DCIT (TDS) 2(1), MUMBAI V. L & T INFOTECH LTD, MUMBAI

ITA 5821/MUM/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4220 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-04-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 16-09-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RADHIKA KATYAL NARANG
• Section: 201(1)

Judgement Text

1 INCOME TAX APPELLATE TRIBUNAL,MUMBAI- A,BENCH , , BEFORE S/SHJOGINDER SINGH,JUDICIAL MEMBER & RAJENDRA,ACCOUNTANT MEMBER / ITA NO./5821/MUM/2014 / ASSESSMENT YEAR: 2011-12 DCIT-(TDS)-2(1) R.NO.702, 7 TH FLOOR, SMT. KG MITTAL AYURVEDIC HOSPITAL BLDG. CHARNI ROAD,MUMBAI--400 002. VS. M/S. LARSEN & TOUBRO INFOTECH LTD. GATE NO.2, SOUTH BLOCK,SAKI VIHAR RD. POWAI, ANDHERI(E),MUMBAI-400 072. PAN:AAACL 1681 P ( /APPELLANT ) ( / RESPONDENT) REVENUE BY: MS. RADHIKA KATYAL NARANG (DR) ASSESSEE BY: SHRI VIJAY MEHTA (AR) / DATE OF HEARING: 07.04.2016 / DATE OF PRONOUNCEMENT: 07.04.2016 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA A.M. - CHALLENGING THE ORDER DT 4.7.2014 OF THE CIT(A)-14, MUMBAI THE ASSESSING OFFICER (AO), HAS FILED THE PRESENT APPEAL.THE EFFECTIVE GROUND OF A PPEAL IS ABOUT DELETING THE SHORT DEDUCTION OF TAX UNDER THE HEAD BANK GUARANTEE. WHILE PASSING THE ORDER U/S. 201(1)/201(1A) OF THE ACT,ON 19.3.2013,THE AO MENTIONED THAT THE ASSESSEE HAD NOT DEDUCTED ANY TAX ON BANK GUARA NTEE CHARGES,AMOUNTING TO RS.90.05 LAKHS,THAT IT HAD CLAIMED THAT THE BANK GUARANTEE C HARGES WERE COVERED BY THE DEFINITION OF WORD INTEREST[SECTION 2(28)],THAT THE INTERST HAD BEEN PAID TO BANK, THAT NO TAX WAS DEDUCTED IN TERMS OF SEC 194A(3) OF THE ACT,THAT THE AO HELD THAT THE VERY NATURE OF CHARGES SUGGESTED THAT SAME WERE COMMISSION/BROKERAGE PAID TO THE BAN KS.REFERRING TO EXPLANATION (I) TO SECTION 194H,HE HELD THAT ASSESSEE HAD COMMITTEE DE FAULT U/S. 201(1) OF THE ACT.HE CALCULATED SHORT DEDUCTION AT RS.9.37 LAKHS AND DETERMINED IN TEREST PAYABLE U/S. 201(1A) OF THE ACT. 2. AGGRIEVED BY THE ORDER OF THE AO THE ASSESSEE PREFE RRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORIRTY(FAA).AFTER CONSIDERING THE ORD ER U/S. 201 AND 201(1A) IN ASSESSEES OWN CASE AND THE ORDER OF THE TRIBUNAL DELIVERED IN THE CASE OF KOTAK SECURITIES LTD.(50 SOT 158),HE HELD THAT NO TDS WAS PAYABLE ON BANK GUARAN TEE CHARGES U/S. 194H OF THE ACT, THAT THE QUESTION OF LEVY OF INTEREST WOULD NOT ARISE FO R SUCH PAYMENTS. 3. BEFORE US,THE DEPARTMENTAL REPRESENTATIVE (DR) STAT ED THAT THE MATTER COULD BE DECIDED ON MERITS.THE AUTHORISED REPRESENTATIVE (AR) RELIED ON THE CASE OF KOTAK SECURITIES LTD.WE FIND THAT IDENTICAL ISSUE HAS BEEN DECIDED BY THE T RIBUNAL IN CASE OF KOTAK SECURITIES IN FOLLOWING MANNER: THERE IS NO PRINCIPAL AGENT RELATIONSHIP BETWEEN TH E BANK ISSUING THE BANK GUARANTEE AND THE ASSESSEE.WHEN BANK ISSUES THE BANK GUARANTEE, ON BE HALF OF THE ASSESSEE, ALL IT DOES IS TO ACCEPT THE COMMITMENT OF MAKING PAYMENT OF A SPECIF IED AMOUNT TO, ON DEMAND, THE BENEFICIARY, AND IT IS IN CONSIDERATION OF THIS COM MITMENT, 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 THE S. 194H. THIS TR ANSACTION, IS NOT A TRANSACTION BETWEEN PRINCIPAL AND AGENT SO AS TO ATTRACT THE TAX DEDUCT ION REQUIREMENTS UNDER S. 194H. CIT(A) INDEED ERRED IN HOLDING THAT THE ASSESSEE WAS INDEE D UNDER AN OBLIGATION TO DEDUCT TAX AT SOURCE UNDER S. 194H FROM PAYMENTS MADE BY THE ASSE SSEE TO VARIOUS BANKS. ASSESSEE WAS NOT 5821-L&T INFOTECH 2 REQUIRED TO DEDUCT TAX AT SOURCE U/S 194H, THE QUES TION OF LEVY OF INTEREST U/S 201(1A) CANNOT ARISE. RESPECTFULLY FOLLOWING THE ABOVE DECISION,THE EFFEC TIVE GROUND OF APPEAL IS DECIDED IN FAVOUR OF THE ASSESSEE. AS A RESULT,APPEAL FILED BY THE AO STANDS DISMISSED . . ORDER PRONOUNCED IN THE OPEN COURT ON 7 TH ,APRIL, 2016. 07 , 2016 SD/- SD/- /JOGINDER SINGH) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED :07.04.2016. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR A BENCH, ITAT, MUMBAI / , A , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.