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Deputy Commissioner of Income Tax, Corporate Circle 1 (1) , Chennai Versus M/s. Amalgamations Ltd.

2015 (11) TMI 113 - ITAT CHENNAI

Disallowance u/s 40(a)(ia) - amount paid to seconded employees on which tax is not deducted at source - Held that:- Since the issue raised in this appeal is identical to the issue decided by this Bench of the Tribunal in the assessee’s own case for the subsequent assessment year 2010-11 what has been paid to the deputed personnel is a salary and hence the assessee was not liable to deduct tax at source from the payment made by it to IHC as reimbursement of salaries in respect of various personne .....

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disputed that the deputed persons, wherever liable, have paid the tax on the salaries received by them and hence no further tax can be collected from the assessee. The order passed under ss. 201, and 201(1A) is bad in law and the CIT(A) had also erred in confirming the same. Needless to add, since the assessee was not liable to deduct tax under s. 194J, there is no question of levying any interest also under s. 201(1A)

Both the Revenue Authorities has not examined the following aspect .....

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ges payable by the assessee company to the assessee’s subsidiary company and also the decisions cited by the assessee hereinabove, we hereby remit back the matter to the file of the Ld. Assessing Officer to consider all these aspects discussed hereinabove and pass appropriate order as per merits and law. - Decided in favour of assessee.

Disallowance invoking Section-14A of the Act and Rule 8D of the Rules - Held that:- This issue is also identical to the issue raised in the assessee’s .....

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fore us and if found to be so, delete the addition made on account of Section-14A of the Act. - Decided in favour of revenue for statistical purposes - I.T.A.No.1712/Mds./2013 - Dated:- 29-9-2015 - SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI V. DURGA RAO, JUDICIAL MEMBER For The Appellant : Dr.B.Nischal, JCIT, D.R For The Respondent : Mr.R.Vijayaraghavan,Advocate .....

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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 delete the disallowance made by invoking Section-14A of the Act and Rule 8D of the Rules. 3. The brief facts of the case are that the assessee company is engaged in the business of consultancy & export agency services, investments, Mar .....

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es 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 the assessee is to be reimbursed by the assessee s subsidiary com .....

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oyees 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 roll of the assessee company and in fact they are all employees of the o .....

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en 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 there is no matching concept between the income and the expenditure claim. 4 .....

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relevant portion of the order is extracted herein below for reference We have heard both the parties and carefully perused the materials available on record. The claim of the assessee is that the assessee is only making payment to its seconded employees from the assessee s subsidiary company on behalf of its subsidiary company which is to be reimbursed to the assessee company by the assessee s subsidiary company. The tax is deducted at source directly by the assessee s subsidiary company for th .....

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salary payment would amount to double deduction of tax at source. It is apparent from the facts of the case that the assessee company is obtaining some service from its subsidiary company for which the assessee company pays service charges to its subsidiary company. Ld. A.R. submitted before us that the amount paid to the seconded employees from the assessee s subsidiary company is not the additional remuneration paid to the assessee s subsidiary company but only a payment in the nature of advan .....

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ny profession. If an accounts executive was deputed, he was doing the duty as was assigned to him by his employer. It cannot be said that he was carrying on the profession of accountancy and that what he received were fees in the course of carrying on such profession. In fact, what he received was merely salary from the employer for doing the duty assigned to him by the employer. Similarly, if an engineer was deputed, the engineer was not rendering any technical consultancy to the assessee. He w .....

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services . This is because Expln. 2 clearly excludes consideration which would be income of the recipient chargeable under the head salaries . In the present case, it is not in dispute that what is reimbursed by the assessee is the actual salary of the• deputed personnel. Undoubtedly, far each deputed person, the amount received by him is income chargeable under the head salary and therefore, it cannot be termed as fees for technical services What s. 194J envisages is that what the recipien .....

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laries , In the- present case, what has been paid to the deputed personnel is a salary and hence the assessee was not liable to deduct tax at source from the payment of ₹ 39,55,161 made by it to IHC as reimbursement of salaries in respect of various personnel deputed to the hotel of the assessee. The alternative contention of the counsel also has to be accepted in view of the clear provisions of the Explanation to s. 191. Assuming, without admitting, that the assessee was liable to deduct .....

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had also erred in confirming the same. Needless to add, since the assessee was not liable to deduct tax under s. 194J, there is no question of levying any interest also under s. 201(1A). 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 by the assessee to the seconded employees from the assessee s su .....

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scussed hereinabove and pass appropriate order as per merits and law. We further direct the assessee to co-operate with the Revenue in its proceedings to expedite their orders. This ground is accordingly disposed off. Since the issue raised in this appeal is identical to the issue decided by this Bench of the Tribunal in the assessee s own case for the subsequent assessment year 2010-11, this appeal is also disposed off with similar directions to the Ld. Assessing Officer extracted herein above .....

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ai Bench of the Tribunal in the case EIH Associates Hotels Vs. CIT reported in 2013-TIOL-796-ITAT-MAD-A.Y 2008-09 dated 17.2.2013, we hereby direct the Ld. Assessing Officer to verify whether the fact of the case is identical as to what is submitted by the Ld. A.R before us and if found to be so, delete the addition made on account of Section-14A of the Act. 6. In the result, the appeal of Revenue is partly allowed for statistical purposes as indicated herein above. Order pronounced on 29th Sept .....

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