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2022 (1) TMI 336 - AT - Income TaxTDS u/s 194H - guarantee fee paid to the bank - Addition u/s 40a(ia) - HELD THAT:- The assessee in the case before us could not have been saddled with any obligation to deduct tax at source on the bank guarantee fee that was charged by the bank for rendering banking services in the normal course of its business i.e standing as a guarantee to third parties qua the contractual obligations of the assessee. As in the case M/S. NAVNIRMAN HIGHWAY PROJECT PVT. LTD. [2019 (10) TMI 656 - ITAT DELHI] as bank guarantee commission partook the character of interest u/s 2(28A) of the Act and as such, exemption provided u/s 194A(3)(iii) qua such payment was available to the assessee, therefore, no obligation on the said count too was cast upon the assessee to deduct tax at source on the said amount. Backed by its aforesaid observations, the Tribunal had vacated the disallowance u/s 40(a)(ia) that was made by the department by holding the assessee as being in default for not having deducted tax at source on the amount of bank guarantee fee u/s 194H. Also see KOTAK SECURITIES LIMITED VERSUS DEPUTY COMMISSIONER OF INCOME-TAX, TDS CIRCLE 2(1), MUMBAI [2012 (2) TMI 77 - ITAT MUMBAI] Both the lower authorities had erred in treating the assessee as being in default for not having deducted tax at source on the amount of bank guarantee fee u/s 194H of the Act. Accordingly, de-hors any obligation on the assessee to deduct tax at source on the amount of bank guarantee fees within the meaning of section 194H of Act, no disallowance of the aforesaid amount could have been made u/s 40(a)(ia) - Decided in favour of assessee.
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