Lc usance period interest -tds

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

12 September 2012 Dear Sir,
We have opened a LC in favour of our supplier and he discounted from nationalize bank and bank deducted 90 days usance period interest and balance paid to our supplier. He raised a debit note to us and claimed reimbursement of this interest we want to deduct TDS on this interest but supplier is saying that this is reimbursement of interest that he have paid to bank and that is not liable to TDS because interest is paid to bank and he is producing bank advice and this is not his income as interest.
What we should do? we should deduct TDS or he is right because he producing bank advice for such interest.
Please give reply and if any exemption for non deduction.