ITO (TDS) (OSD) RG 2, MUMBAI vs. INFRASTRUCTURE LEASING & FINANCIAL SERVICES LTD, MUMBAI

आदेश / O R D E R Per Ashwani Taneja (Accountant Member):

"i. On the facts and circumstances of the case and in law, the CIT(A) erred in allowing the appeal of the assessee on the basis of reasoning that bank guarantee commission are 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 learned CIT(A) has erred in deleting the interest u/s 201(IA) of the IT Act, 1961, determined by the AO as the tax determined has already been deleted by her on the bank guarantee commission and interest deletion is consequential to the quantum deletion for which further appeal has been recommended vide ground No. 1."

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3.1. During the course of hearing, it has been brought to the notice of the bench by Ld. Counsel that this issue is covered with the judgment of Hon’ble Tribunal in the case of M/s. Kotak Securities Ltd. in dated 03.02.2012, wherein it has been held by the Hon’ble Bench that TDS is not required to be deducted u/s 194H on the payment made by the assessee to the bank on account of guarantee commission charges.

3.2. On the other hand, Ld. DR has relied upon the order of AO.

3.3. We have heard both the parties and gone through the cases relied upon before us. It is noted that Hon’ble coordinate bench in the case of M/s. Kotak Securities Ltd., (supra) has held as under:

"In the case before us, there is no principal agent relationship between the bank issuing bank guarantee and 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 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 4 Infrastructure Leasing & F. S. Ltd. 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. We are therefore of the considered view that the CIT(A) indeed erred in holding that the assessee was indeed under obligation to deduct tax at source u/s 194H from payments made by the assessee to various banks. As we have held that the assessee was not required to deduct tax at source u/s 194H, the question of levy of interest u/s 201(1A) cannot arise. In view of the above discussion, we quash the impugned demands u/s 201(1) and 201(1A) r.w.s. 194H. We therefore, also see no need to deal with other peripheral legal issues raised by the assessee.”

It may be seen from the above, it is clearly held by the Hon’ble Coordinate Bench that no TDS is required to be deducted on the amount of payment made on account of guarantee commission charges to the bank. No contrary decision has been brought to our notice by the Ld. DR. Thus, the issue being covered with the aforesaid judgment, we hold that Ld. CIT(A) has rightly followed the order of M/s. Kotak Securities Ltd., for deciding that no TDS was required to be deducted by the assessee. No interference is called in the order of Ld. CIT(A) same is upheld. Thus, grounds raised by the Revenue are dismissed.

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Order pronounced in the open court on 6th January, 2016.