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2022 (4) TMI 1490 - AT - Income TaxTDS u/s 192 - Addition u/s 40a(ia) - disallowance of payments made to employees - As submitted expenditure reimbursed as payment for service rendered - HELD THAT:- When the employees were on the pay rolls of associate enterprises and further, the associate enterprises have paid salary to their employees on their own, it cannot be said that amount paid by the assessee towards cost of employees salary to their associate enterprises is reimbursement of expenses, just because those employees were employed on deputation to the assessee company. The reimbursement of expenses is something, which the assessee needs to incur, but some third party has incurred expenditure on behalf of the assessee and later, the assessee had paid back amount to the third party. In this case, although, employees were on deputation to the assessee company, but they were remain in pay rolls of the associated enterprises and the associate enterprises continued to pay salary to the employees and thus, same cannot be considered as reimbursement of expenses. CIT(A), after considering relevant facts has rightly held that amount paid by the assessee to associate enterprises is not in the nature of reimbursement of expenses, but payment made for rendering services. Scope of amended provisions of section 40(a)(ia) - The provisions of section 40(a)(ia) of the Act, has been amended along with provisions of section 201, by the Finance Act, 2012, as per which, if an assessee not held to be an assessee in default u/s.201 & 201(1A) of the Act, and further, if recipients have included sum paid by the assessee in their return of income and paid taxes and also furnished necessary certificate to that effect, then sum paid without deduction of tax cannot be disallowed u/s.40(a)(ia) In the case of CIT Vs. Hindustan Coco Cola Beverages Pvt.Ltd. [2007 (8) TMI 12 - SUPREME COURT] had considered an identical issue and held that if the assessee files necessary evidence to prove that recipients have accounted sum paid without deduction of tax in their return of income and offered for tax, then same cannot be disallowed u/s.40(a)(ia) - In this case, the assessee has furnished necessary certificate from the associate enterprises and argued that sum paid by the assessee to associate enterprises is accounted in their books of account and offered for taxation for the assessment year 2012-13. We find that if claim of the assessee is correct that associate enterprises have accounted sum paid by the assessee in their return of income and offered to tax, then same cannot be disallowed u/s.40(a)(ia) of the Act, in light of decision of the Hon'ble Supreme Court in the case of CIT Vs. Hindustan Coco Cola Beverages P.Ltd (supra). But fact remains that the assessee has filed these certificates for the first time before us. The Assessing Officer did not have an opportunity to verify claim of the assessee in light of certificates furnished by the assessee. Therefore, in our considered view, the issue needs to go back to the file of the Assessing Officer for verification of claim of the assessee in light of certificates filed by associate enterprises - Appeal filed by the assessee is treated as allowed for statistical purposes.
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