I. Recent Updates:
1. M/s. Kotak Securities Limited Vs. CIT, INCOME TAX APPEAL NO. 3111 OF 2009, Date: 21.10.2011, Bombay high court
ISSUES: " Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in holding that the transaction charges paid by the assessee to the stock exchanges were not fees for technical services and, therefore, the provisions of Section 194J were not attracted and consequently the provisions of Section 40(a) (ia) of the Income Tax Act, 1961 were also not attracted ?
Held: plain reading of Section 194J read with Explanation 2 to Section 9(1)(vii) of the Act clearly shows that the expression 'fees for technical services' includes rendering of any managerial services.
A stock exchange manages the entire trading activity carried on by its members and accordingly renders “managerial services”. Consequently, the transaction charges constituted “fees for technical services” u/s 194-J and the assessee ought to have deducted TDS. However, since both the revenue and the assessee were under the bonafide belief for nearly a decade that tax was not deductible at source on payment of transaction charges, no fault can be found with the assessee in not deducting the tax at source in the assessment year in question and consequently disallowance made by the assessing officer under Section 40(a)(ia) of the Act in respect of the transaction charges cannot be sustained.
(Please click here for judgment)
2. Asstt. DIT (Intl. Tax.) v. M/s.Neo Sports Broadcast Private Limited Nimbus Centre , ITA No. 99/Mum/2009 : Asst.Year 2008-2009, Date: 09.11.2011, ITAT mumbai.
Payment made by M/s.Neo Sports Broadcast Private Limited, Mumbai (assessee) to
NIMBUS SPORTS INTERNATIONAL PTE. LTD. (Singapore) (NSI) towards “live feed” for broadcasting cricket matches in India is different from that made for the purpose of broadcast of “recorded feed” and hence is not in the nature of “Royalty payment” and therefore, there was no requirement of deduction of tax under section 195 of the Income-tax Act, 1961.
27. The relevant criteria is the carrying on of business operations in India by the non-resident and not the earning of income by any resident from the use of any product acquired from the non-resident. Where the non-resident only allows some resident to exploit certain right vested in it on commercial basis, it cannot be said that the non-resident has carried out any business activity in India. The act of the assessee earning revenues from India cannot lead to a business connection of Nimbus in India as the transaction between assessee and Nimbus is confined to receiving broadcasting right for a consideration. Whether the assessee earns income or suffers losses from the exploitation of such broadcasting is not the concern of Nimbus. Such transaction of the assessee with Nimbus on principal to principal basis cannot be considered as a ground for holding that Nimbus has a business connection in India and hence the income shall accrue to Nimbus through this business connection in India.
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3. CIT v. M/s State Urban Development Society Date of Decision: 19.10.2011, ITA No. 210 of 2011, Date: P&H High Court
it has been held that reflection in the profit and loss account towards the income is not determinative. The entries in the books of account do not decide the nature of receipts. Since, the grants have been received by the assessee for disbursement and keeping in view the fact that the same cannot be utilized for any other purpose such as distribution for the poverty in furtherance to the object of the Schemes, it cannot be treated as income of the assessee.
(Please click here for judgment)
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