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2016 (5) TMI 540 - ITAT MUMBAI

2016 (5) TMI 540 - ITAT MUMBAI - TMI - Revision u/s 263 - non deduction of tds on reimbursement of expenses - Held that:- We find that bank guarantee charges paid by assessee to NCL was neither payment for carrying out any work nor it is made towards broadcasting and telecasting services. From the agreement entered into by the assessee with NCL, it is clear that bank guarantee is to be provided to BCCI as joint and several liability of both the parties and therefore reimbursement of bank guarant .....

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ement of actual expenditure incurred by NCL on payment of bank guarantee commission is merely a reimbursement. In the light of the above, we are of the view that tax is not required to be deducted from bank guarantee commission in the absence of agent/principal relation. Consequently tax is not required to be deducted from reimbursement of actual expenses by assessee as incurred by NCL under any of the provisions of the Act. - Decided in favour of assessee

Short deduction of TDS on th .....

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under section 194C of the Act and there is no shortfall in tax to be deducted. In this regard the issue of the assessee is very clear on merits also that assessee has rightly deducted tax @ 2% u/s. 194C of the Act on payments made to Noida Software Technology Park Ltd. Even otherwise in view of the decision of the Hon'ble Calcutta High Court in the case of S.K. Tekriwal, [2012 (12) TMI 873 - CALCUTTA HIGH COURT] wherein it has been held that if there is any shortfall due to any difference of op .....

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ided in favour of assessee - ITA No. 2766/Mum/2015 - Dated:- 1-4-2016 - SHRI R.C. SHARMA, AM AND SHRI MAHAVIR SINGH, JM For The Appellant : Dr. K. Shivaram Respondent For The Respondent : Shri N.P. Singh ORDER PER MAHAVIR SINGH, JM: This appeal by the assessee is directed against the revision order of Principal CIT-10, Mumbai passed u/s. 263 of the Income-tax Act, 1961 (hereinafter referred to as the Act ) vide order dated 23.03.2015. The assessment was framed by DCIT (OSD) Range-8(1), Mumbai u/ .....

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he fact that the Ld. AO has considered the issue, therefore, order passed u/s 263 of the Act is liable to be quashed. 2. On the facts and circumstances of the case, the learned CIT erred in setting aside the order passed u/s 143(3) dated 06-03-2013 with the direction to the AO to make assessment afresh after proper verification of the facts and law applicable thereto. 3. The brief facts of the case are that the CIT-10, Mumbai issued Show Cause Notice (SCN) dated 22.09.2014 stating that the asses .....

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arantee of Rs. Two thousand crores. Subsequently, NCL entered into an agreement with the assessee on 27.11.2007 and assessee agreed to reimburse 80% of the bank guarantee to NCL. BCCI was not a party to the agreement between the assessee and NCL. Accordingly, as per the CIT, the assessee was under obligation to deduct TDS @2% on such reimbursement of expenses but was not done by the assessee. Similarly, another issue in this revision proceeding is that the assessee has paid a sum of ₹ 45 l .....

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onsidering all the facts and if at this stage this issue would be raised it will tantamount to change in opinion, but the CIT was of the view that the assessee has not deducted TDS on reimbursement and there is shortfall of TDS in respect of payments to Noida Software Technologies Park Ltd. amounting to ₹ 45 lakhs and hence the assessment frames by the AO is erroneous and prejudicial to the interest of Revenue. Hence, he wrongly directed the AO to make fresh assessment after proper verific .....

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tes approximately 80% of the total rights of NCL. The agreement between assessee and NCL is towards granting of broadcast rights of cricket matches to be played in India in its TV Channel Neo Cricket. To assure regarding timely and full payment of charges, BCCI had laid down a condition on NCL to provide bank guarantee from certain banks for which NCL has to make payment of bank guarantee charges to banks. Assessee has not provided any guarantee to the NCL for payment of license fees and assesse .....

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ssee and NCL has not carried out any work for assessee and since the payment is towards reimbursement of actual expenditure without any profit element, it is not covered under section 194C of the Act. With respect to another issue of shortfall in deduction of TDS as pointed out by the CIT in respect of payment of ₹ 45 lakhs to Noida Software Technology Park Ltd. for technical and professional services, the assessee has deducted tax @ 2% as per provisions of section 194C of the Act and this .....

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ed under section 263 of the Act. 7. We have heard the rival contentions and gone through the facts and circumstances of the case. The above stated facts are undisputed in respect to the first issue of reimbursement of bank guarantee charges. Now the question arises whether the reimbursement of bank guarantee charges paid by assessee to NCL falls under section 194C of the Act or not. We find that bank guarantee charges paid by assessee to NCL was neither payment for carrying out any work nor it i .....

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the payment is towards reimbursement of actual expenditure and hence the same cannot be presumed to be covered under section 194C of the Act. Even otherwise assessee has reimbursed 80% of bank guarantee commission reflected under the head Financial expenditure of its audited Profit & Loss Account. The assessee relied upon the CBDC circular No. 715 dated 08.08.1995 wherein CBDT, vide question No. 30 answered the proposition as under: - Q.30: Whether the deduction of tax at source u/s 194C an .....

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antee commission is merely a reimbursement. In the light of the above, we are of the view that tax is not required to be deducted from bank guarantee commission in the absence of agent/principal relation. Consequently tax is not required to be deducted from reimbursement of actual expenses by assessee as incurred by NCL under any of the provisions of the Act. This issue is squarely covered by the Coordinate Bench decision in assessee s own case, wherein the issue under adjudication was revision .....

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c. 194A do not apply. Payment made to NCL is not income by way of interest. The impugned receipt would be in the nature of reimbursement of expenses incurred by it. In view of the above discussion, we do not find any merit in the order passed u/s. 263 in respect of one of the possible view taken by the AO. Even on merit, we found that bank guarantee commission does not come under the purview of interest so as to make assessee liable for TDS u/s. 194A. In view of the above order of Coordinate Ben .....

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