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TMI Blog2015 (8) TMI 36X X X X Extracts X X X X X X X X Extracts X X X X ..... t:- It is understood from the facts of the case that Amalgamation Pvt Ltd is a holding company under which several other group companies are working. Whatever expenditure is incurred by the holding company in London to share the office space, advertisement expenses, travelling, telephone charges etc., are being shared by all of them as per the understanding they had with the holding company. The share of expenditure paid by the subsidiary companies are in the form of reimbursement of expenditure incurred by the holding company on behalf of subsidiary companies. Since the reimbursement of expenditure by the holding company is not leading to any accrual of income in the hands of that company, the question of making TDS on such income does not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted that it had not incurred any expenditure for earning exempt income. The assessee company submitted that since it had not incurred any expenditure by way of interest and other charges, no arbitrary amount of expenses can be disallowed. It is further submitted by the assessee that in its own case, the Tribunal for the assessment year 2001-02 by order in ITA No.1725/Mds/2003 dated 26.10.2005 restricted the disallowance to 2% as against 10% disallowed by the Assessing Officer. However, the Assessing Officer disallowed 10% of the dividend income earned by the assessee as the expenses attributable for earning the dividend income by invoking provisions of section 14A of the Act. On appeal, the Commissioner of Income Tax (Appeals) following the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch payments and therefore proposed to disallow the said payments under section 40(a)(i) of the Act. In the course of assessment proceedings, assessee submitted that amounts paid to M/s. Amalgamation Pvt. Ltd. were reimbursement of expenses made by the assessee. The expenses were incurred on behalf of the assessee by M/s. Amalgamation Pvt. Ltd., therefore such expenses were reimbursed and the provisions of TDS have no application. 7. On appeal, Commissioner of Income Tax (Appeals) deleted the disallowance against which Revenue is in appeal before us. 8. Departmental Representative vehemently supports the orders of Assessing Officer in invoking the provisions of section 40(a)(i) of the Act on the payments made to M/s. Amalgamation Pvt. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the purpose of export promotion of products offered by the participating companies in the group during that year. The assesee is one of the participating companies in that group. It is submitted that entire amount has been paid to Amalgamation Ltd which pays to a person outside India who is a non resident. Therefore, the provision of the Indian Income Tax Act does not apply and therefore, no TOS has to be deducted by the assessee. As per explanation 1 to section 9 (1)(b), no income shall deem to accrue or arise in India to a non resident. It is an established principle of law that the TOS has to be deducted only in cases where the tax is payable and not otherwise. Once the tax liability does not exist, the question of deducting T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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