TaxTMI 
TaxTMI 
2016 (8) TMI 646
X X X X Extracts X X X X
X X X X Extracts X X X X
....O completed the assessment, u/s. 143 (3) of the Act, on 27. 12. 2011, determining her income at Rs. 73. 36 lakhs. 2. First ground of appeal is about deleting the disallowance made u/s. 40(a)(ia) of the Act, amounting Rs. 55. 45 lakhs. During the assessment proceedings, the AO found that the assessee was proprietor of the business concern namely Advait Enterprises that was engaged in marketing of consumer and liquor products through its agents. While scrutinising the profit and loss account, he found that she had received commission of Rs. 93. 80 lakhs, that she had paid commission amounting to Rs. 61. 82 lakhs to various parties/agents, that she did not deduct tax on such payments, that she had claimed that the payment of commission agen....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ject to deduction of TDS u/s. 194H of the Act, that she had failed to deduct tax at source, that the expenditure shown by her towards commission payment was liable to be disallowed u/s. 40(a)(ia)of the Act. Accordingly, a sum of Rs. 61. 82 lakhs, paid as commission, was added back to her income. 3. Aggrieved by the order of the AO, the assessee preferred an appeal before the First Appellate Authority(FAA). Before him, she submitted that as per the clause 11 of the agreement with M/s. ABD Pvt. Ltd. (ABDPL), It was agreed upon between the assessee and the company that on submitting the monthly travel bills of the field formation/agents employed by her travel expenses would be reimbursed to a maximum amount being Rs. 43. 50 per case of liqu....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... audited. After considering the submission of the assessee and the assessment order, the FAA held that she was appointed as promoter of the liquor brands manufactured by ABDPL and to be supplied to the Canteen Stores Department of the Armed Forces across the country. He referred to the agreement dated 01/04/2008 entered into by her with the company. After analysing the various clauses of the agreement, including clause 11, 12 and 13 of the agreement, he held that the assessee was required to appoint subagents to market the liquor products of its principal, that accordingly she entered into agreements with various subagentsnumbering 29, located and spread across the length and breadth of the country, that the agreements entered with the s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e Act, that in response to the notices three parties had admitted of receiving reimbursement from the assessee, that the AO had not taken the confirmation filed by the three parties into consideration while determining the tax library of the assessee, that the service agreements entered by the assessee with the principal and the subagents specifically mentioned that the services were to be rendered by the assessee with the help of its subagents was to be reimbursed by the principal, that the agreements clearly mentioned that reimbursement would be made on submission of the monthly travel bills by the field force of the assessee, that an upper limit to the reimbursement was also provided in order to ensure that no access claim was made, that....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ce u/s. 40(a)(ia). He further mentioned that total payment received by the assessee during the year from its principal was of Rs. 93. 80 lakhs, that out of it and amount of Rs. 55. 45 lakhs was towards reimbursement of expenses incurred by subagents and routed through the assessee's books in the terms of the agreement, that in other words commission received by the assessee in the terms of the agreement was of Rs. 38. 35 lakhs, that the said amount was below the limit of Rs. 40 lakhs laid down u/s. 44AB of the Act. Finally, he held that the payment of Rs. 55. 45 lakhs, made towards reimbursement of expenses to the subagents, was not liable for deduction of tax u/s. 194H of the act capitalise that, that the payment of Rs. 6. 37 lakhs towards....
X X X X Extracts X X X X
X X X X Extracts X X X X
....about the genuineness of the expenditure, had to make a payment to the assessee, that assessee would be making the payments to the subagents as per the agreements entered into with them, that the AO had made some independent enquiries, that the subagents had admitted to have received the reimbursement, that the AO did not consider the said fact while passing the assessment order. The agreements, entered in to by the assessee with the principal and the agents, clearly indicates that the assessee was to reimburse the actual expenditure incurred by her subagents. In our opinion, there is no need to quote any authority to hold that no tax is to be deducted for reimbursing an expenditure. The AO had not brought on record that the reimbursement h....