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2016 (7) TMI 1356 - AT - Income TaxTDS u/s 194H - tds on Bank Guarantee Commission and Miscellaneous Bank charges - interest u/s 201(1A) - Held that - DR did not bring any material on record to reverse the well reasoned findings of the ld.CIT(A) that there is no principal agent relationship between the bank issuing the bank guarantee and the assessee. When bank issues the bank guarantee, on behalf of-the assessee. When bank issues the bank guarantee, on behalf of the assessee, all it does is to accept the commitment of making payment of a specified amount to, on demand, the beneficiary and it is in consideration of this commitment, the bank charges a fees which is customarily termed as Bank Guarantee Commission . While it is termed as guarantee commission it is not the nature of commission as it is understood in common business parlance and in the context of the section 194H. This transaction, in our considered view, is not a transaction between principal and agent so as to attract the tax deduction requirements u/s.194H. See M/s. Kotak Securities Ltd case 2012 (2) TMI 77 - ITAT MUMBAI CIT(A) correctly held that the assessee was not required to deduct TDS u/s 194H the question of levy of interest u/s 201(1A) does not arise - Decided in favour of assessee.
Issues:
- Deletion of processing fees - Deletion of deduction of Bank Guarantee Commission and Miscellaneous Bank charges u/s 194H of the Income Tax Act, 1961 - Deletion of interest u/s 201(1A) of the Act Deletion of Processing Fees: The appellant challenged the order of the ld.CIT(A) regarding the deletion of processing fees. The AO observed that the assessee debited amounts for processing fees and bank guarantee commission without deducting TDS. The appellant argued that processing fees are akin to upfront interest and should not be subjected to TDS. The ld.CIT(A) agreed with the appellant, citing precedents where processing fees were considered as interest falling within an exclusion from TDS requirements. Consequently, the demand raised by the AO was deleted, and the decision of the ld.CIT(A) was upheld. Deletion of Deduction of Bank Guarantee Commission and Miscellaneous Bank Charges: The appellant contested the deletion of deduction of Bank Guarantee Commission and Miscellaneous Bank charges under section 194H. The ld.CIT(A) relied on a decision by the Hon'ble ITAT to support the deletion, emphasizing that the transaction did not involve a principal-agent relationship, thus not necessitating TDS deduction. Following the ITAT's decision, the demand raised by the AO for non-deduction of TDS on Bank Guarantee Commission & Miscellaneous Bank Charges was deleted. The appellate tribunal confirmed the ld.CIT(A)'s decision, rejecting the grounds raised by the department. Deletion of Interest u/s 201(1A) of the Act: Regarding the levy of interest u/s 201(1A) of the Act, the ld.CIT(A) determined that since the assessee was not required to deduct TDS u/s 194H, the question of levying interest under section 201(1A) did not arise. The department challenged this decision, but the tribunal upheld the ld.CIT(A)'s ruling, noting the absence of material to overturn the decision. Consequently, the tribunal dismissed the department's appeal, affirming the ld.CIT(A)'s decision on the interest issue.
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