“Transaction charges” paid to BSE is “fees for technical services” u/s 194-J

CIT vs. Kotak Securities Limited (Bombay High Court)

The assessee paid Rs.5.17 crores to the Bombay Stock Exchange towards “transaction charges” for getting access to the “BOLT” trading system. The AO held that the payment constituted ‘fees for technical services‘ u/s 194J and that as there was a failure to deduct TDS u/s 194-J, the amount was disallowable u/s 40(a)(i). This was upheld by the CIT (A) though reversed by the Tribunal on the ground that the stock exchange did not render any managerial or technical services. On appeal by the department, HELD reversing the Tribunal (except for AY 2005-06):