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TMI Blog2014 (4) TMI 305X X X X Extracts X X X X X X X X Extracts X X X X ..... )-VIII, Ahmedabad has erred in law and on facts in deleting the disallowance of Rs.61,97,917/- for A.Y. 2006-07 (Rs.1,56,43,255/- for A.Y. 2007-08) made by the Assessing Officer u/s.40(a)(ia) of the Income Tax Act, 1961, without property appreciating the facts of the case and the material brought on record by the Assessing Officer. 1.2 In doing so , the learned CIT(A) has erred in law and on facts in holding that the amounts paid purely as reimbursement of manpower costs cannot be subjected to TDS, without appreciating that the said payments made by the assessee to M/s. Mudra Communication Private Limited were in the nature of payment of professional charges and tax was required to be deducted at source on the aforesaid payment by the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... munication Pvt. Ltd. with the particulars mentioned in the debit note were as under: Date of Debit Note Particulars of Debit Note Amount Payment Date Payment Amount 31.3.2006 20,00,000 17.8.2006 38,00,000 31.3.2006 20,00,000 25.8.2006 9,00,000 31.3.2006 20,00,000 06.09.2006 7,00,000 31.3.2006 1,97,917 12.10.2006 5,00,000 17.12.2006 1,00,000 12.10.2006 3,74,043 Reimbursement of Manpower Deputation Cost and Expenses 61,97,917 2.1 The gist of the assessee's reply was as under: "The company decided not to hire payment staff for its business, since this was the first year of operation and there was no conformity of regular business. Instead, they had choice to depend on: - To hire manpower of third party, or - To hire manpower ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter examining the facts of the case, learned CIT(A) has held as under: "3.2 ) I have carefully considered the facts of the case, findings of the AO and submission of the appellant. Apparently, there is no dispute on the facts that - Mudra is not into the business of supply of manpower or rendering services by providing its employees to others. - There is no element of profit involved in the transaction. The appellant has categorically stated that "the company decided not to hire permanent staff for its business, since this was the first year of operation and there was no conformity of regular business. Instead, they had choice to depend on: * To hire manpower of third party, or * To hire manpower from within the group/associated compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e company in time of needs by deputing the required person. g) The employees were employed by Mudra, and they have fulfilled all applicable legal provisions including the provisions of TDS on salary paid to the employees that were deputed to our company. h) The receipts in the nature of cost sharing amount has been deducted from cost and not reflected as income. Without prejudice to the above, we may clarify that Mudra in its accounts which we have submitted, have followed The Institute of Chartered Accountants of India's Standards for displaying the amount received from related parties. A clear picture would emerge if one looks at the totality of the amount specified under that head. The figures displayed include "Manpower Cost" and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . We have considered the rival submissions and pursued the record. The jurisdictional High Court in the case of CIT vs. Seimens Aktiongesellschaft (supra) has held that reimbursement of expenses cannot be regarded as revenue in the hands of the payee. While deciding the issue, the Hon'ble High Court has followed the decision of the Delhi High Court in the case of CIT vs. Industrial Engg. Projects P. Ltd. (202 ITR 1014). It is settled proposition of law from the various decisions of High Courts and particularly the decision of Hon'ble jurisdictional High Court (supra) that when there is no element of income and the payment is only as a reimbursement of expenses incurred by the payee, then no disallowance can | be made u/s. 40(a)(ia). ..... X X X X Extracts X X X X X X X X Extracts X X X X
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