2018 (5) TMI 1541 - AT - Income Tax

Whether TDS u/s 194C is required to be deducted on reimbursement of postage expense - Held that - there is no requirement of making TDS made by the Company - also reimbursement nature of the bill-wise was also clearly indicated on the face of cash invoice - reimbursements are on accounts of postage expenses on actual usage - thus there is no case for invoking the provisions u/s 194C which only mandates for effecting TDS as per the contract norm - decided in favor of assessee.

Summary

Issues involved:
Appeal against disallowance under Section 40(a) of the Income Tax Act for reimbursement of expenses to M/s. Imperial Packers.

Analysis:
The appeal was filed against the order of the Commissioner of Income Tax (Appeals) for the assessment year 2007-08 regarding the disallowance made under Section 40(a) of the Income Tax Act amounting to ?5,60,269 to M/s. Imperial Packers. The Assessing Officer noted that the assessee failed to deduct TDS on the postage expenses reimbursed to M/s. Imperial Packers, invoking the provisions of Section 40(a) of the Act. The CIT(A) granted relief for payments made to Osho International Foundation but confirmed the addition for M/s. Imperial Packers. The main contention was whether the payment to M/s. Imperial Packers constituted reimbursement of actual expenses or payment for services rendered under Section 194C of the Act.

The assessee argued that the payment to M/s. Imperial Packers was reimbursement for actual postal expenses and not for services rendered, thus not warranting TDS deduction. The CIT(A) disagreed, stating that M/s. Imperial Packers provided services as packing, clearing, and forwarding agents, and the payment was for services rendered, not reimbursement. The CIT(A) held that the payment fell under Section 194C of the Act, justifying the Assessing Officer's decision under Section 40(a). The dispute centered on whether the payment was for actual expenses or services provided by M/s. Imperial Packers.

During the appeal, the assessee contended that the payment to M/s. Imperial Packers was similar to that made to Osho International Foundation and did not require TDS deduction. The invoices and notes provided by M/s. Imperial Packers indicated reimbursement nature, as borne by them on behalf of the party. The Revenue argued that M/s. Imperial Packers provided services for packing and postages, receiving payment for services rendered, not reimbursement.

The Tribunal held that the payment to M/s. Imperial Packers was a case of reimbursement as the expenses were already borne by them on behalf of the party, hence not requiring TDS deduction. The Tribunal found the CIT(A)'s decision against the assessee was incorrect, as the payment was clearly indicated as reimbursement on the face of the invoice. Therefore, the Tribunal allowed the appeal, concluding that the payment to M/s. Imperial Packers was for reimbursement of actual expenses and not for services rendered, thus not falling under Section 194C of the Act.