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2016 (3) TMI 963 - ITAT MUMBAI

2016 (3) TMI 963 - ITAT MUMBAI - TMI - Reimbursement of bank guarantee commission - TDS u/s.194A @10% OR u/s.194C @2% - revision u/s 263 - Held that:- In the instant case, there is no money borrowed or debt incurred. Therefore, provisions of sec. 2(28A) and sec. 194A do not apply. Payment made to NCL is not "income by way of interest". The impugned receipt would be in the nature of reimbursement of expenses incurred by it. In view of the above discussion, we do not find any merit in the order pa .....

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r of CIT, Mumbai, for the assessment years 2010-11 & 2011-2012, in matter of order passed u/s.263 of the I.T.Act. 2. In both these appeals common grievance of assessee relates to CIT‟s direction to subject the reimbursement of bank guarantee commission u/s.194A @10%, in place of deduction done by the AO u/s.194C @2%. 3. Rival contentions have been heard and record perused. Facts in brief are that the assessee company is engaged in the business of broadcasting. It has two channels namel .....

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es). The NCL has acquired the telecast rights from BCCI in respect of cricket matches played in India for which as per terms of agreement between BCCI and NCL, NCL was under obligation to provide for the Bank Guarantee to BCCI for ₹ 2000 Crore. To secure this, NCL has been paying Bank Guarantee Commission (BGC) to various banks year after year as per agreed terms. NCL has entered into another agreement with the assessee (NEO) for telecast of the cricket matches for which NCL has set a cond .....

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voked by the AO and held that payment of bank guarantee commission was in the nature of interest, therefore, assessee was liable for deduction of tax at source @10% u/s.194A. As per CIT, the order passed by AO was erroneous as well as prejudicial to the interest of revenue. Against this order of CIT u/s.263, the assessee is in further appeal before us. 4. It was argued by ld. AR Dr. K.Shivram that the AO after analyzing the nature of payment had applied the relevant provisions of law and made th .....

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364. In support of the proposition that bank guarantee commission is not in the nature of interest, he placed reliance on the decision of Hon‟ble Delhi High court in the case reported at 355 ITR 94. 5. Ld. AR further placed reliance on the decision of the Mumbai Tribunal in the case of Kotak Securities Ltd. in support of the proposition that no TDS is required to be deducted in case of payment of bank guarantee commission to the bank, since the payment of commission was not principal to ag .....

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the AO renders the order of AO erroneous as well as prejudicial to the interest of revenue, therefore, the CIT was justified in invoking his power u/s.263. He placed reliance on the order of Hon‟ble Madras High Court in the case of Viswapriya Financial Services, 258 ITR 496 in support of the proposition that any charges paid for services rendered is coming under the definition of the interest u/s.2(28A), accordingly CIT has correctly held that assessee was required to deduct tax on such b .....

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l reimburse NCL 80% of the cost incurred in providing Bank Guarantee to BCCI and thereby to the extent of 80% of Bank Guarantee was joint and several liability, primarily of assessee, who had acquired the rights from NCL and secondary liability was of NCL who had acquired rights from BCCI. BCCI was concerned with the Bank Guarantee for the media rights fees to be received from NCL/Neo. It is not the case that NCL has given any guarantee to BCCI for and on behalf of Neo. NCL has received the reim .....

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o consideration the provisions of Section 194H and 194C came to the conclusion that assessee was liable to deduction of tax on the reimbursement of bank guarantee u/s.194C of the Act. 8. As regards applicability of TDS provisions, not two but three views exist on the impugned issue - (i) TDS u/s 194H - which was discussed by AO in the assessment order dt. 18/3/2012; TDS u/s 194C - which was discussed and upheld by AO in the assessment order dt. 18/3/2012; TDS u/s.194A - (which the assessee does .....

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l to the interests of the revenue, for example, when an ITO adopts one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the ITO has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the ITO is unsustainable in law . Hon‟ble Supreme Court in the case of Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83 (SC) h .....

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an be set aside in revision. It has to be shown unmistakably that the-order of the Assessing Officer is unsustainable. Anything short of that would not clothe the Commissioner with jurisdiction to exercise power under section 263. 9. With regard to CIT‟s contention that bank guarantee commission is in the nature of interest, therefore, the AO was required to deduct tax u/s.194A, we found that as per CBDT Notification No.56, no tax is required to be deducted on various commission paid to th .....

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behalf of Neo to any third party or BCCI. The provisions of Section 194A are not applicable on any payment made to any baking company to which the Banking Regulation Act, 1949 applies as in the case of assessee, the payment reimbursed to NCL towards BGC is what is paid by NCL to Banks. The case law relied on by the ld. DR is not applicable to the facts of the instant case, insofar as the assessee has not taken any loan or deposit from the investors. In case decided by Hon‟ble Madras High .....

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yable ... in respect of any moneys borrowed or debt incurred (including a deposit, claim or other similar right or obligation) and includes any service fee or other charge in respect of the moneys borrowed or debt incurred ... " In the case of CIT v. Car gill Global Trading Co. (P.) Ltd. [2011J 335 ITR 94, Hon‟ble Delhi High Court held as under :- It is clear from the provisions of section 2(28A) that before any amount paid is construed as interest, it has to be established that the s .....

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