The Delhi bench of the Income Tax Appellate Tribunal (ITAT) has held that the circular issued by the Central Board of Direct Taxes ( CBDT ) clarifying that there is no need to deduct TDS on the Bank Guarantee Commission has retrospective application.
The Assessing Officer disallowed the claim of the assessee by holding that the assessee should have deducted TDS and bank commission/guarantee fee. He has also taken note on CBDT Circular No. 56/2012 and held that the said notification was only applicable from 1st January 2013, and therefore, this notification will not apply upon the assessee.
On the first appeal, the Commissioner of Income Tax (Appeals) too has confirmed the said addition.
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The Tribunal observed that in the circular, the CBDT has clarified that no TDS is required to be deducted on the bank guarantee Commission, etc.
“Such a circular was brought to reduce the hardship and the compliance cost of the assessee. Once a benevolent circular has been issued to remove the hardship for the assessee then it cannot be held that any such payment made prior to the said circular which was causing hardship to the assessees should continue. It is a well-settled proposition that CBDT Circular removing the hardship in favor of the assessee has to be treated as retrospective and accordingly, we hold that no disallowance u/s 40(a)(ia) can be made for non-deduction of TDS. In the result this issue is decided in favor of the assessee,” the Tribunal said.
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