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2012 (7) TMI 581 - AT - Income TaxTDS - Liability of the payer to make deduction of tax Held that - Payment made by the assessee is purely reimbursement of expenses which in no way fall within the ambit of the provisions of TDS - Appellant was not liable for deduction of tax as per the provisions of section 194J of the Act, the assessee should not be treated as assessee in default under section 201(1) of the Act - Assessing Officer directed to delete the demand Regarding interest u/s. 201(IA) Held that - original payment was made by the sister concern of the assessee to Diamond Trading Company on behalf of the assessee and subsequently the assessee has reimbursed the amount to the sister concern - once the TDS was deducted by the sister concern and deposited to the government account, then no subsequent TDS is required to be deducted on the same amount - Since the payment was not subjected to TDS provisions, then the liability of interest also does not arise - there is no loss of revenue because the original payment was already subjected to tax and the amount in question is only reimbursement In favor of assessee
Issues Involved:
1. Duplicate Appeal 2. TDS Liability on Reimbursement of Expenses 3. Applicability of Section 194J 4. Interest under Section 201(1A) Detailed Analysis: 1. Duplicate Appeal: The revenue filed two appeals (ITA No.2018/Mum/2010 and ITA No.1949/Mum/2011) against the same order dated 30.12.2009 of the CIT(A) for the Assessment Year 2006-07. The tribunal treated ITA No.1949/Mum/2011 as infructuous and dismissed it as a duplicate appeal of ITA No.2018/Mum/2010. 2. TDS Liability on Reimbursement of Expenses: The core issue was whether the payment of core service charges by the assessee to its sister concern was subject to TDS. The assessee argued that the core service fee paid was a reimbursement of expenses incurred by the sister concern on behalf of the assessee and not an income-generating transaction. The Commissioner of Income Tax(Appeals) accepted this explanation, stating that the payment was purely reimbursement and did not fall within the ambit of TDS provisions. The tribunal upheld this view, noting that the original payment had already been subjected to TDS by the sister concern, and thus, no further TDS was required on the reimbursement. 3. Applicability of Section 194J: The Assessing Officer contended that the assessee was liable to deduct TDS under Section 194J on the core service charges paid. However, the Commissioner of Income Tax(Appeals) and the tribunal found that since the payment was a reimbursement and not for any services rendered, Section 194J was not applicable. The tribunal emphasized that the payment was already subjected to TDS when initially made by the sister concern, and any further TDS would result in double taxation. 4. Interest under Section 201(1A): The Assessing Officer charged interest under Section 201(1A) for the alleged failure to deduct TDS. The Commissioner of Income Tax(Appeals) directed the deletion of this interest, citing that since the payment was not liable for TDS, the interest under Section 201(1A) was also not applicable. The tribunal concurred, referencing the decision of the ITAT Jodhpur Bench in the case of I.T.O. vs. Emerald Construction (P) Ltd, which held that when the tax was not payable, charging interest would be unjust. Conclusion: The tribunal dismissed all four appeals filed by the revenue, affirming the decision of the Commissioner of Income Tax(Appeals) that the payment in question was a reimbursement of expenses and not subject to TDS under Section 194J. Consequently, the assessee was not liable for any interest under Section 201(1A). The tribunal's order was pronounced on 25th May 2012.
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