The assessee’s argument, based on Skycell Communications v/s DCIT 251 ITR 53 (Mad), that the stock exchange does not render “managerial or technical services” is not acceptable because while in that case the subscriber had paid a fixed amount for the use of air time on the mobile phone and was not concerned with the technology or the services rendered by the managerial staff in keeping the cellular mobile phone activated, in the case of a stock exchange, there is direct linkage between the managerial services rendered and the transaction charges levied by the stock exchange. The BOLT system provided by the BSE is a complete platform for trading in securities. 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, on facts, because from 1995 to 2005 no tax was deducted and no objection was raised by the AO and because from AY 2006-07 onwards the assessee had deducted TDS, no disallowance u/s 40(a)(i) can be made for AY 2005-06

If the creditor discloses his PAN and claims to be an assessee, the AO cannot himself examine the return and P&L A/c of the creditor and brand the same as unworthy of credence. Instead, he should enquire from the creditor’s AO as to the genuineness of the transaction and whether such transaction has been accepted by the creditor’s AO. So long it is not established that the return submitted by the creditor has been rejected by the creditor’s AO, the assessee’s AO is bound to accept the same as genuine when the identity of the creditor and the genuineness of transaction through account payee cheque has been established

The assessee had a “site” or “project” in India. Under Article 5 (3) of the treaty, such a “site” or “project” is a PE only if it continues for a period of more than six months. As the assessee’s contract was completed in two months, there was no PE under Article 5(3). The argument that the Mumbai office was a PE under Article 5(2) is not acceptable because while Article 5(2) is a general provision, Article 5 (3) is a specific provision which prevails over Article 5(2).

There is no finding by the AO that the assessee furnished inaccurate particulars and that its explanation was not bonafide. Accordingly, the imposition of penalty u/s 271(1)(c) was a “complete non-starter”. A mere erroneous claim made by an assessee, though under a bonafide belief that, it was a claim which was maintainable in law cannot lead to an imposition of penalty. The claim for deduction was made in a bona fide manner and the information with respect to the claims was provided in the return and documents appended thereto. Accordingly, there is no furnishing of “inaccurate particulars”. Making of an incorrect claim for expenditure does not constitute furnishing of inaccurate particulars of income (Reliance Petroproducts 322 ITR 158 (SC) followed)

The Tribunal recorded the finding that in a number of cases the assessee had held the LTCG shares for more than 10 years and that the purchase and sale of shares within a period of one year had been offered as STCG. In the preceding AY, the AO accepted this. As per Gopal Purohit 228 ITR 582 (Bom) (SLP dismissed) it is open to an assessee to trade in the shares and also to invest in shares. When shares are held as investment, the income arising on sale of those shares is assessable as LTCG/STCG. Accordingly, the decision of the Tribunal in holding that the income arising on sale of shares held as investment were liable to be assessed as LTCG/STCG cannot be faulted