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2019 (10) TMI 656 - AT - Income TaxTDS u/s 194H from payment of bank guarantee commission to the bank - principal-agent relationship - HELD THAT:- When the bank has issued bank guarantee on behalf of the assessee there is no principal – agent relationship between the bank and the assessee which is a mandatory condition for invoking the provisions contained u/s 194H and in these circumstances, the assessee was not liable to deduct tax at source u/s 194H from payment of bank guarantee commission to the bank. Moreover, bank guarantee commission also partakes the character of interest u/s 2(28A) of the Act and as such, exemption provided u/s 194A(3)(iii) is available to the assessee qua such payment. So, we are of the considered view that the CIT (A) has erred in not following the decision of Kotak Securities Ltd. [2012 (2) TMI 77 - ITAT MUMBAI] on the ground that it is not applicable having been pronounced before the issue of Notification No.56/2012 dated 31.12.2012 because ordinarily any provision of the statute has to be read having prospective effect and not having retrospective effect unless it is specifically provided. So, when there is no principal-agent relationship between the bank and the assessee, deduction of tax at source on commission or brokerage is not required for. Consequently, addition made by the AO and confirmed by the ld. CIT (A) is ordered to be deleted, thus the appeal filed by the assessee is hereby allowed.
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