ACIT, CIRCLE-18(2), NEW DELHI V. NIIT TECHNOLOGIES LTD., NEW DELHI

ITA 3559/DEL/2018

AI Insights

The case involves the DCIT, Circle 4(2) as the appellant and M/s. Coforge Ltd. (formerly NIIT Technologies Ltd.) as the respondent. The appeal by the revenue challenged the order of the CIT(A) which had deleted various additions and disallowances made by the AO, including a significant transfer pricing adjustment and disallowances under sections 14A and 40(a)(ia) of the Income Tax Act. The Tribunal examined the adjustments made by the TPO and the subsequent deletions by the CIT(A), focusing on the application of the arm's length principle to the interest on outstanding receivables and the interpretation of sections 14A and 40(a)(ia) in the context of the payments made to banks.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 312657 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2025
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: H
• Assessment Year: 2013-2014
• Other Referred Cases: CIT Vs. Kusum Healthcare Pvt. Ltd., Ameriprise India (P.) Ltd. v. Asstt. CIT, Pr. CIT v. Kusum Healthcare(P.) Ltd., Avenue Asia Advisors Pvt. Ltd. vs. DCIT, Kotak Securities Lid v. Deputy Commissioner of Income-tax
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S.K. JHADAV
• Assessee Lawyers: ROHIT JAIN; SOMYA
• Keywords: Set aside; Transfer pricing; International transaction; Retrospective amendment; Rule of consistency; TDS; Earning of tax free income; Notional interest; Rule 8D; Arm length price; Working capital adjustments
• Section: 143(3); 14A; 40(a)(ia); 92B

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH, ‘H’: NEW DELHI BEFORE SHRI ANUBHAV SHARMA, JUDICIAL MEMBER AND SHRI MANISH AGARWAL, ACCOUNTANT MEMBER ITA No.3559/Del/2018 [Assessment Year: 2013-14] The DCIT, Circle 4(2), C.R. Building, I.P. Estate, New Delhi-110002 Vs M/s. Coforge Ltd. (erstwhile known as NIIT Technologies Ltd.), 8, Balaji Estate, 3rd Floor, Guru Ravi Das Marg, Kalkaji, New Delhi-110019 PAN-AAACN0332P Revenue Assessee Assessee by Shri Rohit Jain , Adv. & Ms. Somya Jain, CA Revenue by Sh. S.K. Jhadav, CIT DR Date of Hearing 03.04.2025 Date of Pronouncement 29.04.2025 ORDER PER MANISH AGARWAL, AM, This appeal by the revenue is directed against the order of the Commissioner of Income Tax (Appeals), 44, New Delhi, [CIT(A)], dated 28.02.1018 in appeal No. 82/2017-18/CIT(A)-44 for Assessment Year 2013- 14, passed under section 250 of the Income Tax Act, 1961 (hereinafter referred as ‘the Act’). 2. Brief facts of the case are that the assessee is a public limited company and is engaged in the business of information technologies, software service, solutions and system integration including development and export of computer software. The return of income for impugned year was originally filed on 30.11.2013 which stood revised on 31.3.2015 declaring total income at Rs.165,91,929,900/-. The case was selected for complete scrutiny under CASS. The AO referred the case to TPO for determining the Arm length price of international transactions. Thereafter, the draft assessment order under Section 143(3) r.w.s. 144C(1) was issued 2 ITA No.3559/Del/2018 ACIT vs. NIIT Technologies Ltd. and served upon on 30.12.2016. When the assessee informed the AO that it will file appeal before CIT(A) challenging the additions / disallowances proposed, the AO passed the final assessment order u/s 143(3) r.w. Section 144(C)(3)(b) of the Act on 22.02.2017, where the total income of the assessee was assessed ₹ 171,40,04,530/- by making various additions and disallowances, which includes the TPO adjustment of ₹ 5,16,73,139/- towards interest on outstanding receivables from AE, disallowance u/s 14A at ₹ 78,420/- and disallowance u/s 40(a)(ia)at ₹ 30,60,074/- for non- deduction of tax atr source on bank guarantee commission. 3. Aggrieved by the assessment order, assessee preferred appeal before the ld. CIT(A) which stood partly allowed in terms of the impugned order dt. 28.02.2018 passed by CIT(A) 44, New Delhi. Against such order the revenue is in appeal before the Tribunal. In form 36 assessee has taken grounds which were later revised by filing the revised Form No. 36. The revised grounds of appeal so filed are as under: “1. Whether On the facts and in the circumstances of the case, the Ld. CIT(A) is legally justified in deleting the addition of Rs.5,16,73,139/- to the income of the assessee on account of Interest charge on outstanding receivables from the associated enterprises (hereinafter referred as \"the AEs\") even when the provisions of section 92B of the Income Tax Act, 1961(hereinafter referred as \"the \"Act\") have been amended by the Finance Act,2012 with the retrospective effect from 01.04.2002? 2. Whether On the facts and in the circumstances of the case, the Ld. CIT(A) is legally justified in holding that interest from AEs on outstanding receivables cannot be charged if the margin of assessee is better than that of comparables after allowing working capital adjustment by ignoring the fact that the receivables were outstanding beyond agreed period? 3. Whether On the facts and in the circumstances of the case, the Ld. CIT(A) is legally justified in deleting the disallowance of Rs.78,420/- us 14A of the Act by not considering the provisions of section 14A of the Act which stipulate computation of disallowance u/s14A of the Act mandatorily nude Rule 8D(2) of the Income Tax Rules, 1962 ? 4. Whether On the facts and in the circumstances of the case, the Ld. CIT(A) is legally justified in deleting the disallowance of Rs.78,420/- U/s of the Act without considering legal principal that allowability or disallow ability of expenditure under the Act is not conditional upon the earning of the Income as upheld by Hon'ble Superme Court in the case of CIT Vs. Rajendra Prasad Moody [1978] 115 ITR 519 and without considering ration decided as upheld in the case of CIT vs. Walfort Share and stock 3 ITA No.3559/Del/2018 ACIT vs. NIIT Technologies Ltd. Brokers P. Ltd[2010] 326ITR1 (SC) and Maxopp Investment Vs CIT [2012] 347 ITR 272 (Delhi) on application of provisions of section 14A of the Act? 5. Whether On the facts and in the circumstances of the case, the Ld. CIT(A) is legally justified in deleting the disallowance of Rs.30,60,074/-u/s 40(a)(ai) of the Act on account of non-, deduction of TDS on bank guarantee communication expense by ignoring the contents of Notification No.56/2012 of the CBDT in this regard issued F.No.275/53/2012- IT(B)/SO(E) dated 31.12.2012 that also by ignoring the fact that the said notification had come into force w.e.f. 1st Januray, 2013? 6. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) is legally justified in allowing relief to the assessee on the basis of its earlier order in the assessee's own case despite the fact that principal of res-judicata is not applicable to Income Tax proceedings as each assessment year is a separate year? 7. The appellant craves leave for reserving the right to amend, modify, alter, add or forego any grounds of appeal at any time before or during the hearing of this appeal.” 4. Grounds of appeal Nos. 1 & 2 are in relation to the deletion of the addition made on account of transfer price adjustment made towards interest on outstanding receivable from AE at Rs. 5,16,73,139/- thus they are taken together for consideration. 5. The TPO re-characterised the delay in receipt of receivables as interest free unsecured loans advanced to the AE and treated the receivables from AE as international transaction in the nature of capital funding. Accordingly, the TPO has made adjustment on notional interest computed @ 12.86% (SBI PLR of 9.86 Plus 300 basis points) and proposed adjustment of Rs. 5,16,73,139/- which was made by AO in final order. The ld. CIT(A) by observing that operating margin of assessee is better than of PLI (OP/TC) margin (both before and after making working capital adjustments) of the comparable taken by TPO and further by following the order of hon’ble jurisdictional high court in the case of CIT Vs. Kusum Helathcare Pvt. Ltd. reported in 398 ITR 66 (Delhi) has deleted the addition so made. 6. Before us the ld. CIT DR strongly supported the findings of the TPO and the AO on this issue. It was the submission of the Ld. CIT DR that the amendment brought in the Act with retrospective effect from 1-4-2002 and 4 ITA No.3559/Del/2018 ACIT vs. NIIT Technologies Ltd. inception of Explanation (i)(c) of section 92B of the Act creating a deeming fiction treating the payments or deferred payment of receivables or any other debt arising during the course of business as a separate international transaction, therefore, notional interest on outstanding receivables is an international transaction. He further submitted that the TPO has rightly computed the adjustments and thus no interference is warranted in this matter and therefore, he prayed for the restoration of the addition made on account of TP adjustment towards interest on outstanding receivable to AE by the AO. 7. Before us, ld.AR of the assessee argued that the assessee being entrepreneur, assumes all entrepreneurial functions and risk and earns entrepreneurial returns and the receivables were arising from core transaction entered with AEs and are not a separate international transaction requiring separate compensation. Ld. AR submitted that the assessee has not charged any interest on outstanding balances of receivables from both AEs and non-AEs. The learned counsel further pointed out that interest cost has also been suitably factored in sale price as operating profit margin of the assessee is much higher than operating margin of the comparable companies. It is thus submitted that the ld. CIT(A) after appreciating these facts has deleted the additions made by the AO/TPO and the assessee humbly prays for confirmation of the order of ld. CIT(A) deleting the additions. 8. We have heard the rival submissions and perused the material. By way of Finance Act, 2012 an Explanation to Section 92B has been inserted to the Income Tax Act with retrospective effect from 1-4-2002, which clarifies the expression 'international transaction' as follows: Explanation.—For the removal of doubts, it is hereby clarified that— (i) the expression \"international transaction\" shall include— (a) the purchase, sale, transfer, lease or use of tangible property including building, transportation vehicle, machinery, equipment, tools, plant, furniture, commodity or any other article, product or thing; 5 ITA No.3559/Del/2018 ACIT vs. NIIT Technologies Ltd. (b) the purchase, sale, transfer, lease or use of intangible property, including the transfer of ownership or the provision of use of rights regarding land use, copyrights, patents, trademarks, licences, franchises, customer list, marketing channel, brand, commercial secret, know-how, industrial property right, exterior design or practical and new design or any other business or commercial rights of similar nature; (c) capital financing, including any type of long-term or short- term borrowing, lending or guarantee, purchase or sale of marketable securities or any type of advance, payments or deferred payment or receivable or any other debt arising during the course of business; 9. The above explanation clarifies and also justifies the adjustment made by the TPO towards interest on receivables, which is well within the definition of international transaction. Therefore, we are in agreement with the ld. CIT DR to the extent that the interest on outstanding receivables to AE is an international transaction. 10. Now coming to the findings given by ld. CIT(A) while deleting the additions as given in para 6.9 of the order, which are as under: “6.9 In the instant case the working capital adjusted margin of comparables was 11.34 % and unadjusted margin was 14.3% which was much lower than the margin of the appellant which stood at 31.59%. In accordance with the principle of consistency and respectfully following the order of Hon'ble Delhi High Court in the case of Kusum Healthcare Pvt. Ltd (supra) the ground of appeal 1 decided in favour of the appellant. The AO/TPO is directed to delete transfer pricing adjustment mac account of transactions pertaining to receivables. 11. The ld. CIT(A) compared the margin of the assessee and of the comparables selected by AP/TPO and after finding that the margin of the assessee was better had deleted the additions. In this case, it is seen that assessee has been able to demonstrate that after undertaking the economic adjustments of working capital, the operating profit margin of the assessee was much higher than the comparables taken by the TPO, which can be seen from the table below: 6 ITA No.3559/Del/2018 ACIT vs. NIIT Technologies Ltd. S. No. Company Name OP/TC (Without Working Capital Adjustment) OP/TC (With Working Capital Adjustment) 1. RS Software (India) Ltd. 18.00% 20.50% 2. SQS India B F S I Ltd. 16.46% 16.47% 3. Akshay Software Technologies Ltd. 7.26% 9.78% 4. Helios & Matheson Information Technology Ltd. 16.80% 15.04% 5. Spry Resources India Pvt. Ltd. 9.87% -14.15% 6. IDB Intech Ltd.- Information Technology 8.57% 8.57% 7. Mindiree Ltd. - Hitech 23.15% 23.15% Mean 14.30% 11.34% Median 16.46% 15.04% Assessee’s Margin 31.59% 12. From the perusal of the above table, it is clear that the assessee’s margin of 31.59% is better than the mean of 14.30% of the comparables taken by AO/TPO thus no adjustment is required. 13. The coordinate bench of Delhi Tribunal in case of Kusum Healthcare (P.) Ltd. v. Asstt. CIT [2015] 62 taxmann.com 79 held that, the working capital adjustment taken into account impact of outstanding receivables and no further adjustment required if the margin of the assessee is higher than working capital adjusted margin of comparable. The coordinate bench of Delhi Tribunal in case of Ameriprise India (P.) Ltd. v. Asstt. CIT [2015] 62 taxmann.com 237 considered the decision of coordinate bench in the case of Kusum Healthcare and held that, the allowing working capital adjustment in the international transaction of rendering services can have no impact on the determination of ALP of the international transaction of interest on receivables from AEs. 14. The Hon'ble Delhi High Court, while dismissing the appeal of the revenue against the order of Tribunal in the case of Pr. CIT v. Kusum Healthcare(P.) Ltd. 2017] 398 ITR 66, held as under: 7 ITA No.3559/Del/2018 ACIT vs. NIIT Technologies Ltd. (i) The inclusion in the Explanation to Section 92B of the Act of the expression \"receivables\" does not mean that de hors the context every item of \"receivables\" appearing in the accounts of an entity, which may have dealings with foreign AEs would automatically be characterized as an international transaction, and (ii) With the Assessee having already factored in the impact of the receivables on the working capital and thereby on its pricing/profitability vis-a-vis that of its comparables, any further adjustment only on the basis of the outstanding receivables would have distorted the picture and re-characterized the transaction. 15. This view is further confirmed by the hon’ble Delhi high court in the case of Avenue Asia Advisors Pvt. Ltd. vs. DCIT reported in 398 ITR 120 (Delhi). 16. In view of the above discussion and by respectfully following the order of hon’ble jurisdictional high court in the case of Kusum Healthcare (supra), we find no infirmity in the order of ld. CIT(A), which is hereby upheld. The grounds of appeal No. 1& 2 of the revenue are dismissed. 17. Grounds of appeal No. 3 & 4 of the revenue are in relation to the deletion of disallowance made u/s 14A Rs. 78,420/- made by AO. 18. In the present case, the assessee had received dividend amounting to ₹7,12,00,000/- from NIIT GIS Limited, now Esri India Technologies Limited, which was claimed as exempt under Section 10(34) of the Act. The assessee itself has made the disallowance of Rs 13,41,081/-in the return of income being expenditure relatable to earn exempt income. The AO worked out the amount of disallowance at ₹14,19,500/- (being 0.5% of average value of investment) towards management fee etc. as per rule 8D (iii) of the IT Rules 1962. The AO made the addition of ₹78,420/- being the differential mountt of the disallowance as computed by him and the disallowance made by assessee itself. The ld. CIT(A) had deleted the disallowance, thus the revenue in appeal before us. 8 ITA No.3559/Del/2018 ACIT vs. NIIT Technologies Ltd. 19. Before us, ld.CIT DR relied on the orders of the AO and submitted that the assessee has a sizable investment portfolio which certainly requires being managed. The administrative expenses, staff cost and other associated cost cannot be brushed aside for the aforesaid activity. The assessee is having investments yielding tax free income. Thus, it was submitted that the computation made by the AO u/s.14A of the Act Is just and proper and ld. CIT(A) has erred in deleting the disallowance so made by the AO. He, therefore, humbly prayed to restore the disallowance made by AO. 20. Per contra, Ld. AR submitted that the AO has made addition u/s.14A r.w. Rule 8D towards the management fee etc. by ignoring the fact that the assessee itself has made the disallowance u/s 14A of the Act. He further submits that in assessee’s own case Hon’ble Delhi High Court in AY 2007- 08 and AY 2008-09 reported in 436 ITR 546 has held that the onus is on the revenue to ascertain the correctness of the suo-motto disallowance made by the assessee. He thus requested for the confirmation of the order of ld. CIT(A) in this regard. 21. We have considered the rival submissions and perused the material available on record. Admittedly, in the instant case it was decided in earlier years that the assessee had made investments out of its own interest free funds thus the AO has made the disallowance of only administrative and management expenses. The assessee after identifying the direct and indirect expenses allocable to investments having exempt income, made disallowance @ 20% of the said expenditures for purpose of section 14A of the Act. This view was fully supported by the judgements of Hon’ble Jurisdictional High Court in assessee’s own case, wherein it is held that burden is on the revenue to ascertain the correctness of the su-motto disallowance made by the assessee. 22. However, from AY 2009-10, Rule 8D was inserted which provides the method of determining the amount of expenditure in relation to income not includible in total income. Since this amendment was made by the IT(Fifth Amdt.) Rules, 2008 and become applicable from AY 2009-10thus it was 9 ITA No.3559/Del/2018 ACIT vs. NIIT Technologies Ltd. before the hon’ble court in earlier years. The after AO satisfying himself that the method adopted by the assessee for making suo-motto disallowance was not correct and thus he resorted to the method provided in Rule 8D and worked out the amount of disallowance. Since the assessee is having its own interest free funds for mking investments and also the investment made in earlier years were carried forward where the Tribunal was of the view that only interest free funds were involved in making investments having exempted income thus the approach of the AO in not making any disallowance as per clause (i) and (ii) of sub Rule 2 of Rule 8D and only 0.5% of the average value of investment towards the administrative and other expenses incurred directly or indirectly for making such investment is made, which in our opinion is in accordance with law. The ld. CIT(A) while deleting the disallowance made has failed to consider the amendment made in Income Tax Rules where Rule 8D was inserted to compute the amount of disallowance to be made u/s 14A of the Act. However, it is held by various courts that the disallowance should be made after considering the value of those investments which yielded exempt income only. 23. In view of above discussion, we hereby set aside the order of ld. CIT(A) on the issue of deletion of addition made u/s 14A of the Act and direct the AO to recompute the amount of disallowance as per clause (iii) of sub-rule (2) of Rule 8D of the Income Tax Rules, 1962 by taking the average value of those investments which yielded exempt income and made the disallowance if the resultant figure is more than the amount of suo-motto disallowance made by the assessee. In the event the resultant figure is less than the suo- motto disallowance made by the assessee, no disallowance is required to be made. With these directions, the ground of appeal number 3 and 4 of the Revenue are partly allowed for statistical purposes. 24. In grounds of appeal No. 5 & 6, revenue has challenged the action of ld.CIT(A) in deleting the disallowance made u/s 40(a)(ia) of the Act of Rs. 30,60,074/- paid to bank as guarantee commission. 10 ITA No.3559/Del/2018 ACIT vs. NIIT Technologies Ltd. 25. The AO has made the disallowance by invoking the provisions of Section 40(a)(ia) by observing that assessee has paid bank guarantee commission without making deduction of tax at source. The ld. CIT (A) deleted the same by holding that there is no principal agent relationship, and the Guarantee Commission is not in the nature of Commission so as to attract the provision Section 194H of the Act. Against such deletion, the Revenue is in appeal before us. 26. Before us, ld. CIT DR reiterated the same facts as were observed by the AO in para 6 of the order and requested for the restoration of the disallowance made by AO. 27. Per contra, ld. AR of the assessee also relied upon the judgement of ld. CIT(A) and further submitted that hon’ble jurisdictional high court in the case of CIT Vs. JDC Apparels Pvt. Ltd. reported in 370 ITR 454 has held that the amount charged by bank as a fee for rendering banking services to its clients could not be treated as a commission or brokerage u/s 194H and requested for the confirmation of the order of ld. CIT(A). 28. We have perused the material available and the arguments advanced by both the parties. The ld., CIT(A) while deleting the disallowance has held as under: “6.10 Ground No 1l pertains to the contention of the appellant that the AO had erred in disallowing bank guarantee charges amounting to Rs. 30,60.074 u/s. 40(a)(ia) of the Act on the ground that tax has not been deducted on such payment made to bank by the appellant. The AO referred to the Notification No. 56/2012 dated 31-12-2012 issued by CBDT wherein it was clarified that no tax was to be deducted in cases where payment was made to a bank in the form of guarantee commission/charges and held that since said Notification was applicable only from January 01, 2013, hence guarantee charges paid before that date would be subject to TDS provisions. 6.11 The issue is covered in favour of the appellant by the order of the Hon'ble Mumbai Tribunal in the case of Kotak Securities Lid v. Deputy Commissioner of Income-tax (18 taxmann.com 48) which has held that the relation between a taxpayer and the banks cannot be regarded as 11 ITA No.3559/Del/2018 ACIT vs. NIIT Technologies Ltd. that of a principal-agent relationship, since while providing various services, the banks do not act as an agent. Accordingly, it has been held that the provisions of section 194H cannot be invoked in case of bank charges. The Hon'ble Tribunal has observed as follows:- \"When one look at the connotations of expression 'commission or brokerage' in its cognate sense, as in the lights of the principle of noscitur a sociis, scope of expression 'commission', for this purpose, will be confined to 'an allowance, recompense or reward made to agents, factors and brokers and others for effecting sales and carrying out business transactions' and shall not extend to the payments, such as 'bank guarantee commission', which are in the nature of fees for services rendered or product offered by the recipient of such payments on principal-to-principal basis. Even when an expression is statutorily defined under section 2, it still has to meet the test of contextual relevance as section 2 itself starts with the words \"In this Act (i.e. Income-tax Act), unless context otherwise requires, and, therefore, contextual meaning assumes significance. Every definition in the Income-tax Act must depend on the context in which the expression is set out, and the context, in which expression 'commission' appears in section 194H, i.e., along with the expression 'brokerage', significantly restricts its connotations. The common parlance meaning of the expression 'commission', thus, does not extend to a payment which is in the nature of fees for a product or service; it must remain restricted to a payment in the nature of reward for effecting sales or business transactions, etc. The inclusive definition of the expression 'commission or brokerage 'Explanation to section 194H is quite in harmony with this approach as it only provides that \"any payment received or receivable, directly or indirectly, by a person acting on behalf of another person for services rendered (not being professional services) or for any services in the course of buying or selling of goods or in relation to any transaction relating to any asset, valuable article or thing, not being securities\" is includible in the scope of meaning of 'commission or brokerage. Therefore, what the inclusive definition really contains is nothing but normal meaning of the expression 'commission or brokerage'. When inclusive definition contains ordinary normal connotations of an expression, even an inclusive definition has to be treated as exhaustive. That is the situation in the instant case as well. Even as definition of expression 'commission or brokerage', in Explanation to section 194H, is stated to be exclusive, it does not really mean anything other than what has been specifically stated in the said definition. Therefore, principal-agent relationship is a sine qua non for invoking the provisions of section 194H. In the instant case, there is no principal-agent relationship between the bank issuing the 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 12 ITA No.3559/Del/2018 ACIT vs. NIIT Technologies Ltd. commitment, the bank charges a fees 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 context of section 194H. This transaction is not a transaction between principal and agent so as to attract the tax deduction requirements under section 194H. Therefore, the Commissioner (Appeals) indeed erred in holding that the assessee was indeed under an obligation to deduct tax at source under section 194H from payments mude by the assessee to various banks. As the assessee was not required to deduct tax at source under section 194H, the question of levy of interest under section 201(IA) cannot arise. [Para 9)\" 6.12 In view of the order of the Hon'ble Mumbai Tribunal in the 2case of Kotak Securities(supra) the relation between the appellant and the bank cannot be regarded as that of a principal and agent. Accordingly, the provisions of section 194H cannot be invoked in case of bank charges. A similar view has been taken y the CIT(A) in his order for AY 2011-12 in Appeal No 313/16-17 dated 31.03.2017. In view of the same, in accordance with the principle of consistency and respectfully following the orders referred to above, the addition made by the AO on account of bank guarantee charges is deleted. The grounds of appeal No Il & Ill are decided in favour of the appellant.” 29. As is seen from the orders of the lower authorities, the AO had relied upon the Notification No.56/2012 issued by CBDT wherein it was stated that miscellaneous charges paid to banks shall not be subject to TDS under the provisions of the Act and since the said notification came into force from 01.01.2013 therefore, the AO held the payments made prior to aforesaid date were subject to deduction of tax at source. In the instant case, the assessee has paid guarantee commission to the banker and though the AO has not specified under which provision, assessee is required to make TDS on such payments. However, from the nature of payments made by the assessee being guarantee commission, it appears that as per AO, assessee has violated the provisions of section 194H of the Act. For the application of the provisions of section 194H, there must exists principal and agent relationship between the payer and payee i.e. the assessee and banker in the instant case. Further such transaction must be for the services rendered or for any services in the course of buying or selling of goods. As observed by ld. CIT(A) while deleting the disallowance, no such Principal - Agent 13 ITA No.3559/Del/2018 ACIT vs. NIIT Technologies Ltd. relationship existed and thus the payment of guarantee commission to the bank is not in the nature of commission so as to attract provisions of section 194H of the Act. 30. In view of the above, in our considered view the order of ld. CIT(A) in holding that the provisions of section 194H are not applicable to the facts of the present case needs no interference and accordingly the order of ld. CIT(A) on this issue is upheld. The grounds of appeal No. 5 & 6 of the revenue are dismissed. 31. In the result appeal of the assessee is partly allowed. Order pronounced on 29th April, 2025. Sd/- Sd/- [ANUBHAV SHARMA] [MANISH AGARWAL] JUDICIAL MEMBER ACCOUNTANT MEMBER Dated 29.04.2025. PK/Sr. Ps Copy forwarded to: 1. Assessee 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi, "