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TMI Blog2016 (3) TMI 207X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the assessee to deduct the tax at source on the entire sum paid by the assessee to the recipient. Under Section 195, the obligation to deduct tax at source was attracted only when the payment was chargeable to tax in India. Thus as pointed out by the CIT(A) in the order the Hon’ble Delhi High Court held that no liability for deduction of tax at source arose under Section 195 in the case of mobilization and demobilization costs reimbursed to a non-resident, not being taxable in India, hence disallowance under Section 40(a)(ia) did not arise. Recently, in case of CIT vs. Ansal Land Mark Township (P) Ltd. [2015 (9) TMI 79 - DELHI HIGH COURT] it was held that what is common to both proviso to Section 40(a)(ia) and Section 210(1) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of ₹ 3,19,66,460/-to its sister concern M/s Akriti Creations Pvt. Ltd. by way of reimbursement of expenses but had failed to deduct tax on this payment. The Assessing Officer was of the opinion that there was a liability to deduct tax u/s 194C of the Income Tax Act, 1961 on the contractual payment of reimbursement of manufacturing expenses. The Assessing Officer, therefore, proposed to disallow the payment of ₹ 3,19,66,460/- u/s 40(a) (ia) of the Income Tax Act, 1961. The assessee contended before the Assessing Officer that M/s Akriti Creations Pvt. Ltd. raised separate monthly bills for the reimbursement of expenses and for the management charges at 5% of the actual expenses incurred. The assessee submitted before the Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer also relied on CBDT Circular No. 715 dated 8/8/1995 the total amount paid on account of reimbursement of expenses of ₹ 3,19,66,460/- was disallowed u/s 40(a) (ia) of the Income Tax Act, 1961. 4. Aggrieved, by the said order the assessee filed appeal before the CIT(A). The CIT(A) held that the amount of 2% required to be deducted by the buyer out of the some credited to the account or paid to the contractor has to be confined to his income component out of that sum. The same was held by the Hon ble Apex Court in the case of Associated Cement Company, the CIT(A) held that the Assessing Officer relied on CBDT Circular No. 715, wherein it was clarified that the deduction of tax at source u/s 194C and 194J of the Incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Akriti Creations Pvt. Ltd. There are no adverse comments or findings of the Assessing Officer in this regard and did not dispute the fact that the reimbursement of expenses were for the purposes of the business of the assessee which are allowable under Chapter IV-D of the Income Tax Act, 1961. In the case of M/s. Akriti Creations Pvt. Ltd. the concerned Assessing Officer did not dispute their claim that there was no profit element in the reimbursement of expenses received from the present assessee. Thus the Assessing Officer in both the cases accepted that these are genuine reimbursement of expenses and there was no profit element and hence no income liable to tax was contained therein. The Hon ble Delhi High Court in case of Van Oord ACZ I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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