TaxTMI 
TaxTMI 
2012 (11) TMI 1155
X X X X Extracts X X X X
X X X X Extracts X X X X
....,22,826/- On the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) erred in upholding the action of the Assessing Officer in disallowing expenses reimbursed to group companies under section 40(a)(ia) of the Act on account of non deduction of tax at source. Without Prejudice to Ground-1, the Commissioner of Income-tax (Appeals) erred in holding that the benefit of second proviso inserted to section 40(a)(ia) of the Act by the Finance Act 2012 cannot be given for AY 2008-09 since amendment is prospective in nature. Ground 2: Disallowance under section 43B of Rs. 37,94,5761- On the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) erred in upholding the action of the Assessing Officer in disallowing under section 43B of the Act, expenses amounting to Rs. 37,94,576/- grouped under the head Miscellaneous Expenses on the ground that same represents interest on delayed payment of VAT. The Appellant craves, to consider each of the above grounds of appeal without prejudice to each other and craves leave to add, alter, delete or modify all or any of the above grounds of appeal." 2. In Ground No.....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... aforementioned two decision. He submitted that AO has wrongly distinguished the decision of Hon'ble Jurisdictional High Court in the case of CIT vs. Siemens Aktiongesellchaft(supra) on the ground that the said decision was rendered on royalty. He submitted that it has clearly been held by Jurisdictional High Court that reimbursement of expenses can, under no circumstances be regarded as revenue receipt. He submitted that when these are not in the nature of revenue receipts, TDS provision will not be applicable and this was so held by the Mumbai Tribunal in the case of ACIT vs. J.B.Boda Surveyors Pvt. Ltd.(supra) and he referred to the following observations from the said decision: " 2. For the sake of brevity the brief facts of the case extracted from ITA No.4252/Mum/2009 in M/s. J.B. Boda Surveyors Pvt. Ltd. for the Assessment Year 2006-07 are that the assessee company is engaged in the business of Marine Cargo Surveyors, Samplers, Analysts and Loss Assessors. The return was filed declaring total income at Rs. 2,78,71,388/-. During the course of assessment it was observed by the Assessing Officer that the assessee has claimed reimbursement expenses Rs. 12,92,46,536/- under t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mbursed by the group company to the flagship company does not constitute income in the hands of the later and does not partake the nature of commission, held that there is no liability to deduct tax on part of the appellant company and accordingly deleted the disallowance made by the Assessing Officer . 3. Being aggrieved by the order of the ld. CIT(A) the revenue is in appeal before us taking following effective grounds of appeal:- "a. On the facts and in the circumstances of the case and in law the CIT(A) erred in deleting the disallowance of Rs. 3,35,73,125/- being payments made to parent company M/s. J.B. Boda & Co. Pvt. Ltd. as commission for providing common facilities, on which TDS was not deducted as per provisions of section 40(a)of the Act. b. On the facts and in the circumstances of the case and in law the CIT(A) failed to appreciate that reimbursement of expenses is not exempt from TDS provisions." 4. At the time of hearing the ld. DR submits that for the reasons as discussed in the assessment order, the ld. CIT(A) was not justified in deleting the disallowance made by the Assessing Officer. He therefore, submits that the disallowance made by the Assessing Officer b....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., on which, tax is deductible at source under Chapter XVII-B of the Act. The assessee has established that the payment to their parent company M/s. J.B. Boda & Co. Pvt. Ltd. was not subject to TDS as payments were not made against any contract work carried out. It is an admitted fact in the case consideration that the payment made to parent company, M/s. J.B. Boda & Co. Pvt. Ltd. is a payment of reimbursement of expenses. In case of reimbursement of expenses, the expenditure incurred is related to the person who was not made the original payment. In other words, the payment of expenditure is made by X-party on behalf of the Y-party and later on the same is reimbursed to the X-party, by Y-party, the expenditure is pertaining to Y-party and not pertaining to X- party. Thus, the payment to M/s. J.B. Boda & Co. made by the assessee is a simple reimbursement. In the case under consideration, the parent company M/s.J.B. Boda & Co. Pvt. Ltd. has acted merely the role of agent for making payment of expenditure on behalf of the assessee and getting reimbursement. Therefore, the payment made to M/s. J.B. Boda & Co. Pvt. Ltd. is not on account of any expenditure. Section 40(a)(ia) applicable ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pute the fact that the impugned amount was in the nature of reimbursement expenses on cost to cost basis. If it is so, according to the ratio of the decision rendered by Co-ordinate Bench in the case of ACIT Vs. J.B.Boda Surveyors Pvt. Ltd.(supra) , it has to be held that the disallowance cannot be made as it has not been shown or established that aforementioned payments were made by the assessee to the aforementioned group concerns against any contract work carried out by them for the assessee. In the case of reimbursement of expenses, the expenditure incurred is related to the person who has not made the original payment. The payment of expenditure is made by "X" party on behalf of "Y" party and later on the same is reimbursed to "X" party by "Y" party, the expenditure is pertaining to "Y" party and not pertaining to "X" party. Therefore, applying the ratio laid down in the case of ACIT vs. Crowe Boda & Co. Pvt. Ltd. in ITA No.4251/M/2009 vide order dated 30/3/2010, relied upon in the case of ACIT Vs. J.B.Boda Surveyors Pvt. Ltd., the issue is decided in favour of assessee. The relevant observations have already been reproduced above. In view of the above discussion, Ground No.1 ....