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2015 (9) TMI 328 - HC - Income TaxInterest free deposit in favour of the sister concern - excess security deposit purportedly made by the Assessee in respect of renting of the premises from DEWPL - liability to TDS under Section 194H - Held that:- The making of the interest free deposit in favour of the sister concern was its business decision and it gained no undue advantage. On the second issue, it was held that the elements of income were not embedded in the reimbursement made to its sister concern and therefore the Assessee was not obliged to deduct TDS. As regards reimbursement made to KPL, as pointed out by the ITAT, it did not appear to have any element of income warranting deduction of tax at source under Section 194C of the Act. The ITAT also concurred with the view of the CIT (A) that since no element of income was embedded in the reimbursement, the Assessee was not obliged to deduct TDS. The decision entirely appears to be on factual basis. Relevant to AY 2009-10, the other issue concerns the travelling expenses paid to dealers. There was no basis for AO to come to the conclusion that this payment was actually in the nature of commission to the agents. It was noticed that the entitlement to foreign travel was not proportionate to the volume of business conducted through a particular dealer/sub-dealer. Anyone who achieved the actual sale target was entitled to visit the foreign destination. In order to characterize the payment as commission, for the purposes of Section 194H of the Act, it was essential first to establish the relationship of principal and agent, which admittedly was absent in the case of the Assessee. Consequently, the CIT (A) correctly held that the foreign travel expenses of the dealers could not be disallowed under Section 40(a)(ia) of the Act. - Decided in favour of assessee.
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