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2016 (8) TMI 646 - ITAT MUMBAI

2016 (8) TMI 646 - ITAT MUMBAI - TMI - TDS u/s. 194H - Disallowance made u/s. 40(a)(ia) - Held that:- We find that the assessee had entered into an agreement with the principal on one hand and on the other hand agreements were signed with the subagents, that the subagents were to file monthly bills of travel expenses to the assessee, that she had to submit the bills to the principal, that the principal, on being satisfied about the genuineness of the expenditure, had to make a payment to the ass .....

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In our opinion, there is no need to quote any authority to hold that no tax is to be deducted for reimbursing an expenditure. The AO had not brought on record that the reimbursement had income element embedded in it. It was pure and simple case of reimbursing the expenditure incurred by the sub-agents. We find that the FAA had clearly brought out the distinction between the commission received from the principal and the reimbursement received by the assessee, in his order. He has specifically he .....

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ging the order, dtd. 28. 01. 2013, of the CIT(A)-27, Mumbai, the Assessing Officer(AO)has filed the present appeal. Assessee, an individual, is engaged in the business of distribution and marketing of liquor products, filed her return of income on 24. 09. 2009, declaring income of ₹ 9. 05 lakhs. The AO completed the assessment, u/s. 143 (3) of the Act, on 27. 12. 2011, determining her income at ₹ 73. 36 lakhs. 2. First ground of appeal is about deleting the disallowance made u/s. 40( .....

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such payments, that she had claimed that the payment of commission agents included reimbursement expenses. The AO issued notices u/s. 133 (6) of the Act seeking information from the three parties/agents. After considering the submissions of those parties, he held that the assessee had paid to her agent commission. He made further enquiries and before him the assessee admitted that out of the total payment ₹ 55. 45 lakhs was towards reimbursement expenses incurred by the agents, that ₹ .....

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the amounts of commission paid included the amount reimbursement to the extent of ₹ 55, 45, 054/-, that she did not furnish documents to prove that the expenses were incurred in connection with the sale of liquor and she had reimbursed the expenses incurred by the agents, that the reimbursement being incidental to the payment of agency commission would partake the character of commission payment only, that substance of the transaction was more important than the form, that the entire paym .....

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ore him, she submitted that as per the clause 11 of the agreement with M/s. ABD Pvt. Ltd. (ABDPL), It was agreed upon between the assessee and the company that on submitting the monthly travel bills of the field formation/agents employed by her travel expenses would be reimbursed to a maximum amount being ₹ 43. 50 per case of liquor sold, that the agreement provided that reimbursement would not attract any service tax or would not be liable for TDS, that it was the primary responsibility o .....

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ties, from whom enquiries were made by the AO, had confirmed in writing that payments received by them included reimbursement of travel and other expenses, that the AO had ignored the submission made by them, that the expenses reimbursed to the agents could not be treated as income in the hands of the assessee, that the payment would not partake the character of commission, that there was no liability on part of the assessee to deduct tax on such amount paid. A reference was made to the case of .....

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factured by ABDPL and to be supplied to the Canteen Stores Department of the Armed Forces across the country. He referred to the agreement dated 01/04/2008 entered into by her with the company. After analysing the various clauses of the agreement, including clause 11, 12 and 13 of the agreement, he held that the assessee was required to appoint subagents to market the liquor products of its principal, that accordingly she entered into agreements with various subagentsnumbering 29, located and sp .....

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s through the assessee subject to a maximum of ₹ 43. 50 per case, that any expenditure in excess of the specified limit was to be reimbursed by the subagent, that it was also agreed that reimbursement would not attract any service tax nor would it be liable for deduction at source, that for rendering the services to her principle the assessee had received a commission of ₹ 38. 35 lakhs and reimbursement of expenses incurred by the subagents of ₹ 55. 45 lakhs from ABDPL for the .....

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ales division of ABDPL. The FAA further held that the AO had made enquiries by issuing notices u/s. 133 (6) of the Act, that in response to the notices three parties had admitted of receiving reimbursement from the assessee, that the AO had not taken the confirmation filed by the three parties into consideration while determining the tax library of the assessee, that the service agreements entered by the assessee with the principal and the subagents specifically mentioned that the services were .....

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ores Depots of the Armed Forces were located across the India, that the assessee was required to promote the sales of the principal in all the outlets, that the said fact stood confirmed by the list of agents appointed by her, that she was expected to carry out lot of services as per the agreement entered with the principal, that rendering of such services required a lot of travel and other expenses, that the subagents were interned expected to carry out all the services that were agreed upon by .....

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d not be treated on par with the commission. Relying upon the certain case laws, he held that the reimbursement of expenses did not constitute income in the hands of the recipient, that such reimbursement was not liable for deduction of tax in the hands of the persons making the payment, that reimbursement of expenses could not be subject matter of disallow -ance u/s. 40(a)(ia). He further mentioned that total payment received by the assessee during the year from its principal was of ₹ 93. .....

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the subagents, was not liable for deduction of tax u/s. 194H of the act capitalise that, that the payment of ₹ 6. 37 lakhs towards payment of commission was liable for deduction, that assessee had not deducted tax on the payment of ₹ 6, 37, 363/-, that the AO had rightly disallowed the said amount u/s. 40(a)(ia). Thus, he deleted the disallowance of ₹ 55. 45 lakhs and confirmed the disallowance of ₹ 6. 37 lakhs. 4. During the course of hearing before us the Departmental .....

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81), M/s. J. B. Boda & Brothers Pvt. Ltd. (ITA/No. 4252/Mum/2009 dt. 21. 05. 2010 AY. 2006-07), Karma Energy Ltd. (19 ITR (Trib. )552), Lehman Brothers & Advisors (P) Ltd. (157 ITD 1003) and Om India Trading Co. (P) Ltd. (58 taxmann. com325). 5. We have heard the rival submissions and perused the material before us. We find that the assessee had entered into an agreement with the principal on one hand and on the other hand agreements were signed with the subagents, that the subagents we .....

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