Payments to CECO deemed reimbursement, not liable for TDS. CIT(A) decision upheld citing precedent and agreement terms. Revenue appeal dismissed.

The ITAT held that payments to CECO were reimbursement, not subject to TDS deduction. CIT(A)'s decision was upheld, citing relevant judgments and the agreement's terms. Revenue's appeal was dismissed, with general grounds 1 and 3 not elaborated on.

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Issues:
1. Nature of payment to CECO Electronics Pvt. Ltd. - reimbursement or contractualRs.
2. Requirement of TDS deduction on the payment made to CECO.

Analysis:

Issue 1: Nature of Payment to CECO Electronics Pvt. Ltd.
The appellant contended that the payment of Rs. 49,53,046 made to CECO was contractual in nature and required TDS deduction. The AO disallowed the amount under section 40(a)(ia) of the Income-tax Act, stating it was reimbursement. The AO's reasons included CECO showing the payment as income, lack of supporting bills, and previous years' payments being contractual. The AO concluded it was a contractual payment for managerial support, necessitating TDS deduction. However, the assessee argued that TDS was duly deducted on each expenditure and no double taxation should occur. The CIT(A) noted that the expenses were incurred on behalf of the assessee, and as per Tribunal judgments, no TDS was required on reimbursements. The CIT(A) held that section 40(a)(ia) did not apply to these expenses, thus deleting the addition.

Issue 2: Requirement of TDS Deduction
The AO's stance was that TDS was required on the payment to CECO under section 194C. The assessee maintained that TDS was deducted wherever applicable, and no additional amounts were paid to CECO. The CIT(A) referred to Tribunal decisions supporting that reimbursements do not necessitate TDS deduction. The Delhi ITAT case of Dr. Willmar Schwabe India (P) Ltd. was cited to emphasize that when payments are reimbursement in nature, TDS deduction is not mandated. The ITAT concurred with the CIT(A) and upheld the relief granted to the assessee, dismissing the revenue's appeal.

Conclusion:
The ITAT upheld that the payments to CECO were reimbursement in nature, not requiring TDS deduction. The judgments cited and the royalty-cum-reimbursement agreement supported this conclusion. The ITAT found no fault in the CIT(A)'s decision, leading to the dismissal of the revenue's appeal. Grounds 1 and 3, being general, were not further discussed, and the appeal of the revenue was ultimately dismissed.

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