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2015 (9) TMI 1355 - AT - Income TaxTDS u/s 192 - Disallowance u/s 40(a)(ia) - non deducting tax on the payment made to the seconded employees from the assessee s subsidiary company which is to be reimbursed by the assessee s subsidiary company - Held that - We find merit in the contention of the assessee. If tax is already deducted at source on the salary paid to the seconded employees by the assessee s subsidiary company, then once again deduction of tax on such salary payment would amount to double deduction of tax at source. It is apparent from the facts of the case that the assessee company is obtaining some service from its subsidiary company for which the assessee company pays service charges to its subsidiary company. Ld. A.R. submitted before us that the amount paid to the seconded employees from the assessee s subsidiary company is not the additional remuneration paid to the assessee s subsidiary company but only a payment in the nature of advance which is to be reimbursed by the assessee s subsidiary company. If that is so, then such payments would not attract the provisions of tax deducted at source. However, these aspects are not clearly brought out in the orders of the Revenue. Since the Both the Revenue Authorities has not examined the following aspects and held the issue against and in favour of the assessee; i.e., whether the tax has been duly deducted at source by the assessee s subsidiary company on the payment made by the assessee to the seconded employees from the assessee s subsidiary company, whether the payment made by the assessee company to the seconded employees from the assessee s subsidiary company amounts to advance payment to the assessee s subsidiary company which is reimbursable and does not amount to additional service charges payable by the assessee company to the assessee s subsidiary company and also the decisions cited by the assessee hereinabove, we hereby remit back the matter to the file of the Ld. Assessing Officer to consider all these aspects discussed hereinabove. - Decided in favour of revenue for statistical purposes. Disallowance of U/s.14A of the Act read with Rule 8D - Held that - D.R could not controvert to the findings of the Ld. CIT (A) that this issue is not covered in favour of the assessee by the order of the Chennai Benches of the Tribunal in the case EIH Associates Hotels Vs. CIT 2013 (9) TMI 604 - ITAT CHENNAI wherein it was held that the investments made by the assessee in the subsidiary company are not on account of investment for earning capital gains or dividend income. Such investments have been made by the assessee to promote subsidiary company into the hotel industry. The assessee is not into the business of investment and the investments made by the assessee are on account of business expediency. Any dividend earned by the assessee from investment in subsidiary company is purely incidental. Therefore the investments made by the assessee in its subsidiary are not to be reckoned for disallowance U/s.14A r.w.r. 8D. The Assessing Officer is directed to re-compute the average value of investment under the provisions of Rule 8D after deleting investments made by the assessee in subsidiary company - Decided in favour of assessee.
Issues involved:
1. Disallowance under section 40(a)(ia) of the Act for non-deduction of tax on payments to seconded employees. 2. Disallowance under Rule 8D(2) after reducing investments in subsidiary companies. 3. Disallowance under Section 14A read with Rule 8D of the Rules. Issue 1 - Disallowance under section 40(a)(ia) of the Act for non-deduction of tax on payments to seconded employees: The appeal by the Revenue challenged the order of the Commissioner of Income Tax (A) directing the deletion of disallowances made under section 40(a)(ia) of the Act for not deducting tax on payments to seconded employees. The Assessing Officer disallowed the amount as tax was not deducted at source. However, the Commissioner (A) deleted the addition, citing that the payments were reimbursements and not for services rendered. The Tribunal remitted the matter back to the Assessing Officer to consider if tax was already deducted at source by the subsidiary company and if the payments were advance payments reimbursable by the subsidiary company. Issue 2 - Disallowance under Rule 8D(2) after reducing investments in subsidiary companies: The Revenue invoked Rule 8D for disallowance under Section 14A due to declared dividends from investments. The Commissioner (A) directed the Assessing Officer to rework the disallowance under Rule 8D(2) after reducing investments in subsidiary companies. The Tribunal upheld the Commissioner's decision, stating that investments in subsidiaries were not for earning capital gains or dividends, but for business expediency. As the case was covered by a previous Tribunal decision, the Tribunal did not interfere with the Commissioner's order. Issue 3 - Disallowance under Section 14A read with Rule 8D of the Rules: The Revenue's appeal was partly allowed for statistical purposes regarding the disallowance under Section 14A read with Rule 8D. The Commissioner (A) directed the reworking of disallowance under Rule 8D(2) after reducing investments in subsidiary companies, which was upheld by the Tribunal based on a previous decision. The Tribunal found the case covered by the Tribunal's decision and did not intervene in the Commissioner's order. In conclusion, the Tribunal's judgment addressed the issues of disallowances under various sections of the Act, remitting one issue back to the Assessing Officer and upholding the decisions of the Commissioner (A) on the other issues based on relevant legal interpretations and precedents.
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