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2016 (7) TMI 259 - AT - Income TaxDisallowance u/s 40(a)(ia) - reimbursement of expenses - Held that:- As per the agreement, the marketing companies are required sufficient number of employees for effectively marketing the products. As per the agreement, the salary expenses, travelling and conveyance expenses, etc., incurred by the marketing companies are required to be reimbursed by the assessee-company. Thus, the reason as to why the expenses were reimbursed by the assessee-company to the marketing companies are sufficiently explained. CIT(A) given a finding that the marketing companies have deducted tax at source from the salary payments. Thus, the expenses which have been reimbursed by the assessee have already suffered tax deduction at source at the end of the marketing companies. Hence, we are of the view that though the character of marketing expenses are in the nature of reimbursement of expenses yet the same has already suffered tax at source, i.e., the marketing companies have deducted tax at source from the said payments. Accordingly, we are of the view that there is no requirement of invoking the provisions of section 40(a)(ia) of the Act in the hands of the assessee. Various case law relied upon by the assessee has taken the view that the reimbursement of expenses does not require tax deduction at source. - Decided against revenue Bombay High Court in the case of CIT v. OCB Engineers relied upon wherein it was held that Reimbursement of salary expenses of employees to the sister concern, who were deputed by the sister concern to the assessee does not require deduction of tax at source.
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