So, following the decision rendered by the coordinate Bench of the Tribunal, 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.
Sec. 194H of Income Tax Act, 1961—Deduction of tax at source— 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) and as such, exemption provided u/s 194A(3)(iii) is available to the assessee qua such payment. - NAVNIRMAN HIGHWAY PROJECT PVT. LTD. V/s DEPUTY CIT - [2019] 75 ITR (TRIB) 067 (ITAT-DELHI)
So, following the decision rendered by the coordinate Bench of the Tribunal, 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.
Sec. 194H of Income Tax Act, 1961—Deduction of tax at source— 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) and as such, exemption provided u/s 194A(3)(iii) is available to the assessee qua such payment. - NAVNIRMAN HIGHWAY PROJECT PVT. LTD. V/s DEPUTY CIT - [2019] 75 ITR (TRIB) 067 (ITAT-DELHI)