Commissioner Of Income Tax (Tds)-1 v. M/S. Larsen & Toubro Ltd

(Private Secretary) IN THE HIGH COURT OF JUDICATURE AT BOMBAYO.O.C.J.INCOME TAX APPEAL (IT) NO. 769 OF 2016 Commissioner of Income Tax (TDS)-1 ..Appellant Versus M/s. Larsen & Toubro Ltd ..Respondent ................... Mr. Suresh Kumar for the Appellant Mr. Suresh Kumar for the Appellant Mr. Jehangir Mistri, Senior Counsel a/w Mr. Atul Jasani for theRespondentMr. Jehangir Mistri, Senior Counsel a/w Mr. Atul Jasani for theRespondent ................... CORAM : AKIL KURESHI & M.S. SANKLECHA, JJ. DATE : DECEMBER 4, 2018. P.C.: 1.This appeal is filed by the Revenue to challenge theJudgment of the Income Tax Appellate Tribunal, Mumbai(“the Tribunal” for short) dated 4.6.2015. Following question is presented for our consideration:- “(i) Whether on the facts and in the circumstances of thecase, the Tribunal was justified in allowing the appeal ofthe assessee on the basis of reasoning that no TDSwas required to be deducted u/S. 194H of the I.T. Actfrom the payments of bank guarantee made to thebank? “case, the Tribunal was justified in allowing the appeal ofthe assessee on the basis of reasoning that no TDSwas required to be deducted u/S. 194H of the I.T. Actfrom the payments of bank guarantee made to thebank? “ 2.For the Assessment Year 2010-11, the return filed bythe respondent – assessee was taken in scrutiny. TheAssessing OfÏcer noticed that the assessee had madepayment of “bank guarantee commission” on which no taxwas deducted at source. The Assessing OfÏcer was of theopinion that this payment attracted the requirement ofdeducting tax at source in terms of Section 194H of theIncome Tax Act, 1961 (“the Act” for short). He passed theorder of assessment accordingly. The issue eventuallyreached the Tribunal. the Tribunal, by a brief impugnedorder, dismissed the Revenue's appeal following its ownjudgment in case of Kotak Securities Limited. 3.Learned counsel for the Revenue stated that theRevenue had filed an appeal against the judgment of theTribunal in case of Kotak Securities Ltd but that the appealwas withdrawn on the ground of low tax effect. He has,however, made available a copy of the judgment of theTribunal in the said case which contains a detail discussionon the issue at hand. In the said judgment, the Tribunalreferred to Section 194H of the Act which requires an assessee responsible for paying any income by way ofcommission or brokerage to deduct tax at source. TheTribunal was of the opinion that the words “commission orbrokerage” must take colour from each other. The Tribunalwas of the opinion that the payment in question, thoughcategorized as “bank guarantee commission” is not strictlyspeaking payment of commission since there is no principalto agent relationship between the payer and the payee. TheTribunal, therefore, held that the requirement of deductingtax at source emanating from Section 194H of the Act in thepresent case does not arise. 4.We are broadly in agreement with the view of theTribunal. The so called bank guarantee commission is not inthe nature of commission paid to an agent but it is in thenature of bank charges for providing one of the bankingservice. The requirement of Section 194H of the Act,therefore, would not arise. No question of law arises. TheIncome Tax Appeal is dismissed. [ M.S. SANKLECHA, J. ] [ AKIL KURESHI, J ]