AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2018 (2) TMI 1587
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.... the assessee has made the payment of Rs. 4,36,13,708/- towards the conversion expenses but not deducted TDS as required u/s 194C of the Act, hence made the addition of Rs. 4,36,13,708/- u/s 40(a)(ia) of the Act. 3. Aggrieved by the order of the A.O., the assessee went on appeal before the CIT(A) and made threefold argument. Firstly the assessee argued that the assessee had made short deduction of TDS, but not the non deduction hence, the provisions of section 40(a)(ia) of the Act is not attracted. The second proposition made by the assessee before the CIT(A) was that the expenditure in question was reimbursement of expenses and TDS has no application. Thirdly relied on the decision of special bench in the case of Merylin Shipping and Transports Vs. ACIT, Visakhapatnam and argued that there was no outstanding payment hence no addition under section 40(ia) is applicable. The CIT(A) allowed the appeal of the assessee placing reliance on the decision of Hon'ble ITAT, Visakhapatnam in the case of Merylin Shipping and Transports Vs. ACIT Visakhapatnam as well as holding that there is no necessity to make TDS on reimbursement of expenses. Accordingly, deleted the addition. 4. Aggri....
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....tya Spinners Pvt. Ltd. for converting spin 30s & 100s count of Polyester staple figre and viscos staple fibre. For this purpose, the assessee would supply the raw material in required quantities and the contractor M/s. Aditya Spinners would undertake the job work as per the agreement. The expenditure in production i.e. power, wages, production, consumables, etc. would be borne by the assessee and argued that as per the agreement the assessee required to make the payment to M/s. Aditya Spinners, contractors on job conversion charges and the job conversion expenses should be borne by the assessee. Therefore, the Ld. A.R. argued that the job conversion charges would not attract TDS. The job conversion expenses are the reimbursement of expenses and the reimbursement of expenses does not involve the element of profit and does not attract the TDS, hence requested to delete the addition. The Ld. A.R. further argued that even if it is presumed that job conversion expenses attract TDS the assessee has deducted the TDS on part amounts hence it should be considered that assessee has made short deduction but not non deduction of tax at source. The Ld. A.R. argued that the short deduction of ta....
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....04, 720/Hyd/2005 and 721/Hyd/2005 dated 30.6.2010. The Hon'ble ITAT in the cited decision held that there is no profit element in the reimbursement of expenses, hence the reimbursement of expenditure received by the recipient does not form part of total income. Since the reimbursement of expenditure does not form part of total income, the TDS does not attract in respect of the reimbursement of expenditure. For ready reference, we extract para Nos.21 to 24 of the order relied upon by the Ld. A.R as follows: "21. We have also carefully gone through the judgement of the Delhi High Court in CIT Vs. Industrial Engineering Projects Pvt. Ltd. (1993) 202 ITR 1014. In the case before the Delhi High Court the assessee had agreement with M/s. ETAG, a Swiss Company, for rendering services. The assessee would receive a minimum sum of Rs. 1,20,000/- per month for the services rendered besides reimbursement of certain costs and expenditure incurred by the assessee while rendering the services as per the agreement. The Income-tax Officer disallowed the expenses incurred. On appeal by the assessee before the Delhi Bench of this Tribunal, it was held that the reimbursement of the expenditur....
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....t. The Apex Court held that 5% of the expenses in lieu of the contingency expenses was for the expenditure incurred in the performance of the duties of the respondent as selling agent. Therefore, it will not form part of the taxable income Accordingly, the same was exempt. In view of this judgement of the Apex Court, the reimbursable expenditure received by the assessee in pursuance to the agreement cannot form part of the taxable income Accordingly, the same has to be excluded. 24. We have also carefully gone through the judgement of the Bombay High Court in CIT Vs. Tanubai D. Desai (1972) 84 ITR 713. In the case before the Bombay High Court, the assessee was a practicing solicitor. In the course of carrying on his profession the assessee used to receive money from or on behalf of his clients. The money received was deposited by him in separate current account with Imperial Bank of India. Subsequently, the assessee withdrew a sum of Rs. 3.25 lakhs and placed the same in fixed deposit with Chartered Bank. The assessee renewed the account from time to time together with interest earned thereon. The assessee earned interest on the fixed deposit. The interest earned on the fi....
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....ement imbedded in the remittance. The obligation of the assessee to deduct tax under s. 195 is limited only to the appropriate proportion of income chargeable under the Act. It is therefore clear that any remittance which does not have an income element which is chargeable to tax need not suffer tax deduction at source.-Transmission Corporation of A.P. Ltd. &Anr. vs. CIT (1999) 155 CTR (SC) 489: (1999) 239 ITR 587 (SC) relied on. (Para 12) 9. The Hon'ble ITAT Delhi relied on the decision of Transmission Corporation of India of AP Limited Vs. CIT 155 CTR (SC) 489. In the instant case, the expenditure debited to P&L account towards the conversion expenses is reimbursement of expenditure, which is supported by the agreement entered into by the assessee. The A.O. made addition u/s 40(a)(ia) of the Act but not given any reasoning. The Ld. CIT(A) held that the same is reimbursement of expenses. M/s. Aditya Spinners Limited has admitted the entire amount of reimbursement of expenses as well as conversion charges as income in their hands and filed the return of income for the relevant assessment year. As held by the coordinate bench of Hyderabad in the case of M/s. Louis Berger Inter....