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2024 (4) TMI 389 - AT - Income TaxTDS u/s 195 - disallowance u/s 40(a)(i) - failure to withhold tax on salary cost reimbursement to Head Office by the Branch Office treating such receipt of Head Office as FTS - impugned payments made by Branch Office to Head Office are the reimbursement of salary cost of the expats working in the Branch Office in India on cost to cost basis without any mark-up. The entire salary payments made to the expats in India as well as outside India have been subject to TDS under section 192 of the Act which fact has been corroborated by Form 16 issued to the expats Whether provisions of section 40(a)(i) of the Act can be invoked to disallow an expense in respect of which due taxes have been withheld and deposited into the Govt. Account within the prescribed time period? - HELD THAT:- We have perused the decision of the Co-ordinate Bench of Delhi Tribunal in the case of Serco India Pvt. Ltd.[2023 (11) TMI 275 - ITAT DELHI] wherein the ITAT on similar set of facts held that where the assessee has deducted the tax at source under section 192 of the Act and deposited the same into the Govt. Account within specified time as prescribed under the Act, provisions of section 40(a)(i) of the Act are not applicable. Thus disallowance of salary cost reimbursement by Branch Office to the assessee by the Ld. AO under section 40(a)(i) is not justified as TDS has been duly deducted on entire salary payments to the expats and deposited into the Govt. Account within the prescribed time limit. Appeal of the assessee is allowed.
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