The Income Tax Appellate Tribunal, Delhi bench comprising of Judicial Member Shri.Sudhanshu Srivasthava and Accountant Member Shri.Prashant Maharishi held that the provisions relating to TDS under section 194H of the Income Tax Act, 1961 is not applicable to bank guarantee commission paid to banks.
The bench, while holding so, followed the CBDT circular and deleted the penalty proceedings under section 271C of the Income Tax Act levied for non-deduction of tax/ short deduction of tax on account of bank guarantee commission to various banks as per provisions of section 194H of the Act.
This case was about the assesse who had paid bank guarantee commission to various Indian banks without deducting from TDS.Therefore AO passed an order which describes that for all the three years holding the assesse to be in default and levying interest.
The assesse contested the appeal before the CIT who deleted the penalty holding that in the case of the group company he has held that provisions of section 194H do not apply to payment of bank guarantee commission to the bankers.
The revenue had opinioned that CIT(A) committed a mistake in deleting the demand on account of payment of bank guarantee commission. So no TDS shall be done on payment like Bank Guarantee commission.
The tribunal bench, after hearing both the contention proclaimed that the issue involved here was whether the tax should be deducted at source or not on payments made to Indian banks for payment of bank guarantee commission.
The bench observed that the identical issue considered by the CBDT and opinioned that” In exercise of the powers conferred by sub-section (1F) of section 197A of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby notifies that no deduction of tax under Chapter XVII of the said Act shall be made on the payments”.
The bench also noticed the Delhi High Court decision in JDS apparel (P) Ltd and held that bank is not acting as an agent of the assessee.
Read the full text of the Order below.
