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2017 (6) TMI 1382 - ITAT CHENNAITDS u/s 192 - Addition u/s 40a(ia) - disallowance of payments made to employees - whether sec 40(a)(ia) being not applicable as no amount was payable as at the year-end? - Revenue denied the claim on the basis that the expenditure has been merely routed through the books of its sister concerns, which were inoperational, so that their staff was surplus - HELD THAT:- Section 40(a)(ia) places an additional burden, i.e., of deduction of tax at source and its payment to the credit of the Central Government qua the specified sum/s, for its deduction in computation of business income, so that the very fact of its invocation implies that the condition of deductibility is otherwise met. The applicability of TDS in such a case would depend on the nature of the payment and the work done (by the sister concerns). If, on the other hand, the debit notes state of only the employees having been deputed to the assessee-company, which may deploy them for any work it deems fit and proper for the purpose of its business, it would be a case of the employees being made available to the assessee-company. The payment in such a case would have to be directly to the concerned persons in-as-much as they stand seconded, i.e., are on deputation, to the assessee-company, even as they continue to be the regular employees of and on the rolls of their parent firms. The TDS in this, latter case would be on ‘salary’, i.e., as against on the aggregate payments made/credit allowed (during the year) directly to the sister concern/s, as the obligation to pay salary thereto, on account of second-ment/deputation, is on the assessee-company. How, we wonder, could this be regarded as a case of reimbursement of expenditure? The assessee need not have credited, or routed the transaction through, the account of the sister concern/s. That is, considered either way, it is not a case of reimbursement of expenditure. This is precisely what the Revenue means when it states that the assessee-company has merely routed the expenditure through the account of the related parties, and that therefore nothing turns thereon. Be that as it may, where, however, the concerned employees, or the sister concerns, as the case may be, have discharged their tax liability on the relevant income/s, the assessee-company, following the procedure enshrined in s. 40(a)(ia) r/w. s. 201 (as amended by Finance Act, 2012), claim saving from the rigor of s. 40(a)(ia). This is as the said amendments have been clarified by the Hon'ble Courts, as in the case of CIT v. Ansal Landmark Township (P.) Ltd. [2015 (9) TMI 79 - DELHI HIGH COURT] as curative and, therefore, retrospective. Amendment, by precluding application of s. 40(a)(ia) in cases where the payee/creditor has discharged the tax liability on the relevant sum for the relevant year, only seeks to operationalize and apply the decision Hindustan Coca Cola Beverages (P.) Ltd.[2007 (8) TMI 12 - SUPREME COURT] The matter, accordingly, setting aside the impugned order, is, for fresh determination, on the lines indicated above, restored to the file of the AO, to do so by issuing definite findings of fact. The assessee, on whom the burden to establish its’ claims lie, shall be allowed proper opportunity to represent its case before him. Assessee’s appeal is allowed for statistical purposes.
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