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2021 (2) TMI 547 - AT - Income TaxAddition u/s 40(a)(ia) - payment of Cross Charge by the assessee - whether CIT(A) was justified in holding that the payment of Cross Charge by the assessee to Pfizer Ltd. was in the nature of reimbursement of expenses, whereas as per the cost sharing agreement, the payment was on estimate basis which cannot be regarded as reimbursement of quantifiable expenses? - CIT-A held that the second proviso to section 40a(ia) inserted by Finance Act, 2012, shall be operative retrospectively and therefore the assessee shall not be treated as an assessee in default? - HELD THAT:- We find that the assessee paid cross charges to Pfizer Ltd. in terms of the cost sharing agreement dated 21.11.2003 (‘original agreement’) for sharing personnel cost and supplemental cost sharing agreement dated 13.12.2004 (‘supplemental agreement’) for sharing the common costs and expenses pertaining to marketing, promotion, sales distribution and administration and other charges. Admittedly, Pfizer Ltd. has deducted appropriate taxes before making payment to the shared employees in accordance with the provisions of section 192 of the Act and as stipulated in para 2.4 of the original agreement. The expenses under dispute represent reimbursement of amount incurred by shared employees while they are on business tours. Shared employees can claim the said amount only after providing documentary evidence. Hence, such expenses are not liable for TDS. The disallowance u/s 40(a)(ia) of the Act is not warranted in view of the second proviso to section 40(a)(ia) of the Act r.w. first proviso to section 201(1) inserted vide Finance Act, 2012, provided the payee has (a) furnished return of income u/s 139, (b) taken into account the stated sum for computing the income in the return of income and (c) has paid the tax due on the income returned and there is a certificate of a Chartered Accountant to that effect. In the instant case, since all the conditions/requirements were complied with by the payee ‘Pfizer Ltd.’, the assessee cannot be considered as an assessee-in-default and therefore, disallowance u/s 40(a)(ia) is not warranted. - Decided in favour of assessee.
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