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2023 (7) TMI 83 - AT - Income TaxTDS on reimbursement of expenses - demand u/s. 201(1) along with levy of interest u/s. 201(1A) - HELD THAT - The assessee has raised debit note on which there is no profit element and therefore the AO cannot fastened the liabilities of TDS as there is clear absence of profit component and it is actual reimbursement and from the records available, assessee has produced all documents where it is evidences it is an actual reimbursement and where individual is shown proves that there is no profit component. The decision relied upon the ld. Ld. DR wherein the absence of material it was held that the assessee has not proved that the same is of pure reimbursement in nature. In support, reliance was placed on case of CIT vs. Kalyani Steels 2018 (5) TMI 152 - KARNATAKA HIGH COURT and Zephyr Biomedicals 2020 (10) TMI 370 - BOMBAY HIGH COURT wherein the Board Circular has been taken into consideration, we come to the conclusion that reimbursement of expenses were earlier incurred by a person on behalf of another or covered as such where there is no element of profit in such reimbursement and when that reimbursement has sufficient supporting documents that no TDS is required to be deducted by the assessee on reimbursement of actual expenses incurred by the RWPL and we set aside the order passed by the ld. CIT(A). Hence, the appeal is being allowed.
Issues Involved:
1. Non-deduction of TDS on reimbursement of expenses. 2. Levy of interest under section 201(1A) of the Income Tax Act. 3. Validity of treating the assessee as 'assessee in default.' Summary: 1. Non-deduction of TDS on Reimbursement of Expenses: The primary issue in these appeals was whether the assessee, M/s Barmer Lignite Mining Company Limited (BLMCL), was required to deduct TDS on reimbursements made to its joint venture partner, M/s Raj West Power Ltd. (RWPL). The assessee contended that these reimbursements were purely for actual expenses incurred by RWPL on behalf of BLMCL and did not attract TDS provisions. The Assessing Officer (AO) and CIT(A) disagreed, treating the payments as subject to TDS under various sections like 194I and 194C, arguing that the JV agreement did not explicitly state that these were reimbursements without income elements. 2. Levy of Interest under Section 201(1A): The AO levied interest under section 201(1A) for non-deduction of TDS on these reimbursements. The CIT(A) upheld this levy, stating that even if the assessee was not treated as 'assessee in default' for the principal amount under section 201(1) for certain years, the interest under section 201(1A) was still applicable until the date of tax payment by the deductee. 3. Validity of Treating the Assessee as 'Assessee in Default': For the assessment years 2013-14 to 2017-18, the AO did not treat the assessee as 'assessee in default' under section 201(1) because RWPL had filed returns considering the amounts received. However, for the years 2011-12 and 2012-13, the assessee initially failed to provide the necessary certificates, leading to a demand under section 201(1). These certificates were later submitted during appellate proceedings, and the CIT(A) partially allowed the appeals for these years, removing the demand under section 201(1) but upholding the interest under section 201(1A). Tribunal's Findings: The Tribunal found that the lower authorities erred in not accepting the assessee's contention that the payments were pure reimbursements, devoid of any profit element, and thus not subject to TDS. The Tribunal noted that the assessee had provided sufficient evidence, including debit notes and detailed records of the expenses, proving that these were actual reimbursements. Citing various judicial precedents, the Tribunal concluded that TDS provisions do not apply to pure reimbursements. Conclusion: The Tribunal allowed the appeals, setting aside the orders of the CIT(A) and AO, and confirmed that no TDS was required on the reimbursements made by the assessee to RWPL. Consequently, the levy of interest under section 201(1A) was also annulled. The decision in ITA No. 159/JPR/2023 was applied mutatis mutandis to the other appeals (ITA Nos. 153 to 158/JPR/2023).
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