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Income Tax Appellate Tribunal, I Bench, Mumbai
Before: Shri Jason P. Boaz & Shri Ram Lal Negi
This appeal by Revenue is directed against the order of the CIT(A)-59, Mumbai dated 13.04.2015 for A.Y. 2012-13.
The facts of the case, briefly, are as under: - 2.1 The assessee, the holding company of all companies of the IL&FS group, is principally engaged in the business of investment in group companies, granting of loans and advances to group companies and managing its own business centre. Pursuant to survey action under section 133A of the Income Tax Act, 1961 (in short 'the Act') on 16.03.2012 the Assessing Officer (AO) required the assessee to explain as to why tax was not deducted at source on expenses/payments incurred on account of bank guarantee commission. The AO, after considering the assessee’s explanation that TDS is not required to be made on such payments, was of the opinion that bank guarantee charges are in the nature of commission payments and therefore tax ought to be deducted thereon in accordance
Infrastructure Leasing & Finance Services Ltd. with the provisions of section 194H of the Act. In view of the failure on the part of the assessee to do so, the AO treated the assessee as ‘an assessee in default’ under section 201(1) of the Act and charged interest under section 201(1A) of the Act raising the total demand of `56,42,590/- (i.e. default under section 201(1) – `41,48,963/- and interest under section 201(1A) – `14,93,627/-) in the order under section 201(1)/201(1A) of the Act dated 05.03.2014. 2.2 Aggrieved by the order under section 201(1)/201(1A) of the Act dated 05.03.2014 for A.Y. 2012-13 the assessee preferred an appeal before the CIT(A)-59, Mumbai. The learned CIT(A) disposed off the appeal vide the impugned order dated 13.04.2015. In doing so, following the decision of a Coordinate Bench of this Tribunal in the case of Kotak Securities Ltd. vs. DCIT in dated 03.02.2012 the learned CIT(A) held that the assessee is not liable to deduct tax at source under section 194H of the Act on ‘bank guarantee commission’. 3.1 Revenue, being aggrieved by the order of the CIT(A)-59, Mumbai dated 13.04.2015 for A.Y. 2012-13, has preferred this appeal raising the following grounds: - “
1. Grounds of Appeal: - i) On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the short deduction u/s 201(1) and interest u/s 201(IA) of the I.T. Act, in respect of bank guarantee commission on the basis of reasoning that bank guarantee commission is not in the nature of 'Commission' and no TDS was required to be deducted on such charges paid to bank u/s 194H of the I.T. Act, 1961." ii) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding that no TDS was required to be deducted on bank guarantee commission paid to banks u/s 194H of the I.T. Act, 1961, failing to appreciate that in substance and in fact the relationship between the assessee company and banks was in the nature of principal and agents relationship and the payment made to banks for services rendered falls within the meaning of section 194H of the Act."
2. The appellant craves leave to amend or alter any ground or add a new ground which may be necessary at the time of the hearing of the case or thereafter.
Infrastructure Leasing & Finance Services Ltd. 3. The order of the CIT(A) being erroneous be set aside and Ld. A.O's order be restored.” 3.2.1 We have heard the rival contentions of both the learned D.R. for Revenue in support of the grounds raised
(supra) and of the learned A.R. of the assessee and perused and carefully considered the material on record. At the outset of the hearing, the learned A.R. of the assessee submitted that the issue before us, i.e. of whether the assessee in the case on hand is required to deduct tax at source in respect of payments of bank guarantee commission to banks as per the provisions of section 194H of the Act, has been considered and decided by a Coordinate Bench of ITAT, Mumbai in the assessee’s own case for A.Y. 2011-12 in its order in dated 20.07.2016, a copy of which was placed before the bank. 3.2.2 On a perusal of the order of the aforesaid Coordinate Bench in the assessee’s own case for A.Y. 2011-12 (supra) we find that this issue has been discussed, considered and adjudicated in favour of the assessee; holding that the assessee is not required to deduct tax at source on payments of the bank guarantee commission charges under section 194H of the Act. In coming to this finding the Coordinate Bench followed the decisions of other Coordinate Benches in the case of Kotak Securities Ltd. (ITA No. 5241/Mum/2011 dated 03.02.2012) and in the assessee’s own case for A.Y. 2010-11 in ITA No. 3920/Mum/2014. In its order in assessee’s own case for A.Y. 2011-12 in ITA No. 5241/Mum/2014 dated 20.07.2016, the Coordinate Bench considered the issue and held ass under at paras 2 to 4 thereof: -
2. The brief facts of the case are that the survey operation u/s.133A of the Income Tax Act, 1961( in short “the Act”) was conducted on 16.03.2012 at the premises of assessee company M/s. Infrastructure Leasing & Financial Services Ltd. The assessee company is a holding company of all companies of IL & FS group. The Principle business comprises of investments in group companies granting of loans and advances only to group companies and managing its own business centre. During the course of survey, statement of Mr. S. Srinivas, Vice President (Taxation) was recorded u/s.131 of the Act and it was pointed out to Mr. S. Srinivas, that the expenses incurred on account of ‘Bank Guarantee Commission’ were not subjected to TDS. Mr. S.
Infrastructure Leasing & Finance Services Ltd. Srinivas was of the opinion that ‘Bank Guarantee Commission’ was not covered any of the TDS Provisions and accordingly not liable to TDS. Thereafter, the notice u/s.201(1) /201(1A) of the Act was issued on 12.03.2013 to the assessee. Reply filed. The assessee was find in default of non-deducting of TDS on bank guarantee commission to the tune of Rs.94,19,985/- upon which TDS to the tune of Rs.9,41,999/- was required to be deducted. Thereafter the interest u/s.201(1A) of the Act to the tune of Rs.3,39,120/- was also assessed against the assessee. The total amount was required to be payable to the tune of Rs.12,81,119/-, thereafter, the assessee challenged the said order and the learned CIT(A) allowed the appeal on the assessee in the case of M/s. Kotak Securities Ltd. in dated 03.02.2012 for the ITA No.5241/M/14 A.Y. 2011-12 3 A.Y.2004-05. In the said judgment it was held that no TDS was payable on the bank guarantee commission charges u/s.194H of the Act. Feeling aggrieved the revenue has filed the present appeal before us.
We have heard the arguments advanced by the learned representative of the parties and have gone through the record carefully. The Assessing Officer is of the view that TDS is required to be deducted upon the interest/commission payable on bank guarantee and accordingly the interest is also required to be payable u/s.201(1A) of the Act. In appeal the learned CIT(A) has deleted the addition in view of the case of M/s. Kotak Securities Ltd. (Supra). It is specifically held that no TDS is payable on bank guarantee charges u/s. 194H of the Act. Therefore, the same is not liable to be deducted. Accordingly, the learned CIT(A) deleted the said addition. This issue has further came into existence in the assessee’s own case for the A.Y.2010-11. The Hon’ble Income Tax Appellate Tribunal, while deciding the matter in the assessee’s own case in ITA No.3920/Mum/2014 has also decided the issue in favour of the assessee on relying the case decided by the Hon’ble Tribunal M/s. Kotak Securities Ltd. (Supra). This issue has been squarely covered by the above said judgement, therefore honoring the judgement of the Hon’ble Tribunal mentioned above and finding nothing contrary material against the finding of the said judgement, we are of the view that learned CIT(A) has decided the matter judiciously and correctly which does not required to interfere with at this appellate stage.
Accordingly, appeal of the revenue is hereby dismissed.” Following the aforesaid order of the Coordinate Bench in the assessee’s own case for A.Y. 2011-12 in ITA No. 5241/Mum/2014 dated 20.07.2016, we hold that the assessee in the case on hand is not required to deduct tax at source under section 194H of the Act in respect of bank guarantee commission/charges paid to banks. In this view of the matter, and finding no merit in the grounds No. 1 to 3 raised by Revenue (supra),