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| The Tax Publishers2019 TaxPub(DT) 7329 (Del-Trib) INCOME TAX ACT, 1961
Section 194H
Banker did not act on behalf of assessee for rendering any kind of service. The contract of guarantee did not give any rise to principal - agent relationship between assessee and the bank and, therefore, consideration received by the bank on account of guarantee commission could not be reckoned as commission as contemplated under section 194H and accordingly, there was no requirement to deduct tax from this payment.
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Tax deduction at source - Under section 194H - Bank guarantee charges -
Assessee claimed deduction of bank guarantee charges paid by it. AO disallowed deduction for want of TDS under section 194H. Held: 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 income must act on behalf of the principal. In the instant case, banker did not act on behalf of assessee for rendering any kind of service. The contract of guarantee did not give any rise to principal agent relationship between assessee and the bank and, therefore, consideration received by the bank on account of guarantee commission could not be reckoned as commission as contemplated under section 194H and accordingly, there was no requirement to deduct tax from this payment.
Relied:CIT v. JDS Apparels (P.) Ltd. (2015) 370 ITR 454 (Del.) : 2015 TaxPub(DT) 232 (Del-HC), Dy. CIT v. PRL Projects & Infrastructure Ltd. ITA No. 5010/Del/2015 (Del Trib.) : 2018 TaxPub(DT) 1357 (Del-Trib), ACIT v. Jaypee Sports International Ltd. ITA No. 4279 to 4281/Del/2015 (Del Trib.) (relevant extracts), Dy. CIT v. Kotak Securities (2012) 50 SOT 158 (Mum-Trib.) : 2012 TaxPub(DT) 735 (Mum-Trib), Asstt. CIT v. Jet Airways ITA No. 5264/Del/2012 (Mum-Trib.) : 2014 TaxPub(DT) 0133 (Mum-Trib) and Dy. CIT v. Laqshya Media (P.) Ltd. (2016) 182 TTJ 318 (Mum-Trib.) : 2016 TaxPub(DT) 3688 (Mum-Trib)
REFERRED :
FAVOUR : In assessee's favour.
A.Y. : 2010-11
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