2015 (6) TMI 1095 - AT - Income Tax

TDS u/s 194H - non deduction of tds on payments of bank guarantee commission made to the bank - principal agent relationship - interest u/s 201(1A) - Held that - TDS was not required to be deducted under section 194H, therefore, levy of interest under section 201(1A) was not in accordance with law. Since no contrary decision was brought to our notice, respectfully following the said decision of Tribunal in the case of Kotak Securities Ltd.(2012 (2) TMI 77 - ITAT MUMBAI )wherein held when bank issues bank guarantee on behalf of assessee, there is no principal agent relationship between bank and assessee and, therefore, assesee is not required to deduct tax at source under section 194H from payments of bank guarantee commission made to the bank, we decline to interfere in the relief granted by Ld. CIT(A). - Decided in favour of assessee.

Summary

Issues: Appeal against order allowing appeal on bank guarantee charges and interest deletion under IT Act, 1961 for assessment year 2010-11.

Issue 1: Bank Guarantee Charges and TDS under Section 194H
The appeal filed by the Revenue challenges the decision of the Ld. CIT(A) allowing the appeal of the assessee regarding bank guarantee charges not being considered as "commission" and thus no TDS deduction required under section 194H of the IT Act, 1961. The Ld. AR cited the Mumbai ITAT decision in the case of Kotak Securities Ltd. vs. DCIT, wherein it was held that no principal agent relationship exists between the bank issuing a bank guarantee and the assessee, hence TDS deduction is not mandatory. The Ld. CIT(A) relied on this precedent and ruled in favor of the assessee. The Tribunal, noting the absence of any contrary decision, upheld the CIT(A)'s decision, declining to interfere in the relief granted. Consequently, the appeal by the Revenue on this issue was dismissed.

Issue 2: Interest Deletion under Section 201(1A)
The second ground of appeal pertains to the deletion of interest under section 201(1A) of the IT Act, 1961 by the Ld. CIT(A), which was determined by the Assessing Officer. The deletion of interest was considered consequential to the quantum deletion of bank guarantee charges. The Tribunal, following the decision in the case of Kotak Securities Ltd., upheld the CIT(A)'s decision on the TDS issue, thereby leading to the conclusion that the levy of interest under section 201(1A) was not in accordance with the law. As no contradictory decision was presented, the Tribunal dismissed the Revenue's appeal on this ground as well. The order was pronounced in the open court on 04/06/2015, affirming the relief granted by the Ld. CIT(A) regarding the interest deletion under section 201(1A) for the assessment year 2010-11.

This detailed analysis of the judgment highlights the key issues involved in the appeal and the Tribunal's decision based on legal interpretations and precedents cited during the proceedings.