TMI Blog2016 (7) TMI 259X X X X Extracts X X X X X X X X Extracts X X X X ..... payments. Thus, the expenses which have been reimbursed by the assessee have already suffered tax deduction at source at the end of the marketing companies. Hence, we are of the view that though the character of marketing expenses are in the nature of reimbursement of expenses yet the same has already suffered tax at source, i.e., the marketing companies have deducted tax at source from the said payments. Accordingly, we are of the view that there is no requirement of invoking the provisions of section 40(a)(ia) of the Act in the hands of the assessee. Various case law relied upon by the assessee has taken the view that the reimbursement of expenses does not require tax deduction at source. - Decided against revenue Bombay High Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowance of sales promotion expenses made by the Assessing Officer under section 40(a)(ia) of the Act, which has since been deleted by the learned Commissioner of Income-tax (Appeals). 4. The facts relating to the same are discussed in brief. The assessee is engaged in the business of manufacture of medicines. The assessee has sold its products to its associate concerns. On the scrutiny of the profit and loss account, the Assessing Officer noticed that the assessee has incurred a sum of ₹ 8.73 crores towards sales and promotion. All these expenses have been given as reimbursement to its group companies. Since the assessee did not deduct tax at source from these reimbursements, the Assessing Officer disallowed the same under se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he reimbursements so given by the assessee to the marketing companies. Major part of reimbursements consisted of salary expenses only. The learned Commissioner of Income-tax (Appeals) noticed that the marketing companies have deducted tax at source from the salary paid to the representatives and remitted the same to the credit of the Government. The learned Commissioner of Income-tax (Appeals) has confirmed this submission by examining the TDS statements furnished by M/s. Walter Bushnell Bio Health P. Ltd., one of the marketing companies. Further, the learned Commissioner of Income-tax (Appeals) has examined the bill dated February 29, 2008, submitted by the abovesaid marketing company and noticed that the bills have been raised towards sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of Asst. CIT v. Karma Energy Ltd. [2012] 19 ITR (Trib) 552 (Mum) ; 33 CCH 391, wherein also it has been held that the reimbursement of expenses shall not attract liability to deduct tax at source and, hence, no disallowance under section 40(a)(ia) for non-deduction of tax at source is required. The learned authorised representative submitted that the abovesaid decision of the Tribunal has since been upheld by the hon'ble Bombay High Court reported in CIT v. Karma Energy Ltd. [2015] 375 ITR 264 (Bom), wherein the hon'ble High Court has held that the question does not give raise to any substantial question of law. 9. On the contrary, the learned Departmental representative placed heavy reliance on the order passed by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act. 11. The facts prevailing in the instant case, in our view, is identical in nature. There is an agreement between the assessee and the marketing companies. The marketing companies are entitled to commission for the sales generated by them. As per the agreement, the marketing companies are required sufficient number of employees for effectively marketing the products. As per the agreement, the salary expenses, travelling and conveyance expenses, etc., incurred by the marketing companies are required to be reimbursed by the assessee-company. Thus, the reason as to why the expenses were reimbursed by the assessee-company to the marketing companies are sufficiently explained. The learned Commissioner of Income-tax (Appeals) has give ..... X X X X Extracts X X X X X X X X Extracts X X X X
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