2013 (2) TMI 234 - AT - Income Tax

Non deduction of TDS on Retainership charges - CIT(A)allowed after admitting fresh evidence - assessee submitted that the payments were of the nature of reimbursement of expenditure thus TDS provisions were not applicable - Held that - From the order of CIT(A) it is not clear as to how payments represented reimbursement of expenditure. The order of CIT(A) is not a reasoned and speaking order. Since AO has given a clear finding that no evidence had been produced regarding reimbursement of expenditure CIT(A) was required to give opportunity to AO regarding any evidence produced in support of reimbursement of expenditure - order of CIT(A) can not be sustained thus restore the issue back to him for passing a fresh order after allowing opportunity of hearing to the AO - appeal of the revenue allowed for statistical purposes.

Summary

Issues: Disallowance of expenses for non-deduction of tax at source on retainership charges claimed by the assessee.

Analysis:
1. The revenue appealed against the CIT(A)'s order for the assessment year 2007-08, specifically challenging the decision of the Assessing Officer (AO) to allow retainership charges after admitting fresh evidence.

2. During the assessment proceedings, the AO noted that the assessee claimed retainership charges totaling Rs.47,65,235, which were considered professional charges necessitating tax deduction under section 194J. The AO requested details of tax deducted at source. The assessee contended that some payments were for secondment of staff costs, not subject to TDS. However, the AO disallowed Rs.38,65,235 and added it to the total income due to lack of proof of expenditure reimbursement.

3. The CIT(A) found that the disallowed amount was indeed reimbursement of expenses, not subject to TDS. The revenue challenged this deletion of addition, arguing that additional evidence presented before the CIT(A) had not been submitted to the AO, thus questioning the validity of the CIT(A)'s decision.

4. The Tribunal observed that the dispute centered on the disallowed expenses of Rs.33,65,235 paid to a specific entity. While the assessee claimed these were reimbursement payments, the AO found no proof of this. The CIT(A) accepted the reimbursement claim based on evidence not previously submitted to the AO. The Tribunal criticized the lack of reasoning in the CIT(A)'s order and deemed it necessary for the AO to have an opportunity to review the new evidence before a decision was made.

5. Consequently, the Tribunal set aside the CIT(A)'s order and remanded the issue for a fresh decision, emphasizing the need for the AO to assess the evidence supporting the reimbursement claim and granting both parties a fair hearing.

6. Ultimately, the appeal by the revenue was allowed for statistical purposes, with the Tribunal's decision pronounced on January 7, 2013.