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2015 (9) TMI 1429 - ITAT MUMBAI

2015 (9) TMI 1429 - ITAT MUMBAI - TMI - TDS u/s 194C - disallowance u/s u/s 40(a)(ia) - TDS liability on reimbursement of expenses - Held that:- In pursuance of “Cost Allocation & Recharged Agreement” between the assessee and the said company, whereby GSIPL was required to incur cost and make payments after deducting the TDS. Such cost was then recharged to the assessee. Such recharged of cost was purely on account of reimbursement of expenses which were incurred by GSIPL and hence there is no i .....

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RAJESH KUMAR, ACCOUNTANT MEMBER For the Appellant : Shri B D Naik For the Respondent : Shri J D Mistry ORDER PER AMIT SHUKLA, JM: The aforesaid appeal has been filed by the revenue against impugned order dated 16.01.2013, passed by CIT(A)-2, Mumbai for quantum of assessment passed u/s 143(3) for the assessment year 2009-10 on the sole ground, which reads as under :- 1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in directing the Assessing Officer t .....

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of costs pertains to administrative costs like employee cost, rent, finance, legal, corporate recharge etc. which were recharged on the basis of times spent by the employees of GSIPL for supporting assessee. No taxes have been withheld on the ground that these are purely cost recharges and not towards carrying out any work or rendering of any services. However, the Assessing Officer held that such a payment even if it includes reimbursement of expenses should have been made after withholding th .....

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e in PITPL, pursuant to obtaining regulatory approvals, in May 2008. Pursuant to completing the acquisition, GSIFPL leveraged on the employees and other infrastructure of its group company in India, GSISPL. Accordingly, GSIFPL reimbursed the following expenditure incurred by GSISPL and allocated to GSIFPL, aggregating to ₹ 17,307,000 which are as follows: Particulars Amount(Rs) Employee related cost 11,238,600 Rent 456,719 Corporate Recharges 577,634 Depreciation 34,385 Cost of support fun .....

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imbursements costs incurred by GSISPL and there was no income element for GSISPL. However, the learned AO disallowed the deduction for the said expenses to the Appellant under section 40(a)(ia) of the Act, on the basis that the Appellant ought to have withheld tax under section 194C of the Act. 56. In this regard, we have in the following paragraphs our submissions as to why no taxes are required to be deducted on reimbursements made to GSISPL. 57. As per the Agreement, GSISPL shall recharge all .....

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e term "reimbursement" in Law Lexicon is 'to pay back, to make restoration, to repay that expended, to indemnify or make whole . 60. Accordingly, payments made towards meeting actual expenses incurred should qualify as reimbursements. As a pure reimbursement of expense would not include any profit, such payment should never constitute income of the recipient. Where expenses have been incurred by the recipient at the behest of n behalf of or for the benefit of another person, and th .....

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hird parties/employees, wherever applicable, hence original payment has already suffered tax. Ld. CIT(A), relying upon various decisions of the Tribunal upheld the contention of the assessee and held that no disallowance can be made u/s 40(a)(ia) as the assessee was not liable to deduct any TDS on reimbursement of any expenses. 4. Before us, Ld. DR strongly relied upon the order of the Assessing Officer, whereas the Ld. Senior Counsel, Shri J D Mistry apart from referring the following decisions .....

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