Supplier drawing hundi on buyer and routing it through his banker with instructions to charge interest on amount of hundi from date of acceptance to date of actual payment - Whether tax is deductible at source by party retiring hundi from interest at the time of making payment to bank

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..... drawing hundi on buyer and routing it through his banker with instructions to charge interest on amount of hundi from date of acceptance to date of actual payment - Whether tax is deductible at source by party retiring hundi from interest at the time of making payment to bank CLARIFICATION 1 1. I am directed to invite a reference to the Boards Circular No. 48 [F. No. 275/195/70-ITJ], dated .....

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..... annot technically be held as including interest and therefore no tax need be deducted at source from such payments by the bank. Further, the buyer need not deduct any tax from the payment made by him on due date to the bank in respect of such discounted bill inasmuch as these payments to a bank or a banking cooperative society, conforming to the exemption granted by section 194A(3)(iii)(a). 2. .....

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..... the supplier draws a hundi on the buyer and routes it through his banker along with transport documents with instructions to deliver the documents on retirement of the hundi and to charge interest on the amount of hundi from the date of acceptance thereof to the date of actual payment. A question has been raised whether, in such circumstances, tax is deductible at source by the party retiring the .....

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