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2012 (11) TMI 1155 - AT - Income TaxTDS u/s 194C - non deduction of tds on payment made to parent company - Held that - Disallowance cannot be made as it has not been shown or established that aforementioned payments were made by the assessee to the aforementioned group concerns against any contract work carried out by them for the assessee. In the case of reimbursement of expenses, the expenditure incurred is related to the person who has not made the original payment. The payment of expenditure is made by X party on behalf of Y party and later on the same is reimbursed to X party by Y party, the expenditure is pertaining to Y party and not pertaining to X party. - Decided in favour of assessee. Addition u/s 43B - miscellaneous expenses as provision for interest on VAT - Held that - We restore this issue to the file of AO with a direction to give an opportunity to the assessee to submit all the vouchers. After verifying the same AO will re-adjudicate the issue regarding disallowance of impugned amount in accordance with law.
Issues Involved:
1. Disallowance under section 40(a)(ia) of the Income Tax Act for reimbursement of expenses. 2. Disallowance under section 43B of the Income Tax Act for expenses grouped under miscellaneous expenses. Issue-wise Detailed Analysis: 1. Disallowance under section 40(a)(ia) of the Income Tax Act for reimbursement of expenses: The primary issue in this appeal concerns the disallowance of Rs. 8,37,22,826/- under section 40(a)(ia) of the Income Tax Act, 1961, due to non-deduction of tax at source on reimbursements made to group companies. The assessee argued that these payments were reimbursements and not subject to TDS, citing decisions from the ITAT and the Bombay High Court. The AO, however, distinguished these precedents, asserting that the reimbursement amounts were liable for TDS under section 194C. The CIT(A) upheld the AO's decision. The Tribunal noted that the AO acknowledged these payments as reimbursements in the assessment order. The Tribunal referenced the case of ACIT vs. J.B.Boda Surveyors Pvt. Ltd., where it was held that reimbursements do not constitute revenue receipts and are not subject to TDS. The Tribunal found that the AO did not establish that the payments were for contract work, thus disallowance under section 40(a)(ia) was not justified. Consequently, the Tribunal allowed the assessee's appeal on this ground. 2. Disallowance under section 43B of the Income Tax Act for expenses grouped under miscellaneous expenses: The second issue involved the disallowance of Rs. 37,94,576/- under section 43B, initially categorized as provision for interest on VAT but later reclassified under different heads. The AO disallowed the amount, and the CIT(A) upheld the decision, noting incomplete submission of vouchers by the assessee. The Tribunal considered the assessee's claim that sample vouchers were provided and that the AO did not request all vouchers. In the interest of justice, the Tribunal remanded the issue back to the AO, directing the assessee to submit all vouchers for verification. The AO was instructed to re-adjudicate the issue based on this verification. Conclusion: The Tribunal allowed the appeal on the first ground, ruling that reimbursements are not subject to TDS under section 40(a)(ia). On the second ground, the Tribunal remanded the matter to the AO for verification of vouchers, directing a re-evaluation of the disallowance under section 43B. The appeal was thus allowed in part and remanded for further proceedings.
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