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TMI Blog2019 (10) TMI 656X X X X Extracts X X X X X X X X Extracts X X X X ..... e commission also partakes the character of interest u/s 2(28A) of the Act and as such, exemption provided u/s 194A(3)(iii) is available to the assessee qua such payment. So, we are of the considered view that the CIT (A) has erred in not following the decision of Kotak Securities Ltd. [ 2012 (2) TMI 77 - ITAT MUMBAI] on the ground that it is not applicable having been pronounced before the issue of Notification No.56/2012 dated 31.12.2012 because ordinarily any provision of the statute has to be read having prospective effect and not having retrospective effect unless it is specifically provided. So, when there is no principal-agent relationship between the bank and the assessee, deduction of tax at source on commission or brokerage is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to the deductee. 5. That on the fact and circumstances of the case and in law the Ld. CIT(A) has failed to followed the judgment of the Mumbai ITAT in Kotak Securities Ltd. v. DCIT, [2012] 18 taxmann.com 48 (Mum.) which squarely covers the issue holding that Bank guarantee commission is not liable to TDS under section 194H. 6. That on the fact and circumstances of the case and in law, the Ld. CIT(A) failed to consider that a beneficial circular and/or interpretation should be applied retrospectively." 2. Briefly stated the facts necessary for adjudication of the issue at hand are : Assessing Officer (AO) disallowed bank guarantee commission under section 14A (ia) of the Income-tax Act, 1961 (for short 'the Act') on the ground that un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Tribunal by bringing on record any other decision contrary to it. 6. Coordinate Bench of the Tribunal decided the identical issue in favour of the assessee by returning following findings :- "9. In the light of the above discussions, and when we look at the connotations of expression 'commission or brokerage' in its cognate sense, as in the light of the principle of noscitur a sociis as we are obliged to, in our considered view, scope of expression 'commission', for this purpose, will be confined to 'an allowance, recompense or reward made to agents, factors and brokers and others for effecting sales and carrying out business transactions' and shall not extend to the payments, such as 'bank guarantee commission', which are in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of meaning of 'commission or brokerage'. Therefore, what the inclusive definition really contains is nothing but normal meaning of the expression 'commission or brokerage'. In the case of South Gujarat Roofing Tiles Manufacturers Association Vs State of Gujarat [(1976) 4 SCC 601], Hon'ble Supreme Court were in seisin of a situation in which an expression, namely 'processing', was given an inclusive definition, but Their Lordships were of the view that "there could be no other meaning of 'processing' besides what is stated as included in that expression" and that "Though 'include' is generally used in interpretation clause as a word of enlargement, in some cases context might suggest a different intention'. Their Lordships then concluded t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bank charges a fees which is customarily termed as 'bank guarantee commission'. While it is termed as 'guarantee commission', it is not in 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 under section 194H. We are, therefore, of the considered view that the CIT(A) indeed erred in holding that the assessee was indeed under an obligation to deduct tax at source under section 194 H from payments made by the assessee to various banks. As we have held that the assessee was not required to deduct tax at source under section 194 H, the question ..... X X X X Extracts X X X X X X X X Extracts X X X X
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