If a single bill is raised for the professional fee inclusive of reimbursement of expenditure, in such a case TDS is to be made on gross amount.
The above view is supported by a case law ITO v. Dr. Willmar Schwabe (2005) 3 SOT 71 (ITAT).
Where as per CBDT circular No. 715 dated 8-8-1995, TDS should be on total payment including reimbursement of expenses. But ITAT in the above decision it was held that reimbursement of expenses for which bill is separately raised did not attract the provisions of section 194J, the above circular attracts only in case bill is raised inclusive of reimbursement of expenditure
If reimbursement of expenses are claimed through a separate invoice then they dont attract TDS. However in case of consolidated invoice/bill TDS is to be deducted on the Gross amount inclusive of reimbursements..
Reason of above is this question from the Boards Circular -
Question 30 : Whether the deduction of tax at source under sections 194C and 194J has to be made out of the gross amount of the bill including reimbursements or excluding reimbursement for actual expenses ?
Answer : Sections 194C and 194J refer to any sum paid. Obviously, reimbursements cannot be deducted out of the bill amount for the purpose of tax deduction at source.