2020 (2) TMI 1466 - AT - Income Tax

Disallowance of TDS paid on license fees on VISA cards - reason to confirm the disallowance on VISA card is the fact that the terms of Master Card and VISA cards have been found to be at variance - HELD THAT - As noted by Ld. CIT(A), Article-11 of agreement with VISA cards mandated assessee to provide proof of payment of taxes and nothing more and there were no specific stipulations that the payment of the same would constitute assessee s liability - the fact that whether the said expenditure was reimbursable by VISA or not, was not brought on record. The answer to the same would be vital to clinch the issue in proper perspective. Obviously, if the expenditure was non-reimbursable in nature and it was borne by the assessee himself, the same would certainly become assessee s liability and hence an allowable expenditure as held in earlier years. On the contrary, if the expenditure was reimbursable in nature, it would materially alter the assessee s claim of deduction. The submissions made by Ld. AR also do not throw much light on this fact and the observation made by Ld. CIT(A) has remained unaddressed. Therefore, with a view to bring on recordclear facts and to dispel the concerns raised by Ld. DR, we restore the matter back to the file of Ld. CIT(A) with a direction to ascertain the correct facts. The assessee is directed to provide the requisite details / information. Needless to add that, if the expenditure was non-reimbursable in nature, the same would be an allowable deduction otherwise not. Assessee appeal allowed for statistical purposes

Summary

Issues: Disallowance of TDS paid on license fees on VISA cards for Assessment Year 2015-16.

Analysis:
1. The appeal challenges the disallowance of TDS paid on license fees on VISA cards for ?55.05 Lacs under the terms of agreement for Assessment Year 2015-16. The issue for consideration is the disallowance of TDS paid on license fees on VISA cards.

2. The Authorized Representative for Assessee submitted that the issue is in favor of the assessee based on previous Tribunal decisions. The Departmental Representative could not counter the fact that the Tribunal had already considered the issue in the assessee's favor in previous years. The CIT(A) distinguished the factual matrix for the current year.

3. The assessee claimed expenses towards non-reimbursable TDS for VISA Card and Mastercard during assessment under section 143(3). The Assessing Officer disallowed the expenses despite the assessee's defense based on favorable orders from previous years.

4. The assessee argued that agreements with VISA Card and Master Card obligated it to pay service charges & license fees without tax deduction. The CIT(A) differentiated between the two agreements, noting that the VISA card agreement did not clearly make tax payment the assessee's liability. The CIT(A) confirmed the disallowance of TDS on VISA cards but deleted the disallowance on Master Cards.

5. The Tribunal found the issue to be narrow, focusing on the variance between the terms of the Master Card and VISA card agreements. The agreement with VISA cards required proof of tax payment without specifying it as the assessee's liability. The Tribunal directed the CIT(A) to ascertain if the expenditure was reimbursable by VISA, which would impact its deductibility. The matter was remanded to clarify the facts for a proper decision.

6. The appeal was allowed for statistical purposes, and the case was sent back to the CIT(A) for further examination and clarification of facts regarding the reimbursability of the expenditure.