9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2019 (1) TMI 1990 - AT - Income TaxTDS u/s 195 - Disallowance of expenses u/s 40(a)(ia) - assessee claimed expenses on account of book charges under the head administrative and other expenses - HELD THAT - As section 195(1) uses expression sum chargeable under the provisions of the Act , and section 195 uses the word 'payer' and not the word assessee , Payer becomes assessee-in-default, only when he fails to fulfil statutory obligation under section 195(1). If payment does not contain any element of income, payer cannot be made liable. He cannot be declared to be an assessee-in-default. When a payer remits amount to a non-resident out of India, he claims deduction or allowances under the Act for as an expenditure . From order passed by AO it is an admitted position that payment made by assessee represents its share of expenses incurred by the group companies on cost-to-cost basis. Ld. AO made addition only on the ground that assessee made certain payments to a non-resident without deducting TDS. Nowhere there is any material that has been brought on record by Ld.AO to establish that payments made to non-resident involved an element of income which is chargeable to tax in India. We do not find any infirmity in the order of CIT (A) and the same is upheld. Accordingly grounds raised by revenue stand dismissed.
Issues Involved:
1. Disallowance of expenses under section 40(a)(ia) of the Income Tax Act, 1961 for non-deduction of TDS. 2. Applicability of section 195 of the Income Tax Act, 1961 for payments made to non-residents. Issue-wise Detailed Analysis: 1. Disallowance of expenses under section 40(a)(ia): The revenue challenged the deletion of additions made by the Assessing Officer (A.O.) under section 40(a)(ia) of the Income Tax Act, 1961, for non-deduction of TDS on payments made to non-residents. The A.O. had disallowed expenses amounting to Rs.1,76,41,309/- for AY 2010-11 and Rs.1,45,99,745/- for AY 2011-12, arguing that the assessee was required to deduct tax at source under section 195 of the Act. The assessee contended that the payments were reimbursements of expenses incurred by overseas group entities on a cost-to-cost basis without any income element, hence not liable for TDS. The CIT(A) accepted the assessee's claim, noting that the payments were for administrative, financial, IT, HR, and marketing support services provided by group entities and were not chargeable to tax in India. The CIT(A) relied on judicial precedents, including the Delhi High Court decision in DLF Commercial Project Corporation Vs. CIT and the Gujarat High Court decision in Commissioner of Income Tax-Ill v. Gujarat Narmada Valley Fertilizers Co. Ltd., which held that reimbursement of expenses without any income element does not attract TDS. 2. Applicability of section 195: The revenue argued that section 195(2) mandates the payer to seek permission from the A.O. for non-deduction of tax at source on payments to non-residents. The assessee countered that section 195(1) applies only to sums chargeable under the Act, and since the payments were pure reimbursements without any income element, section 195 was not applicable. The Tribunal observed that the A.O. did not establish any income element in the payments made to non-residents. The Tribunal referred to the Supreme Court ruling in Transmission Corporation of AP vs. CIT, which held that TDS is required only if the payment includes an income element. The Tribunal upheld the CIT(A)'s decision, emphasizing that the payments were reimbursements of expenses incurred on a cost-to-cost basis, not chargeable to tax in India, and hence, section 195 was not applicable. Conclusion: The Tribunal dismissed the revenue's appeals for both AY 2010-11 and AY 2011-12, affirming the CIT(A)'s orders that disallowed the additions made by the A.O. under section 40(a)(ia) for non-deduction of TDS. The Tribunal concluded that the payments made by the assessee to non-residents were reimbursements of expenses without any income element, and therefore, not subject to TDS under section 195. The Tribunal's decision was consistent with the judicial precedents cited by the CIT(A) and the assessee's own case for AY 2012-13. Order Pronounced: The appeals by the revenue for AY 2010-11 and AY 2011-12 were dismissed, and the order was pronounced in the open court on 03rd January, 2019.
|
