TMI Blog2022 (9) TMI 1363X X X X Extracts X X X X X X X X Extracts X X X X ..... not attracted, there can be no question of applying section 40(a)(i) for making disallowance in the hands of the assessee. - Respectfully following the precedent, we uphold the order of ld. CIT (A) on this issue. Disallowance of Domestic payments u/s 40(a)(ia) in respect of payment to local vendors on behalf of group entities - HELD THAT:- As appellant has explained that the appellant company has deducted Tax Deducted at Source(TDS) on the expenditure which has been included in the total amount of group charges. Further, the details of said expenses along with the TDS deducted has been enclosed as Annexure 4 and relevant TDS certificates Since the appellant has deducted TDS on the expenses AO is directed to delete the addition u/s 40( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment order, AO observed that assessee has claimed expenses of RS.1,63,55,218/- on account of Group Charges under the head other expenses . AO enquired as to why the same should not be disallowed under section 40(a)(i) of the Income-tax Act, 1961 (for short 'the Act') as TDS has not been deducted. AO was not convinced by assessee s reply. He held as under :- 4. The assessee has claimed expenses of Rs.1,63,55,218.00 on account of group charges under the head other expenses . During the course of assessment proceedings, when asked about the nature of these expenses, the assessee submitted that group charges accrued in the books of APCO India represent charges received from various corporate towards allocation of cost incurre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roup charges incurred during the year have been tabulated by the appellant as under: Entity Name Country of tax residence of payee entity Group Charges (in Rs.) APCO Worldwide Limited ( APCO UK ) UK 42,80,603 APCO Worldwide SA ('APCO Belgium') Belgium 12,31,656 APCO Worldwide FZ-LLC ( APCO Dubai') UAE 47,98,738 APCO Worldwide Inc. ('APCO US') USA 31,13,984 APCO Holding Pvt. Ltd. ('APCO Sing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r called upon the assessee to explain as to why the disallowance be not made u/s 40(a)(i) for default in making deduction of tax at source u/s 195 of the Act. The assessee submitted that 'Group charges' were the assessee's share in the overall group expenses incurred by the foreign group companies for corporate administration, finance support, IT support, human resources, marketing and legal support functions and other services. It was further submitted that the costs incurred by the group companies on behalf of the assessee were relatable to the assessee's activities which have been recouped from it on a cost to cost basis. It was, therefore, claimed that since no income element was involved in the payment, the provisions o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aken by the Hon'ble Bombay High Court in DIT VS. Wizcraft International Entertainment P. Ltd. (Bom) (2014) 364 ITR 227 (Bom) holding that payment by way of reimbursement of expenses is not taxable in India. In view of the fact that the amount paid by the assessee to non-residents is not chargeable to tax in their hands and, as such, the provisions of section 195 of the Act are not attracted, there can be no question of applying section 40(a)(i) for making disallowance in the hands of the assessee. We, therefore, uphold the impugned order and sustain the deletion of disallowance made in the assessment order. 5. In the result, the appeal filed by the Revenue is dismissed. 8.2.4 The facts of the present case are exactly simila ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c payments of Rs. 28,63,982/- u/s 40(a)(ia) of the Act in respect of payment to local vendors on behalf of group entities: 8.3.1 In this regard, Ld. AR has submitted as under: The break-up of aforesaid payment of Rs. 28,63,982/- made to various resident parties and the corresponding TDS made by the Appellant is enclosed as Annexure 4. We wish to submit that out of total expenditure of Rs.28,63,982, the Appellant has duly deducted TOS on the expenses aggregating to Rs 27,41,274. The evidence in the form of TDS certificates in Form 16A in order to substantiate that the Appellant has already deducted tax at source on the aforesaid payments are enclosed herewith as Annexure 5. By reviewing the aforesaid documents, your hon ..... X X X X Extracts X X X X X X X X Extracts X X X X
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