Kolkata bench of Income Tax Appellate Tribunal (ITAT) recently held that brokerage or commission paid in connection with share transaction is not liable for Tax Deduction at source under the provisions of the Income Tax Act, 1961.
Assessee is a private company in the present case has duly filed its return of income and declared a total income of Rs. 15,75,802.
During the course of assessment proceedings the Assessing Officer (AO) found that the assessee had paid sub brokerage of Rs.10,67,725 to its agents for doing share business in its name and he also disallowed the expenses of the said amount. He was of the view that the sub brokerage given to the agents was for doing business and not for sale of shares and securities. Therefore, it cannot be said that the sub-brokerage was against brokerage on securities, but it was for doing business on behalf of the company as its agents, which was fixed on the basis of the volume of the transactions, Hence he opinioned that TDS on such payments should have been deducted.
However, Assessee maintained that as per Section 194H of the Income Tax Act 1961 TDS was not deductible on brokerage on securities.
On appeal, the CIT(A) also confirmed the addition made by the AO. Aggrieved by the order of the authority assessee was on appeal before the tribunal bench.
After hearing the submissions of both the parties the division bench comprising of Judicial Member A.T. Varkey and Accountant Member Dr. A.L. Saini objected the findings of lower authorities. The bench held that brokerage/commission paid in connection with the securities was not liable for deduction of tax at source, as mentioned in explanation 1 of section 194H of the Act.
The Tribunal bench further observed that brokerage paid in connection with the services rendered in the course of business of buying and selling of units of mutual fund or in relation to transactions pertaining to mutual fund is not covered by provisions of tax at source in view of the explanation (i) to section 194H of the Act. Therefor it can be concluded that brokerage or commission paid in connection with share transaction is not liable for TDS.
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