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TMI Blog2017 (2) TMI 801X X X X Extracts X X X X X X X X Extracts X X X X ..... as no requirement to deduct TDS on this payment. TDS u/s 194I - Addition with regard to payments made by the assessee for holding/display rights - Held that:- Definitely there is no requirement of deducting TDS under section 194I on such payment, because it does not fall within “rent”. Interest levied u/s. 201 (1A) - Held that:- There was no liability to deduct tax at source for the payment made on account of Processing Fees and Guarantee Commission, that there was no short deduction of tax with regard to payments made for holding/display rights by the assessee. So, the issue of levying interest would not survive. - Decided in favour of assessee - ITA No. 5157/Mum/2014 - - - Dated:- 15-2-2017 - Shri Rajendra, A. M. and Sanjay Garg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urce deducted thereon. From the details furnished by the assessee the AO noted that, the TDS has not been deducted on certain payments. He treated the assessee as assessee-in default for alleged failure to deduct taxes on the payment of, Processing Fee paid to nationalized banks for obtaining loans; e-guarantee fee paid to Nationalized Bank for obtaining guarantee; and payment for putting up advertising hoardings . The relevant details TDS amount and interest levied by the AO are as under:- S. No. Nature of payment Amount paid Alleged failure to deduct tax Interest u/s. 201(1A) 1. Processing fee pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elete the payment on items of expenditure which are capitalized and for the balance payment AO should verify the deduction of TDS and recompute the demand accordingly. 4. We have heard the rival submissions and also perused the relevant material placed on record. The first payment is on account of loan processing fees paid to the Nationalized Bank. This fee is charged by the bank for, processing the application filed by the borrower and for any inspection of title deeds and documents relating to properties and to verify and creation of charge etc. on the property. The Ld. Counsel s case before us is that, such a payment does not entail deduction of tax, because it is in the nature of service fee on borrowed money and hence it is cov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the moneys borrowed or debt incurred or in respect of any credit facility which has not been utilized . From the above, it is quite apparent that the definition of interest will include any service fee or any other charge in respect of money borrowed. Here, processing fee definitely falls within such definition and, therefore, it cannot be reckoned as payment for rendering of any managerial services by the bank as held by the AO. This has been reiterated by the ITAT Pune Bench in the following cases: i) Chintamani Hatcheries (P. ) Ltd v DCIT, reported in [2000] 75 ITD 116 (Pune) (SMC) and ii) Ghatge Patil Ltd v ACIT, reported in [2011] 11 taxman. com 168 (Pune) Despite such a payment to the Nationalized Bank fal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services in the course of buying or selling of goods or in relation to any transaction relating to any asset, valuable article or thing, not being securities . Thus, it is sine qua non that there has to be a principal agent relationship for a payment to be treated as commission or brokerage. The recipient of the income must act on behalf of the principal. Here the banker does not act on behalf of the assessee for rendering any kind of service. The contract of guarantee does not give any rise to principal - agent relationship between the assessee and the bank and, therefore, the consideration received by the bank on account of guarantee commission cannot be reckoned as commission as contemplated under section 194H and accordingly, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion; (b) Material purchased and installation charges; and (c) Purchase of Wall laminated units. Once that is so, then definitely there is no requirement of deducting TDS under section 194I on such payment, because it does not fall within rent . Since CIT(A) has already directed the AO to verify, therefore, we also reiterate the same direction that AO should look into the nature of expenses and if the contention of the Ld. Counsel is correct that these are in the nature of aforesaid payments, then there would be no requirement of deducting tax under section 194I. With this direction, this ground of the revenue is treated as dismissed. 8. In the result, appeal filed by the revenue stands dismissed. Respectfull ..... X X X X Extracts X X X X X X X X Extracts X X X X
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