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TMI Blog2023 (1) TMI 866X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee has cumulatively offered to tax income and disclosed service tax thereon in its books of accounts in excess of income and service tax reported in Form No. 26AS for the Financial Year 2007-08 through Financial Year 2010-11. The assessee is maintaining regular books of accounts audited by independent chartered accountant which normally to be taken as correct unless there are adequate reason to indicate that the same is incorrect or unreliable. It is not the case of the A.O. that there are a specific defect or discrepancies in the books of accounts of the assessee. Therefore, in our opinion, the Ld.CIT(A) has committed no error in deleting the disallowance - Ergo, we find no merit in the Ground No. 1 of the Revenue. Accordingly, Ground No. 1 is dismissed. Disallowance u/s 40(a)(ia) of the Act on account of non deduction of tax at source on the amount paid for its expat employees - HELD THAT:- The social security contribution do not constitute income from salary in the hands of expatriate employees and the employees do not have any right over such contributions. The same will not take care the character of salary in the year of contribution. Therefore in our opinion, the deletion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as preferred an appeal before the CIT(A). The Ld.CIT(A) has partly allowed the appeal by deleting the disallowance of Rs. 2,72,66,619/- made by the A.O. u/s 68 of the Act and also deleted the disallowance of Rs. 63,57,485/- made by the A.O. u/s 40(a)(ia) of the Act on non deduction of the tax at source. 5. Aggrieved by the order of the Ld.CIT(A) dated 15/07/2019, the Revenue has preferred the present appeal on the grounds mentioned above. 6. The Ld. DR submitted that the Ld.CIT(A) has committed an error in deleting the disallowance of Rs. 2,72,66,619/- made by the A.O. u/s 28 of the Act on account of difference between receipts as per 26AS and as per books of accounts. Further submitted that, the Ld.CIT(A) has also committed an error in deleting disallowance of Rs. 63,57,485/- made by the A.O. u/s 40(a)(ia) of the Act on account of deduction of tax at source on amounts paid for its expat employees and relied on the assessment order. 7. Per contra, the Ld. Counsel for the assessee has relied on the order of the Ld.CIT(A) and submitted that the Ld.CIT(A) has rightly allowed the appeal which requires no interference and taken us through the paper book and the reasons given by the L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee was higher than the corresponding income and service tax which was subjected to TDS deduction as reported in Form No. 26AS for the Financial Year 2007-08 to 2010-11. The said excess has been compensated in the Financial Year 2011-12 which is evident from the fact that the income and service tax reported in Form No. 26AS in the Financial Year 2011-12 is higher than the income and service tax accrued disclosed by the assessee in the audited financials for the said year. Thus, the difference between income reported in Form No. 26AS and the income reflected in audited financial of the assessee has cumulative decreased for a period of five years accept for an amount of Rs. 61,09,616/-. The cumulative difference of Rs. 61,09,616/- exists between the income considered in the audited financials and Form No. 26 AS for the said five years, the amount TDS withheld by the deducter stood duly reconcile. The assessee has also explained to the A.O. that some of the differences are overlapping due to different years in which the assessee and the deductor have considered the respective income/expenses and corresponding income tax deducted at source and also clarified the difference in inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g in India. These contributions related to expatriates who were deputed to work under the employment of the appellant. The expatriates continued to be covered by social security schemes outside India. Social security contributions were paid by the appellant's associate companies outside India and charged to appellant for recovery on cost incurred basis. 4.3. During the course of assessment proceedings, the AO raised the issue of disallowance of salary cost incurred in the form of social security contribution on account of non-deduction of TDS. Since, the amount under consideration is part of the salary cost, inadmissibility, if any, of this expenditure will arise under section 40(a)(iii) which deals with "any payment which is chargeable under the head "Salaries" if it is payable outside India or to a non-resident". 4.4. The appellant in its submission provided a detailed reply explaining that amount under consideration was not chargeable as income under the head "Salaries" in the hands of the expatriate employees in the year when the contributions were made. It was contended that the TDS was not required to be deducted in respect of reimbursement of social security contributi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in the case of Mehar Singh Sampuran Singh Chawla. 4.8. In terms of the ratio contained in the decisions stated above the contributions to social security are not chargeable to tax under the head salaries. The Hon'ble Supreme court in the case of GE India Technology Centre Private Ltd. [327 ITR 456] held that seption. 195(1) uses the expression ''sum chargeable under the provisions of the Act". This means that a person paying any sum to a non-resident is not liable to deduct tax if such sum is not chargeable to tax. TDS obligation u/s 195(1) arises only if the payment is chargeable to tax in the hands of non-resident recipient. 4.9. Therefore, the mere fact that the payment was been made to a non-resident does not, in itself, becomes a basis for disallowance for non-deduction of TDS. The payment must have the character of Income" for TDS provisions to get invoked. 4.10. The appellant has already stated in its tax audit report that it is of the view that the reimbursements of t actual cost incurred towards social security/superannuation contributions by the associated companies outside India do not constitute consideration or fee for services rendered/do not include any in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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