. ROHIT KUMAR P A G E | 14 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI