Reimbursement vs TDS under section 194C requires proper verification of liability crystallisation and profit element before final decision.

Payments to affiliates could not be finally treated as reimbursement outside TDS under section 194C on the existing record because the true character of the remittances had not been properly examined. The Tribunal noted that the Assessing Officer and the first appellate authority had not sufficiently verified whether the liability had actually crystallised, whether the payment was only a square-off of an existing liability, or whether any profit element was embedded, and the supporting documents were incomplete. The order of the first appellate authority was therefore set aside and the matter was restored for de novo adjudication after giving the assessee a reasonable opportunity of being heard.

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Issues: Whether the payments made by the assessee to its affiliates were reimbursements outside the scope of tax deduction at source under section 194C, and whether the matter required fresh examination on the nature of the transaction.

Analysis: The Tribunal noted that the core dispute was the true character of the remittances to affiliates. It observed that the parameters of reimbursement, including whether the liability had actually crystallized, whether the amount paid was merely a square-off of an existing liability, and whether any profit element was embedded, had not been properly examined by the Assessing Officer or the first appellate authority. The relevant documents necessary to test the claim of reimbursement were also not produced in complete form. In these circumstances, the Tribunal found it inappropriate to decide the TDS issue finally on the existing record.

Conclusion: The order of the first appellate authority was set aside and the matter was restored to the Assessing Officer for de novo adjudication after giving the assessee a reasonable opportunity of being heard.

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