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2018 (3) TMI 1037 - AT - Income TaxTDS u/s 194C - Non deduction of tds on reimbursement of expenses made to group companies - invoking the provisions of section 40a(ia) - Held that - As decided in assessee s own case 2012 (11) TMI 1155 - ITAT MUMBAI 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. - Not required to deduct TDS - Decided in favour of assessee Non TDS on advertising and promotion expenses relating to Team Lease Service Pvt. Ltd. - Held that - As given that Rule 31ACB is applicable with effect from 19.02.2013 and that the ammendment made in section 40a(ia) of the Act came into effect from 1 April 2013 the assessee could not produced the said evidences during the course of the assessment proceedings which were concluded prior to 19.02. 2013. The assessee only requested for remitting the matter back to the file of the AO for verification of the certificate and accordingly deciding the issue. Hence we remit this issue back to file of the AO for limited verification only to give effect to the direction mentioned above.
Issues Involved:
1. Deletion of disallowance for non-deduction of TDS under Section 194C of the Income Tax Act, 1961. 2. Disallowance of advertising and promotion expenses for non-deduction of TDS under Section 40(a)(ia) read with Section 194 of the Income Tax Act, 1961. Issue-Wise Detailed Analysis: 1. Deletion of Disallowance for Non-Deduction of TDS under Section 194C: Facts: The assessee reimbursed expenses to group entities without deducting TDS. The AO disallowed these expenses under Section 40(a)(ia) of the Act, aggregating to ?11,25,35,749/-. The CIT(A) deleted this disallowance, relying on the ITAT's decision for AY 2008-09, which held that the provisions of Section 40(a)(ia) are not applicable to reimbursement of expenses made to the assessee's sister concerns. CIT(A) Decision: The CIT(A) deleted the addition by following the ITAT's decision for AY 2008-09, stating that the reimbursement of expenses was on a cost-to-cost basis without any markup, and thus did not warrant TDS deduction. ITAT Decision: The ITAT upheld the CIT(A)'s decision, confirming that the issue is covered by the Tribunal's earlier decision in the assessee's own case for AY 2008-09 and 2009-10. The Tribunal reiterated that disallowance cannot be made for reimbursement of expenses on a cost-to-cost basis without any markup, as it does not constitute payment for any contract work. 2. Disallowance of Advertising and Promotion Expenses for Non-Deduction of TDS: Facts: The AO disallowed advertising and promotion expenses amounting to ?1,89,16,055/- paid to Team Lease Service Pvt. Ltd. for non-deduction of TDS under Section 40(a)(ia). The CIT(A) confirmed this disallowance. Assessee's Argument: The assessee argued that the second proviso to Section 40(a)(ia), inserted by the Finance Act 2012, should be given retrospective effect. The proviso states that if the payee has filed its return of income and paid taxes on the income received, the payer should not be treated as an assessee in default. Legal Precedent: The assessee relied on the Hon'ble Delhi High Court's decision in CIT v. Ansal Landmark Townships Pvt. Ltd., which held that the second proviso to Section 40(a)(ia) is declaratory and curative, and should be applied retrospectively. ITAT Decision: The ITAT accepted the assessee's argument and noted that the assessee had provided details showing that the payee had filed its return of income, taken into account the sum received, and paid the tax due. The ITAT remitted the matter back to the AO for verification of the certificate and documents, including Form 26A and Annexure A, certified by a chartered accountant, to ensure the payee had appropriately offered the amount to tax. Conclusion: The ITAT dismissed the Revenue's appeal concerning the deletion of disallowance for non-deduction of TDS on reimbursement of expenses. It allowed the assessee's appeal for statistical purposes, remitting the matter back to the AO for verification of compliance with the provisions of Section 40(a)(ia) and the corresponding amendments and notifications. The order was pronounced in the open court on 16-03-2018.
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