2016 (3) TMI 207

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....a) (ia) of the I.T. Act for the amou9nt reimbursed to M/s Aakriti Creations Pvt. Ltd". 3. The assessee is a proprietor of M/s Alankar Creations engaged in the business of manufacture and export of garments and accessories. The assessee filed his return of income on 30/9/2008 disclosing a total income of Rs. 49,2,099/- during the scrutiny assessment proceedings the Assessing Officer noted that the assessee claimed the payment of Rs. 3,19,66,460/-to its sister concern M/s Akriti Creations Pvt. Ltd. by way of reimbursement of expenses but had failed to deduct tax on this payment. The Assessing Officer was of the opinion that there was a liability to deduct tax u/s 194C of the Income Tax Act, 1961 on the contractual payment of reimbursement ....

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....e Assessing Officer observed that the basis of bills raised for reimbursement of expenses was not clear and relied upon the judgment of the Hon'ble Apex Court in the case of Associated Cement Co. Vs. CIT [1993] 201 ITR 0435, wherein the Hon'ble Apex Court held that the person responsible for deduction of tax has to deduct from the entire sum paid or credited and not merely from the income component of the same. The Assessing Officer also relied on CBDT Circular No. 715 dated 8/8/1995 the total amount paid on account of reimbursement of expenses of Rs. 3,19,66,460/- was disallowed u/s 40(a) (ia) of the Income Tax Act, 1961. 4. Aggrieved, by the said order the assessee filed appeal before the CIT(A). The CIT(A) held that the amount of 2% r....

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....aside. 6. The AR relied upon the Ld. CIT(A)'s order and stated that the Ld. CIT(A) has taken into consideration all the contentions and the factual aspects of the assessee's case. The AR also relied upon the various cases laws. 7. We have perused all the records and proceedings as well as heard both the parties. The Assessing Officer did not dispute the genuineness of the reimbursement of expenses to M/s. Akriti Creations Pvt. Ltd. There are no adverse comments or findings of the Assessing Officer in this regard and did not dispute the fact that the reimbursement of expenses were for the purposes of the business of the assessee which are allowable under Chapter IV-D of the Income Tax Act, 1961. In the case of M/s. Akriti Creations Pvt....