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TMI Blog2014 (1) TMI 939X X X X Extracts X X X X X X X X Extracts X X X X ..... l to deduct tax at source then said amount shall not be allowed as deduction u/s 40 (a) (i) – assessee contended that there is no mala fide in the conduct of the assessee, it has just reimbursed the expenses to the parent company - It has not made this arrangement for avoiding payment of taxes - The element of income is embedded in the receipt of the auditor - If the receipts are routed through the parent company that does not extinguish the element of income from the payments – thus, the assessee was bound to deduct TDS - It failed to deduct TDS, hence a disallowance is to be made u/s 40 (a) (i) – the AO is directed to exclude the amount from the disallowance after verification – Decided partly in favour of Assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... d provision because, for carrying out the audit service, if third party would receive any amount then that amount would be taxable in India. 4. Alternatively, assessee has contended that a sum of Rs.1,05,989/- was written back as an income being excess provision and it was offered for taxation. According to the assessee the only amount payable by it is Rs.1,55,,551/- which at the most can be disallowed. 5. We find that qua this argument AO has just observed that contention of the assessee is not acceptable because it had made a provision of Rs.2,61,540/-. 6. Appeal to the CIT (A) did not bring any relief to the assessee. 7. Before us ld. counsel for the assessee, on the strength of two Tribunal decisions rendered in the case of ACIT Vs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DS while making payment to non-resident. It nowhere provides that such an obligation can be absolved by showing reasonable cause for not deducting the TDS while making payment or crediting the account. Thus the contentions of the assessee that under bona fide belief, it has reimbursed the expenses are irrelevant. The element of income is embedded in the receipt of the auditor. If the receipts are routed through the parent company that does not extinguish the element of income from the payments. Therefore assessee was bound to deduct TDS. It failed to deduct TDS, hence a disallowance is to be made u/s 40 (a) (i). As far as quantification of the amount is concern, we find that assessee has made the provision for a sum of Rs.2,61,540/-. The ex ..... X X X X Extracts X X X X X X X X Extracts X X X X
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