Law:

Section:

OCTOBER 21, 2011 Section 194J of the Income-tax Act, 1961 - Deduction of tax at source - Professional technical service fee - Assessment year 2005-06 - Transaction charges paid by stock-brokers to stock exchange for availing BOLT system of trading in securities constitutes fees for technical services under section 194J and hence liable to TDS [In favour of revenue][Paras 27-29] FACTS â–  The respondent-assessee was a company engaged in the business of share broking, depositories, mobilisation of deposits and marketing of public issues. The assessee had paid to the BSE a sum towards transaction charges. The question is, whether the said payment of transaction charges constituted payment of 'fees for technical services' covered under section 194J so as to hold that the assessee was liable to deduct tax at source at the time of crediting the transaction charges to the account of the stock exchange. Transaction charges are levied by the BSE on the members who enter into transactions in securities/derivatives through the BOLT system provided by the BSE. HELD â–  The argument that in the present case there was no contract for rendering technical/managerial service is without any merit, because, the very object of providing the BOLT system is to provide a complete platform for carrying on the trading in securities/derivatives. â–  The fact that the stock exchange levies or collects lesser transaction charges where the value of the transaction is higher, cannot be a ground to hold that no managerial services are rendered by the stock exchange, because, what should be the criteria for levying the transaction charges is left to the discretion of the stock exchange. [Para 25] â–  The fact that the BOLT system provided by the stock exchange has inbuilt automatic safeguards which automatically gives alert signal if the fluctuation in the prices of the securities exceed a particular limit prescribed by the stock exchange does not mean that the managerial services are not rendered, because, firstly, the in-built mechanism in the BOLT system itself is a part of the managerial service rendered by the stock exchange and, secondly, even the in-built mechanism…

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