TaxTMI 
TaxTMI 
2018 (3) TMI 116
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....t agency services, furnishing guarantee for subsidiaries, holding for investments etc. During the course of audit of accounts, it was noticed that they have received a total guarantee commission of Rs. 6,57,39,048/- and commitment charges of Rs. 2,90,11,205/- during the period 2004 - 05 to 2006 - 07. The respondent had discharged service tax only on the guarantee commission and had not paid service tax on commitment charges. Show cause notice was issued proposing to demand service tax on the commitment charges received by the respondent which after adjudication culminated in the Order-in-Original which confirmed the service tax to the tune of Rs. 31,61,349/- along with interest and also imposed penalty under section 76 as well as equal pena....
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.... companies for availing credit facilities from the Central Bank of India, when the respondent extends guarantee on the amount a percentage on the credit availed by the subsidiary companies is charged by the respondent as guarantee commission. The respondent also charges an amount as commitment charges from the subsidiary companies on the unavailed credit portion extended by the said bank. Such commitment charges are considered as interest and hence not liable for service tax. The respondent is paying service tax on the guarantee commission. In the books of accounts both guarantee commission and commitment charges are accounted as guarantee commission only. This is because both are received only in connection with the corporate guarantee giv....
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....he Circular issued by CBDT dated 5.7.1976 in the context of commitment charges. The same is reproduced as under:- "The term interest has been defined in new clause (28A) inserted, in Section 2 of the Income Tax Act with a view to removing doubts about the true character of fees or other charges paid in respect of monies borrowed or in respect of credit facilities which have not been utilized. The definition is very wide and covers interest payable in any manner in respect of loans, debts, deposits, claims and other similar rights or obligations. It also includes any service fees or other charges in respect of such loans, debts, deposits etc. as also fees in the nature of commitment charges on unutilized portion of credit facilities. This ....