2013 (7) TMI 875 - AT - Income Tax

TDS u/s 194C - Disallowance of reimbursement of expenses - CIT(A) deleted the disallowance - Held that - Payments made to agent for final settlement of bills at Orissa, i.e., payment made to NLP as an agent in pursuance of agreement for supply of trucks are merely reimbursement. The assessee has claimed total freight charges at ₹ 1,45,14,602 including this amount of reimbursement of ₹ 72,83,181 and the assessee has already deducted the tax at source under section 194C of the Act on contractual payment of freight, i.e., total freight at ₹ 1,45,14,602 and nothing is to be deducted from reimbursement. These were never claimed as expenditure by the assessee and once the assessee has not claimed the expenditure qua this reimbursement, the assessee is not liable to tax deduction at source under section 194C of the Act. Further, the Assessing Officer has wrongly made disallowance by holding that the expenses incurred are not for the purpose of business rather according to him, these are inflated expenses booked by the assessee. This finding of the Assessing Officer is erroneous for the reason that the payments made of reimbursement of expenses are purely for business expenses. - CIT(A) rightly deleted the addition - Decided against Revenue.

Summary

Issues:
1. Addition of reimbursement of expenses paid to truck drivers by the agent.

Analysis:
The appeal by the Revenue challenged the deletion of an addition of reimbursement of expenses paid to truck drivers by the agent of a company. The Revenue contended that the Commissioner of Income-tax (Appeals) erred in directing the Assessing Officer to delete the addition without considering certain key factors. The Assessing Officer received information regarding contractual payments made by the assessee, out of which a specific amount was not subjected to tax deduction at source (TDS). The assessee claimed this amount as reimbursement to the agent, but the Assessing Officer disallowed it under section 40A(3) of the Income-tax Act, stating it was an inflated expense. The assessee explained that the reimbursement was for road expenses of truck drivers, and the agent made the balance payments in Orissa. The Commissioner of Income-tax (Appeals) considered the submissions and deleted the addition, stating that the expenses were genuine business expenses and not inflated.

The Revenue's appeal argued that the payments made to the agent were reimbursement and not subject to TDS under section 194C of the Act. The Revenue contended that the expenses were inflated and not for business purposes. However, the Tribunal upheld the Commissioner's decision, emphasizing that the reimbursement was part of genuine business expenses. The Tribunal noted that the assessee had already deducted TDS on the total freight charges and that the disallowance made by the Assessing Officer was erroneous. The Tribunal agreed with the Commissioner's decision to delete the addition, dismissing the Revenue's appeal.

In conclusion, the Tribunal upheld the Commissioner's decision to delete the addition of reimbursement expenses paid to truck drivers by the agent, emphasizing that the expenses were genuine business expenses and not inflated. The Tribunal found that the Assessing Officer's disallowance was erroneous, confirming the deletion of the addition and dismissing the Revenue's appeal.