AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2014 (5) TMI 44
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....serving that the learned Assessing Officer was justified in invoking provisions of section 40(a) (iii) of the Act. 2. Disallowance of foreign travelling expenses amounting to Rs 3,340,906 a. The learned CIT(A) erred in confirming the disallowance of Rs. 3,340,906 being expenses incurred in respect of foreign travel. b. He erred in not appreciating the submissions made by the appellant company in the correct perspective that the foreign travelling expenses were incurred wholly and exclusively for the business and thereof should be fully allowable as deduction. 3. Disallowance of expenses under section 40(a)(i) of the Act amounting Rs.65,000 a. The learned CIT(A) erred in confirming the disallowance of expenses amounting to Rs. 65,000 under section 40(a)(i) of the Act. b. He erred in not appreciating in the correct perspective the submissions made by the appellant company with regard to the aforesaid disallowances/addition. c. He erred in observing that the appellant has intentionally not filed a copy of Tax Audit report during the appellate proceedings. 2. Brief facts of the case, qua the issue raised in ground no.1 are that the assessee company i.e. M/s Nagase India Private....
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....efore the CIT(A), it was submitted by the assessee that apart from the fact that the payments made to Nagase Company, Japan, were simply in the nature of reimbursement of salary expenses and no income had either accrued or received by the assessee in India but there is an other important aspect that the assessee had already deducted tax u/s 192 on the entire salary of the deputed employees, which is evident from the Form No.16 in case of both the employees. Thus, the tax has been withheld on the entire salary paid to these employees and this was specifically submitted before the AO, vide letter dated 17/09/210. Once the assessee has already deducted the tax even on the reimbursement of salary which was paid by the Japanese Company then there was no requirement of withholding tax again on the same amount twice u/s 195. The ld. CIT(A) though has noted this important argument of the assessee, however, held that as per the agreement, 50% of the expenses pertaining to salary of these two employees borne by the Japanese Company has been reimbursed by the assessee on which TDS was required to be deducted. He held that the provisions of section 192 r.w.s. 40(a)(iii) is applicable in this c....
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....e assessee as well as by the Japanese company, but also the working of the amount on which the assessee has deducted TDS and deposited the same in the Govt. treasury. The ld. CIT(A) despite noting this fact has confirmed the AO's findings, without any proper reasoning or analysis, as to how there was a requirement of double dedcution of TDS, one at the time of payment of salary and other at the time of reimbursement of the salary expenses. He also drew our attention to form no. 16 of both the employee as given at page 105 to 107 and page 109 to 112 of the paper book. From this form no. 16, he submitted that the assessee has deducted TDS on the entire salary and has also provided the details which were annexed along with the form no. 16 itself. He also drew our attention to page 96 of the paper book, wherein the details and break-up of the salary paid and TDS deducted has been given and from this detail he pointed out that the salary which were subjected to TDS u/s 192 in India also included the salary paid by the Japanese company to these employees. Once the TDS has been deducted on the entire salary, then there was no requirement in law in holding that part of the salary which....
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....e services in India for the Indian company was to be paid by the Japanese company, which was to be reimbursed by the Indian company. During the under consideration, the assessee company has reimbursed a sum of Rs.69,32,708/- to the Japanese company as per the details incorporated above. The Assessing Officer, without any basis or analysis has disallowed a part of the sum of Rs. 36,53,755/- pertaining to one of the employee i.e., Mr. A. Ishii and has not made any comment or any disallowance on the part of the reimbursement made in the case of Mr. H. Ishigaki. Even the CIT(A) also has not pointed out as to why such a divergent approach, has been adopted. It is an undisputed fact that the assessee has filed form no. 16, before the AO as well as before the CIT(A) and has also categorically pointed out that the entire salary paid to these employees that is, partly paid by the Indian Company and partly paid by the Japanese company has been included in form no. 16 on which TDS has been deducted. From the perusal of the form no. 16 of Mr. H. Ishigaki, Director, it is seen that gross salary shown is inclusive of various perquisites and allowances for the assessment year 2008-09 was at Rs.83....
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....ssessee is situated in Japan and further, the commission on indent business earned by the assessee is mostly on the sale of goods dealt by the parent company. Therefore, the employees of the Indian company are required to visit Japan and various foreign countries in connection with sales and in order to understand the product and also various updates on such products. The travelling also included various business discussion held with the head office. The Assessing Officer rejected the assessee's contention and held that assessee is earning indent commission on the sale of goods dealt only by the parent company and there is no reason for employees of the assessee company go abroad. As far as the assessee is concerned, there was no requirement to incur foreign travel expenses and in fact the expenses incurred by the assessee, is actually the expenses incurred on behalf of the parent company. The ld. CIT(A) also upheld the AO's contention and confirmed the said disallowance on the ground that the assessee has failed to explain as to how the incurring of the foreign travel expenses gives advantage to the assessee business and hence such a foreign travelling is not incurred whol....
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....ose, then adverse presumption cannot be drawn that such expenses were genuine or were not required to be incurred by eh assessee. Thus, the view taken by the ld. CIT(A) for confirming the disallowance cannot be sustained and as such stands deleted. In the result, ground no. 2 raised by the assessee is allowed. 15. In ground no.3, the assessee has challenged the disallowance of Rs.65,000/- made u/s 40(a)(i). The Assessing officer noted that an amount of TDS deducted of Rs.1320/- was due to be deposited on 07/09/2007 whereas the same has deposited on 02/05/2008. Hence, the expenses pertaining to this deposit of TDS of Rs.1320 was estimated at Rs.65,000/- and was added u/s 40(a)(i). Even the ld. CIT(A) has confirmed this addition. Before the CIT(A), it was submitted that during the year, the assessee had paid an amount of Rs.12,809/- to Bharti Corporate Services, towards professional fee for providing recruitment services to the parent company, on which TDS was required to be deducted at the rate of 10.3%, which amounted to Rs.1320/. Therefore, there was absolutely no justification for the AO to estimate the disallowance at Rs.65,000/-. The ld. CIT(A) has upheld the findings of the A....
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....nt company, Nagase and Company Ltd. and other associates towards reimbursement of following expenses, which were incurred on behalf of the assessee. Sample Charges Rs. 6,290+6,189+1,582 Meeting Expenses Rs. 13,408 Hotel Expenses Rs. 71,924 Rs. 99,393 It was submitted that these expenses were reimbursed which were actually incurred by the parent company and associate company and there is no profit element, therefore, no TDS is required to be deducted. 22. The ld. CIT(A) deleted the said addition after observing and holding as under:- "I have considered the facts of the case. The appellant reimbursed the expenses to parent company for sample charges, meeting expenses and hotel expenses. These expenses reimbursed by the appellant to Japanese parent company were not covered by the provisions of sec. 192 to 194 LA of the Act. These provision deals with withholding of tax on different type of payments. In the facts and circumstances, residuary section 195 of the Act could have some application on these payments. However, provisions of Sec.195 pertain to payments made to non-resident company or to a foreign company in respect of payments of any interest or other sum chargeable under....