TMI Blog2014 (1) TMI 698X X X X Extracts X X X X X X X X Extracts X X X X ..... applicability of section 40(a)(ia) to such payments by way reimbursements do not attract the TDS provisions to the amount – Following CIT vs. OCB Engineers [2013 (6) TMI 48 - BOMBAY HIGH COURT] – Thus, the CIT (A) has wrongly decided the issue without appreciating the facts of the case and the law in force – Decided partly in favour of Assessee. Deletion of disallowance u/s 40(a)(ia) of the Act – Late payment of TDS to Government account – Held that:- The appellant explained that the TDS amount in respect of expenses have been paid before the due date of filing of return of income - the deduction is allowable where TDS has been paid / deposited before the due date of filing of the return of income - the entire tax deducted at source fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the circumstances of the case and in law, the Ld CIT erred in confirming the disallowance of an amount of Rs. 23,87,180/- being payments made to SIDBI towards reimbursement of deputed personnel cost by invoking the provisions of section 40(a)(ia) and the reasons assigned for doing so are wrong and contrary to the facts of the case, the provisions of Income Tax Act, 1961 and the Rules made thereunder. 1(b) On the facts and in the circumstances of the case and in law, the Ld CIT (A) erred in holding that the appellant has defaulted in not deducting tax at source on Rs. 23,87,180/- paid to SIDBI as reimbursement towards salaries of deputed personnel without appreciating that the holding company had deducted TDS u/s 192 on such salaries re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the paper book and mentioned that these are the debit notes raised by the SIDBI on the assessee (SMERA). The impugned payment of Rs. 23,87,180/- is the sum of all the reimbursements. Ld Counsel mentioned that SIDBI pays salaries to these employees, who were deputed for rendering services to the assessee and the salaries are paid after making necessary TDS in accordance with the conditions. Further, Ld Counsel mentioned that the Assessing Officer never doubted these facts. The amount paid by the assessee to the SIDBI is merely a case of reimbursement of expenses incurred on the deputed personnel. Further, bringing our attention to the various decisions, Ld Counsel mentioned that the provisions of section 40(a)(ia) shall not apply to the pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act should not be invoked when the payments involved constitute reimbursements. For instance, the relevant para 3 of the judgment of the Hon'ble jurisdictional High Court in the case of CIT vs. OCB Engineers (supra) reads as under: "3. So far as question (a) is concerned, the respondent assessee was interalia engaged in the business of execution of contracts for erection and commissioning of plants. The AO disallowed an amount of Rs. 16.86 lacs paid by way of reimbursement to sister concerns for payment of salaries to their employees as they were deputed to the respondent assessee. This was disallowed under section 40(a)(ia) of the Income Tax Act, 1961 for failure to deduct tax. In appeal, the CIT (A) upheld the order of the Assessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g grounds which read as under: "1. On the facts and the circumstances of the case, the Ld CIT (A) erred in deleting the disallowance of Rs. 30,93,170/- u/s. 40(a)(ia) of the Act for late payments of TDS to Government account." 9. Briefly stated relevant facts of the case are that the AO disallowed sum of Rs. 30,93,170/- invoking the provisions of section 40(a)(ia) of the Act on the reasoning that the assessee has not debited TDS from the payments made to various parties within the prescribed time. During the assessment proceedings, AO noted that the said amounts were subjected to TDS and the TDS in this regard was Rs. 4,15,374/- and the said amount was paid to the Government before the due date of filing of return of income barring the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en paid / deposited before the due date of filing of the return of income ie 30.9.2008. The appellant further explained that the entire tax deducted at source (except Rs. 1,597/-) from the payments made during the period 1.4.2007 to 28.2.2008 was paid by the appellant in Government account till the month of July, 2008 ie well before the due date of filing of income tax return for the year under consideration. The appellant further explained that section 40(a)(ia) of the Act have been amended by Finance Act, 2010. The said amendment is remedial in nature and therefore, was applicable with retrospective effect from 1.4.2005, the date on which section 40(a)(ia) has been inserted. In respect of its claim that the amendment made in section 40( ..... X X X X Extracts X X X X X X X X Extracts X X X X
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