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2015 (9) TMI 1355 - ITAT CHENNAI

2015 (9) TMI 1355 - ITAT CHENNAI - [2015] 43 ITR (Trib) 540 (ITAT [Chen]) - TDS u/s 192 - Disallowance u/s 40(a)(ia) - non deducting tax on the payment made to the seconded employees from the assessee’s subsidiary company which is to be reimbursed by the assessee’s subsidiary company - Held that:- We find merit in the contention of the assessee. If tax is already deducted at source on the salary paid to the seconded employees by the assessee’s subsidiary company, then once again deduction of tax .....

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of advance which is to be reimbursed by the assessee’s subsidiary company. If that is so, then such payments would not attract the provisions of tax deducted at source. However, these aspects are not clearly brought out in the orders of the Revenue. Since the Both the Revenue Authorities has not examined the following aspects and held the issue against and in favour of the assessee; i.e., whether the tax has been duly deducted at source by the assessee’s subsidiary company on the payment made b .....

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e of the Ld. Assessing Officer to consider all these aspects discussed hereinabove. - Decided in favour of revenue for statistical purposes.

Disallowance of U/s.14A of the Act read with Rule 8D - Held that:- D.R could not controvert to the findings of the Ld. CIT (A) that this issue is not covered in favour of the assessee by the order of the Chennai Benches of the Tribunal in the case EIH Associates Hotels Vs. CIT [2013 (9) TMI 604 - ITAT CHENNAI ] wherein it was held that the invest .....

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assessee in its subsidiary are not to be reckoned for disallowance U/s.14A r.w.r. 8D. The Assessing Officer is directed to re-compute the average value of investment under the provisions of Rule 8D after deleting investments made by the assessee in subsidiary company - Decided in favour of assessee. - ITA No. 811/Mds./2015 - Dated:- 16-9-2015 - A. Mohan Alankamony, AM And Challa Nagendra Prasad, JM For the Petitioner : Mr A V Sreekanth, JCIT, DR For the Respondent : Mr R Vijayaraghavan, Adv ORD .....

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)(ia) of the Act for not deducting tax on the payment of ₹ 1,13,51,946/- made to the seconded employees from the assessee s subsidiary company which is to be reimbursed by the assessee s subsidiary company. 2. The Ld. CIT (A) had erred in directing the A.O to rework the disallowance made by applying the limb (iii) of Rule 8D(2) after reducing the investments made in subsidiary companies. 3. The brief facts of the case are that the assessee company is engaged in the business of consultancy .....

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of ₹ 1,13,51,946/- being the amount paid to seconded employees on which tax is not deducted at source. During the course of scrutiny assessment proceedings, it was observed by the Ld. Assessing Officer that the assessee had not deducted tax on the remuneration paid to the seconded employees from the assessee s subsidiary company. On query by the Ld. Assessing Officer as to why tax is not deducted at source?, the assessee had explained that the remuneration paid to the seconded employees by .....

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urce against the remuneration paid to the assessee s seconded employees because of the following reasons:- "i. There exist a separate agreement to render services to the assessee company by the other party i.e. M/s.Simpson & C. Ltd. ii. Being both the parties are different legal entities and one party rendered services to other party, the provisions of Chapter XVII-B is attracted. iii. None of the employees or man power which rendered the services under this head of expenses are in the .....

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entity and such payments need to be subjected to TDS. vi. In general, men and materials are major inputs either directly or indirectly for any business activity. The assessee s explanation that there is no income or benefit accrued out of such services rendered by M/s. Simpson Co. Ltd, will vitiate the entire claim of such expenses under the business head since it was not incurred for the purpose of business. Hence such expenses without any corresponding income needs disallowance per-se as ther .....

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nvolving and including a profit element while the former does not. Accordingly and also following the ratios relied upon by the A.R, the Assessing Officer is directed to delete the addition." 4.2 Before us, the Ld. A.R submitted that the issue is squarely covered in favour of the assessee by the decision of the Delhi Bench of the Tribunal in the case United Hotels Ltd Vs. ITO in ITA No.1600/Del./2001 for the assessment year 1998-99 vide order dt 11.11.2004 reported in 93 TTJ (Del) 822. The .....

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diary company for the payment made by the assessee company to the seconded employees from the assessee s subsidiary company. It was therefore argued that the assessee is not bound to deduct tax on such advances made by the assessee company on behalf of the assessee s subsidiary company which is reimbursable. We find merit in the contention of the assessee. If tax is already deducted at source on the salary paid to the seconded employees by the assessee s subsidiary company, then once again deduc .....

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the nature of advance which is to be reimbursed by the assessee s subsidiary company. If that is so, then such payments would not attract the provisions of tax deducted at source. However, these aspects are not clearly brought out in the orders of the Revenue. The Ld. A.R. has relied on the decision of the Delhi Bench of the Tribunal stated supra, the gist of which is reproduced herein below for reference:- "Held : It is not the case of the Revenue that the persons deputed in the assessee .....

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ancy to the assessee. He was merely doing his duty as an employee. The meaning assigned to the expression "fees for technical services" is the same as is given in Expln 2 to s. 9(l)(vii). The case of the Revenue is that the persons who were deputed were technically qualified to do the job they were performing and hence the amount which was reimbursed to IHC was nothing but fees for technical services. For a moment, if this argument of the Revenue is accepted, even then it cannot fail w .....

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t;fees for technical services" What s. 194J envisages is that what the recipient receives must not be salary-whether professional services are rendered or whether technical services are rendered. So far as professional services are concerned, the amount must have been received in the course of carrying on the specified profession. So there is no question of deducting tax at source under S. 194J from the salary paid to an accounts executive, legal officer, etc. of the company. Likewise, amou .....

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the Explanation to s. 191. Assuming, without admitting, that the assessee was liable to deduct tax at source under s. 194J, still no demand for non-deduction of tax could have been raised against the assessee. This is because the deductor will be liable only if the recipient has not paid the tax on the amount received by him. In the instant case, it is not disputed that the deputed persons, wherever liable, have paid the tax on the salaries received by them and hence no further tax can be collec .....

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bsidiary company on the payment made by the assessee to the seconded employees from the assessee s subsidiary company, whether the payment made by the assessee company to the seconded employees from the assessee s subsidiary company amounts to advance payment to the assessee s subsidiary company which is reimbursable and does not amount to additional service charges payable by the assessee company to the assessee s subsidiary company and also the decisions cited by the assessee hereinabove, we h .....

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during the relevant previous year and claimed exemption U/s.10(34) of the Act. Therefore, the Ld. Assessing Officer invoked the provisions of Section-14A read with Rule 8D and made additions. On appeal the Ld. CIT (A) held the issue in favour of the assessee by following the decision of this Bench of Tribunal by observing as under:- "5.2 I have carefully considered the facts of the case and the submissions of the Ld. A.R. Similar issue has come up for discussion before me in the appellant s .....

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