TMI Blog2014 (4) TMI 305X X X X Extracts X X X X X X X X Extracts X X X X ..... on - the payment made has no element of profit which is a primary condition for treating the nature of payment to be that in the nature of Professional Fees - Mudra has not been nor was it into the business of supply of manpower or rendering service by providing its employees. The expenses claimed was purely "Reimbursement Of Salary Of Deputed Personnel" and in the nature of "COST SHARING" based purely on distribution of cost as per work done and hence cannot be disallowed under section 40a(ia) – Relying upon M/s. Utility Powertech Ltd. Vs. ACIT [2013 (10) TMI 94 - CESTAT AHMEDABAD] - The assesee has actually shared the cost with MUDRA to the extent of actual utilization of employees time, and there has been no profit element involved at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of professional charges and tax was required to be deducted at source on the aforesaid payment by the assessee as per the provisions of Section 194J of the Act. 1.3 In doing so, the learned CIT(A) has erred in law and on facts in not appreciating that though M/s. Mudra Communication Private Limited is not engaged in the business of providing manpower, the said company had a crew of trained manpower which had been provided to the assessee company and therefore the payments made by the assessee to the said company was in the nature of payment for professional services. 1.4 In doing so, the learned CIT(A) has erred in law and on facts in not appreciating that the assessee company itself has started deducting TDS on the said payments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er Deputation Cost and Expenses 61,97,917 2.1 The gist of the assessee s reply was as under: The company decided not to hire payment staff for its business, since this was the first year of operation and there was no conformity of regular business. Instead, they had choice to depend on: - To hire manpower of third party, or - To hire manpower from within the group/associated companies. Since, the group company Mudra agreed to depute its manpower as and when required by Canvass, we decided to request Mudra to depute their staff members, for which it was agreed that the actual salary cost for the period used by us shall be shared and reimbursed to Mudra. To attract the provisions of Sc. 194-J, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here is no element of profit involved in the transaction. The appellant has categorically stated that the company decided not to hire permanent staff for its business, since this was the first year of operation and there was no conformity of regular business. Instead, they had choice to depend on: To hire manpower of third party, or To hire manpower from within the group/associated companies. Since, the group comgany Mudra agreed to depute its manpower as and when required by Canvass, we decided to request Mudra to depute their staff members, for which it was agreed that the actual salary cost for the period used by us shall be shared and reimbursed to Mudra. The facts were placed before the Assessing Officer in respect of the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m cost and not reflected as income. Without prejudice to the above, we may clarify that Mudra in its accounts which we have submitted, have followed The Institute of Chartered Accountants of India's Standards for displaying the amount received from related parties. A clear picture would emerge if one looks at the totality of the amount specified under that head. The figures displayed include Manpower Cost and also Reimbursement of expenses . That explains the position. It is Manpower Cost that has been disclosed signifying that the same is part of COST that has been recovered and it is not reflected as Manpower Income . It is of significance that even Reimbursement of expenses is also grouped under the same head, and it wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision of the Delhi High Court in the case of CIT vs. Industrial Engg. Projects P. Ltd. (202 ITR 1014). It is settled proposition of law from the various decisions of High Courts and particularly the decision of Hon'ble jurisdictional High Court (supra) that when there is no element of income and the payment is only as a reimbursement of expenses incurred by the payee, then no disallowance can | be made u/s. 40(a)(ia)............. The Appellant has actually shared the cost with MUDRA to the extent of actual utilization of employees time, and there has been no profit element involved at all. The amounts paid purely as reimbursement of manpower cost cannot be subjected to TDS. Therefore the said disallowance u/s. 40a(ia) is deleted. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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