TDS on turnover Tax

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CA Jigar Parikh (Querist)

27 March 2010 Hi

Whether there is any need to deduct tax at source on payment being made for Turnover Tax. In a specific transaction, BSE bills to its DP for the turnover tax and the DPs makes payment to them. The turnover tax billed to DP is on actual basis where as the DP collects turnover tax from the client (i.e normal person trading in shares) on certain percentage of the trade.

The question is...whether the TDS is to be deducted on payment made to BSE(for turnover tax)? (If yes, under which section?) I suppose, the TDS to be deducted, if any, will be on that amount for which the payment is being made to BSE. Also, the amount has no impact on the P&L of the company. It is routed through Balance sheet. 1st the liability is created when the trade takes place and thereafter on the basis of bill raised by BSE, payment is made by debiting this turnover tax account!

Aditya Maheshwari

Aditya Maheshwari (Expert)

27 March 2010 It has been decided by the Honourable Mumbai Tribunal in the case of Kotak Securities Ltd. vs. Addl. CIT (2008) 25 SOT 440 (Mum.) that Transaction fees paid to stock exchange can not be said to be a fee paid in consideration of stock exchange rendering any technical services to the assessee. The provisions of section 194J were not attracted, therefore, there was no obligation on the part of the assessee to deduct tax at source consequently, the provisions of section 40(a)(ia) were also not attracted. Hence on similar grounds depository charges would not be liable for deduction of tax at Source under the provisions of Income Tax Act.