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II. Direct Taxes Case Laws:
1. CIT Vs. M/s Kotak Securities Ltd., Civil Appeal No. 3141 of 2016, Date of Decision: 29.03.2016, Supreme Court of India
Whether
transaction charges paid by a member of the Bombay Stock Exchange for
sale and purchase of shares amounts to payment of a fee for technical
services?
Held_No
Brief Facts:
In the present case, the High Court of Bombay has held that the
transaction charges paid by a member of the Bombay Stock Exchange to
transact business of sale and purchase of shares amounts to payment of a
fee for 'technical services' rendered by the BSE, thus, deducting the
TDS u/s 194J of the Income Tax Act, 1961. The said deductions not having
been made by the assessee, the entire amount paid to the BSE on account
of transaction charges was not deducted u/s 40(a)(ia) of the Act in
computing the income under “profits and gains of business or profession”
AY 2005-06. Notwithstanding the above, the Bombay High Court held with
regard to the liability to deduct TDS on transaction charges paid to the
BSE right from the year 1995 i.e. coming into effect of Section 194J
till the AY in question, benefit, in the facts of the case, should be
granted to the assessee and the disallowance made by the AO u/s
40(a)(ia) of the Act must be held to be not correct.
Held:
The Hon’ble Supreme Court held that there is no exclusivity to the
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 facilities provided by the
Stock Exchange on payment 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. The view taken by the Bombay High court that the transaction
charges paid to the BSE by its members are for technical services
rendered is not an appropriate. Thus, No TDS on such payments would be
deductible u/s 194J of the Act.
(Please click here for judgment)
2. Nirmal Kumar Jain Vs. ITO, I.T.A. Nos. 6696 & 6645/Del/2014, Date of Order: 02/03/2016, ITAT - Delhi
Issue:
Whether provisions of Section 271B & 271(1)(c) of the Income
Tax Act, 1961 can be invoked in case where assesse does not maintain
books of accounts?
HELD_NO
Brief Facts:
The assessee is an individual who filed return declaring total income
inclusive of salary and interest from two partnership firms. The AO
called for information u/s 133(6) from four bank accounts in which
deposits were made by the assessee totaling to Rs.1.43 crore. When AO
asked for the books of account, the assessee stated that no such books
were maintained so, he estimated the assessee’s sales outside books of
account at Rs.1.50 crore. By applying estimated profit rate of 5% on
such sales, he made an addition of Rs.7.50 lac. Thereafter, the AO
imposed penalty u/s 271B and also u/s 271(1)(c) of the Act.
Held:
It was held that penalty u/s 271B ought not to have been levied.
Hon’ble ITAT held that penalty u/s 271B should be deleted on the basis
of judgment of Hon’ble Gauhati High Court in Suraj Mal Parasuram Todi
vs.CIT (1996) 222 ITR 691 (Gau.), that where no books of account are
maintained, penalty should be imposed for non-maintenance of books of
account u/s 271A and no penalty can be imposed u/s 271B for violation of
section 44AB requiring audit of accounts.
As for
the imposition of penalty u/s 271(1)(c), ITAT follow the decision of
Hon’ble Delhi high court in case of CITvs. Aero Traders P. Ltd. (2010)
322 ITR 316 (Del) and held that the addition has resulted on estimation
of income and cannot be considered as concealment, so, there is no basis
for imposition of penalty. Therefore, ITAT ordered for deletion of
penalties.
(Please click here for judgment)
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