TMI Blog2014 (12) TMI 1326X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of TDS under the Act. Such confirmations are placed at pages 42 to 45 of the paper book. Certain bills raised by the advertisement agencies are in the name of distributors. Whether these persons have made TDS or not is not clear from the records. CIT (A) was justified in directing the assessee to produce the evidences before Assessing Officer to establish that the parties to whom the reimbursements have been made had actually complied with the provisions of Chapter XVII-B. Such verification is necessary to arrive at the correct facts of the case and to establish the extent of default on the part of the assessee for violating the provisions of TDS in respect of the payments of the advertisement expenses through the structural arrangement. - ITA No.3898/Del./2013, CO No.245/Del/2013 (in ITA No.3898/Del./2013) - - - Dated:- 29-12-2014 - SHRI I.C. SUDHIR, JUDICIAL MEMBER and SHRI B.C. MEENA, ACCOUNTANT MEMBER Assessee By : Shri Rupesh Jain, Advocate Revenue By : Shri B.R.R. Kumar, Senior DR O R D E R PER B.C. MEENA, ACCOUNTANT MEMBER : The appeal filed by the revenue and the cross objection filed by the assessee emanate from the order of the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the hands of the recipient. It is for the person who is actually making payment to the person who has executed the work to deduct TDS. Never the less, it is noted that this position of law cannot be allowed to be taken as an excuse to structure arrangements whereby payment are routed through third parties only to circumvent the liability for making TDS. The assessee cannot absolve itself from the vicarious liability of ensuring TDS from such payments as these have been made wholly and inclusively on its behalf. Therefore, in the case under consideration, the assessee is directed to produce before the AO proof/evidence to the effect that the parties to whom reimbursement had been made had actually deducted TDS while making payments to the final recipients. To the extent such verification is positive, the liability of deducting TDS cannot be fastened on the assessee. Consequently, the disallowance made invoking Section 40(a)(ia) will stand allowed. However, to the extent such verification is negative, it is held that assessee was liable for making TDS and therefore the provision of Section 40(a)(ia) will be triggered and consequently such expenses will stand disallowed. Against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x at source from payments made to the final recipient(s). 4. Before us, it was submitted that the assessee is engaged in the business of manufacturing and trading of mobile handsets and related accessories. During the year, assessee has sold its products to various regional distributors and they further sold the same to customers on their own account. It was also pleaded that the regional distributors in order to sell the product on their own account incurred expenses on advertisements on such products and claimed reimbursement for such expenses from the assessee on the submissions of the third party bills and other proofs/ evidences. It was also submitted before us that these reimbursements of advertisement expenses are made by the assessee to the regional distributors without deduction of TDS as no tax was required to be deducted on the reimbursement of expenses. It was also claimed before us that in certain cases, the undertaking form the regional distributors on sample basis had been submitted by stating that the regional distributors has duly complied the provisions of Chapter XVII-B of the Act while making the payments to the advertisement agencies / advertisers. Before u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which is evident from page 16 of the paper book. The bill has been raised in the name of Spice Communication Limited and the client name is also Spice Communication Ltd., New Delhi. The SPG Distributors, one of assessee s distributors has stated that it has paid the whole amount by cheque no.136282 of ₹ 2,24,795/-. This is equal to the amount mentioned in the bill itself (evident form pages 15 16 of the paper book). Thus, even the Distributor has not deducted the TDS as claimed by the assessee. He further drew our attention to various other bills submitted by the assessee. He submitted that there was a structure arrangement to circumvent the liability of deducting TDS and the assessee cannot be absolved by vicarious liability of ensuring TDS for making the payments for advertisements wholly and exclusively on the assessee s behalf. 6. We have heard both the sides on the issue. The assessee has claimed that these were the reimbursements and there cannot be a TDS liability on the reimbursements in view of various decisions relied upon. We agree with this contention that no TDS provisions are attracted where it is a purely reimbursement and there was no profit element for ..... X X X X Extracts X X X X X X X X Extracts X X X X
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