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| The Tax Publishers2020 TaxPub(DT) 0130 (Del-Trib) INCOME TAX ACT, 1961
Section 194H
Since in the absence of any principal agent relationship between the bank issuing bank guarantee and assessee, transaction between them was not transaction between the principal and agent so as to attract the tax deduction under section 194H. Thus, addition made in this case under section 40(a)(ia) could not be sustained.
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Tax deducted at source - Under section 194H - Bank guarantee commission -
Assessee was engaged in business of constructing highways, roads and commercial buildings for corporate sector, etc. AO noticed that assessee paid a bank guarantee commission and such payments were in the nature of those mentioned in Notification No. 56/2012 dt. 31-12-2012, not covered within the definition of 'interest' under section 2 (28A). Therefore, exemption provided under section 194A (3 (iii) (a) was not applicable to such payments, since payment for such services can be made without deduction of TDS to scheduled banks. AO made addition on account of disallowance of bank guarantee commission under section 40(a)(ia). Held: The issue is no longer res Integra and has squarely been covered in assessee's own case for the earlier year by orders of Tribunal, while respectfully following the same that in the absence of any principal agent relationship between the bank issuing bank guarantee and assessee, transaction between them was not transaction between the principal and agent so as to attract the tax deduction under section 194H. Thus, addition made in this case under section 40(a)(ia) could not be sustained.
REFERRED : Kotak Securities Limited v. DCIT (2012) 147 TTJ 0443 (Mum) : 2012 TaxPub(DT) 0735 (Mum-Trib)
FAVOUR : In assessee's favour.
A.Y. : 2013-14
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