TDS applicability on reimbursement made to dealers for business promotion

[avinash chauhan]

dear all,

A Co. X is making reimbursement to dealers who are paying to 3 rd party on behalf of the Co. X, Co. X is not deducting tax at source on he reimbursement made to the dealers on the basis that the payment made is purely an reimbursement in nature, the dealers are raising seperate bill against the co.X for rendering the above service & charging ST on the same and different bill for reimbursement,

My querry is whether TDS is applicable on the reimburement made to the dealers and if on what basis, please JUSTIFY  with any CASE LAW or any PROVISION

Regards

Avinash C

AI Summary

TDS Not Applicable on Reimbursement of Excise Duty, Must Be Deducted on Service Charges, Clarifies Query A company is reimbursing dealers for payments made to a third party on its behalf and not deducting tax at source, arguing the payments are purely reimbursements. Dealers issue separate bills for services rendered, including service tax, and another for reimbursement. The query seeks clarification on whether Tax Deducted at Source (TDS) applies to these reimbursements. The response clarifies that TDS is not applicable on reimbursement of excise duty as it does not generate income, but TDS should be deducted on charges for services rendered.