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TMI Blog2021 (10) TMI 264X X X X Extracts X X X X X X X X Extracts X X X X ..... ived, went into liquidation and the said amount was not liable to be refunded. In our view this security deposit is a capital receipt not chargeable to tax. Thus, no interference is called for in the finding of Ld. CIT(A). Ground no.1 raised by the revenue is dismissed. Non-deduction of tax at source on payments made on behalf of EION Telecom charged to profit and loss account for which reimbursement was received and credited to income - CIT-A deleted the addition - HELD THAT:- We find that the M/s. EION Telecom P. Ltd. has deducted the income tax at source as applicable on all the expenses farming part of the alleged disallowance. The details/summary of TDS deducted and deposited by EION Telecom Pvt. Ltd. during the relevant period st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... never claimed as revenue expenditure in the past, whereas such security deposit forfeited is in the nature of benefit arisen in the hands of the assessee and is liable to tax as business income of the assessee. 2. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of ₹ 2,33,59,716/- towards the payments made on behalf of M/s. EION Telecom by holding that TDS arises in the hands of the principal and the agent who is making the payment/expense on half of the principal is not liable to TDS? 2. Brief facts of the case as culled out from the records are that the assessee is a Private Limited Company. E-return of income filed on 29.09.2013 declaring income of ₹ 26,77,090/-. C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income reduced this sum from profit as per P L Account in the computation of income. When the assessee was asked to justify the basis for not offering income of ₹ 33,00,000/- to tax it was submitted that the forfeited security deposit is a capital receipts and not liable to be taxed. But Ld. AO was not satisfied and he made the addition against which the assessee preferred an appeal before the Ld. CIT(A) who after considering the assessee s submissions mentioned in para 7.2 of the impugned order deleted the addition observing as follows:- 7.3 It is observed that assesse was rendering certain services to M/s Waveset INC for which purpose it had taken a property situated at Bangalore on lease for which a security deposit of ͅ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the liability under consideration was not on account of any deduction claimed by the assessee against income/gross revenue. It was a write off of capital receipts being security deposit taken from a company for the purpose of giving security for taking a property on lease on its behalf. The company namely M/s Waveset INC from which the security deposits was received, went into liquidation and the said amount was not liable to be refunded. In our view this security deposit is a capital receipt not chargeable to tax. Thus, no interference is called for in the finding of Ld. CIT(A). Ground no.1 raised by the revenue is dismissed. 8. As regards ground no.2 relating to deletion of disallowance of ₹ 2,33,59,716/- made for non-deduction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eted the disallowance u/s 40a(ia) of the Act observing as follows:- 8.3 The assessee has explained that it provided fund management services to Eion Telecom P Ltd . Under the arrangement with that client all payments of that company were first paid by the assessee and thereafter were got reimbursed. In addition service charges were received for these services rendered. As per the accounting system consistently followed by the assessee since its inception all payments made for and on behalf of the said company were charged to expenses under the head Direct Expenses EION . These payments along with the agreed service charges were billed to EION Telecom P Ltd and are credited to income account. Thus no part of these payments was effect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erefore, qua the assessee, the payments were only reimbursements not liable for TDS deduction at the end of the assessee. 8.5 Regarding, the observation of the AO that various payments are not in the nature of business expenses it is observed that the appellant had provided the services to the said client and all payments made on behalf of the client were got reimbursed from the client along with applicable services charges. Therefore, the nature of expenses and its allowability is to be seen in the hands of M/s EION Telecom P Ltd. As the appellant had merely acted as an agent and had got all the payments made reimbursed from the client, the nature of expenses was not relevant in the case of assessee. 8.6 It has also been pointed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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