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DCIT (TDS) -2 (1) , Mumbai Versus Laqshya Media Pvt Ltd

2016 (8) TMI 867 - ITAT MUMBAI

TDS u/s 194A - “loan processing fees” - non deduction of TDS - Held that:- The first payment is on account of “loan processing fees” paid to the Nationalized Bank. This fee is charged by the bank for, processing the application filed by the borrower and for any inspection of title deeds and documents relating to properties and to verify and creation of charge etc. on the property. The Ld. Counsel’s case before us is that, such a payment does not entail deduction of tax, because it is in the natu .....

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ed for rendering of “managerial services” and in support various decisions have been filed before us. Rather it falls within the ambit of interest as defined under section 2(28A), which provides that, interest includes any service fees or other charge in respect of all monies borrowed. Thus, there was no requirement to deduct the TDS on account of rendering of managerial services. - As regards the payment of “processing fee” paid to Nationalized Bank, we agree with the contention of Ld. Coun .....

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es by the bank as held by the AO. Thus the assessee is not required to deduct TDS on such payment of income paid to any banking company. Accordingly, the finding of the CIT(A) deciding in favour that the payment of processing fee does not require deducting of TDS is upheld and revenue’s ground on this score is dismissed. - TDS u/s 194H - “guarantee fees” paid - Held that:- We are unable to accept the contention of the AO, because the assessee has sought its banks like HDFC Bank, Dena Bank an .....

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d accordingly, there was no requirement to deduct TDS on this payment. Thus, on this score also, the order of the Ld. CIT(A) is affirmed. Before us, the Ld. Counsel had also brought to our notice a CBDT Circular No.56 of 2012 wherein it has been clarified that ‘guarantee fee’ paid to a nationalized bank will not be subject to withholding tax. Thus in view of the CDBT Circular also the ground raised by the revenue cannot be sustained and accordingly, the same is dismissed. - TDS u/s 194I - Pa .....

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iled a breakup of expenditure before the AO and it was explained that these payments were in the nature of Ground level and beatification;Material purchased and installation charges; and Purchase of Wall laminated units. - Once that is so, then definitely there is no requirement of deducting TDS under section 194I on such payment, because it does not fall within “rent”. Since CIT(A) has already directed the AO to verify, therefore, we also reiterate the same direction that AO should look int .....

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al has been filed by the revenue against impugned order dated 03.12.2013 passed by the CIT(A)-14, Mumbai in relation to the order passed under section 201(1)/201(1A) for the assessment year 2010-11. In the grounds of appeal, following grounds have been raised:- i) On the facts and circumstances of the case and in law, the learned CIT(A) has erred in allowing the appeal of the assessee on the basis of reasoning of the processing fees and bank guarantee commission are not in nature of managerial s .....

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/s 201(1A) of the I.T. Act, 1961, determined by the AO as the tax determined has already been deleted by her and interest deletions consequential to the quantum deletion fort which further appeal has been recommended vide ground No.(i) & (ii) . 2. Brief facts of the case are that, the assessee company is engaged in providing outdoor media advertising services to leading Indian and multinational brands. The AO issued notice under section 133(6) to the assessee calling for information on vario .....

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nterest levied by the AO are as under:- S No. Nature of payment Amount paid Alleged failure to deduct tax Interest u/s 201(1A) 1 Processing fee paid to nationalized bank for obtaining loans (default u/s 194J) 40,18,998 4,55,352 1,63,927 2 Guarantee fee paid to nationalized banks for obtaining guarantee (default u/s 194J) 8,92,665 1,01,139 36,410 3 Payments for putting up Advertisement hoardings (erroneously treated as Payments for obtaining rights To put up advertisements) (default u/s 194C) 6,6 .....

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d deducted TDS on some of the items but most of the items have been capitalized therefore, there is no requirement for TDS to be deducted on such capitalized expenses. The Ld. CIT(A) after considering the submission and material on record decided the first three payments in the favour of the assessee and for the last he directed the AO to delete the payment on items of expenditure which are capitalized and for the balance payment AO should verify the deduction of TDS and recompute the demand acc .....

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ax, because it is in the nature of service fee on borrowed money and hence it is covered within the meaning and definition of interest as defined under section 2(28) and consequently, falls within the exclusion clause provided under section 194A(3). Further, AO has also treated these charges as payment for managerial services rendered by the bank and therefore, tax was required to be deducted under section 194J r.w. section 9(1)(vii). The Counsel s case before us is that, such a payment of proce .....

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ing fee paid to Nationalized Bank, we agree with the contention of Ld. Counsel that, loan processing fee is charged by the banks for processing the application when a borrower approached the bank for a loan. Such a service fee or charge it has been included in the definition of interest , as given in section 2(28A) which reads as under:- interest means interest payable in any manner in respect of any moneys borrowed or debt incurred (including a deposit, claim or other similar right or obligatio .....

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has been reiterated by the ITAT Pune Bench in the following cases: i) Chintamani Hatcheries (P.) Ltd v DCIT, reported in [2000] 75 ITD 116 (Pune) (SMC) and ii) Ghatge Patil Ltd v ACIT, reported in [2011] 11 taxman.com 168 (Pune) Despite such a payment to the Nationalized Bank falls within the ambit of interest under section 2(28) but the TDS provisions under section 194A are not applicable, because it falls within the exclusionary provisions as laid down in sub-section (3) of section 194A, spec .....

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As regards guarantee fees paid which has been held to be liable for TDS under section 194H by the AO, we are unable to accept the contention of the AO, because the assessee has sought its banks like HDFC Bank, Dena Bank and Yes Bank to issue guarantee in its favour for which bank has charged certain amount as guarantee fee . To fall within the ambit and scope of section 194H, the payment has to be in the nature of commission or brokerage . The Explanation to section 194H defines the phrase commi .....

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yment to be treated as commission or brokerage. The recipient of the income must act on behalf of the principal. Here the banker does not act on behalf of the assessee for rendering any kind of service. The contract of guarantee does not give any rise to principal - agent relationship between the assessee and the bank and, therefore, the consideration received by the bank on account of guarantee commission cannot be reckoned as commission as contemplated under section 194H and accordingly, there .....

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