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2005 (5) TMI 259 - ITAT DELHI-ADeduction of tax at source - Subcontracting expenses as well as travelling expenses - Payment so made to the sub-contractors - HELD THAT:- At the time of hearing before us, the learned counsel for the assessee has not been able to establish that the findings recorded by the learned CIT(A) to come to this conclusion are factually incorrect. Even the attempt made by him to plead that the services rendered by the sub-contractors were not the "technical services" as defined in the relevant DTAA, i.e, India-US Tax Treaty is not supported by any cogent evidence and the learned CIT(A) having arrived at a conclusion that the said services rendered by the sub-contractors were absolutely technical in nature on the examination of the relevant vouchers as well as other documentary evidence, we find no merit in this plea raised by the learned counsel for the assessee. Moreover, the fact that no application was made by the assessee under sub-section (2) of section 195 to the Assessing Officer also goes against the assessee because as held by Hon'ble Supreme Court in the case of Transmission Corporation of AP Ltd. v. CIT [1999 (8) TMI 2 - SUPREME COURT], if no such application is filed, income-tax on the sum chargeable under the Income-tax Act, 1961 payable to a nonresident is required to be deducted and it is the statutory obligation of the person responsible for paying such sum to deduct tax thereon before making payment. Thus, we are of the view that there was nothing on record to conclusively establish that the income of the concerned sub-contractor was not chargeable to tax inIndiaand that the payments made to them were not covered by the provisions of section 195(1). In that view of the matter, we hold that the assessee-company was under an obligation to deduct tax at source from the payments made to the sub-contractors in terms of section 195(1) and having failed to do so, the Assessing Officer was fully justified in disallowing the same by invoking the provisions of section 40(a)(i). As such considering all the facts of the case, we are of the view that there was no infirmity in the impugned order of the learned CIT(A) confirming the said disallowance made by the Assessing Officer and upholding the same, we dismiss ground No. 1 of the assessee's appeal. Travelling expenses of the sub-contractors - In our opinion, the payment made by the assessee to the concerned sub-contractors on account of travelling expenses was not covered by the provisions of section 195 for the simple reason that the amount so paid was on account of reimbursement of actual expenses incurred by the sub-contractors and the same, therefore, could not be treated as income of the concerned subcontractors much less income chargeable to tax in India so as to attract the provisions of section 195. However, it is observed that the disallowance on this count was made also for the reason that a copy of agreement with the sub-contractors could not be produced by the assessee before the authorities below to support and substantiate its contention that there was an obligation on its part to bear the travelling expenses incurred by the sub-contractors. Even before us, copy of such agreement has not been produced by the assessee and we, therefore, find it difficult to accept that the substantial expenses on the travelling of concerned sub-contractors were borne by the assessee-company without there being any agreement in writing casting such obligation on it. In these circumstances, we are of the view that the travelling expenses of the sub-contractors claimed to have been borne by the assessee company could not be allowed as deduction in computing its income from business. In that view of the matter, we uphold the disallowance made by the Assessing Officer and confirmed by the learned CIT(A) on this issue and dismiss Ground No. 2 of the assessee's appeal. In the result, the appeal of the assessee is dismissed.
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