The Board has through Circular No.715 dated August 8,1995 clarified that since Section 194J refers to "any sum paid", reimbursement of actual expenses cannot be deducted from the bill and that such reimbursement will also have to be taken into account in deducting tax at source.
However, the issue of whether tax deduction will be attracted where such expenses are claimed through a separate statement stands unclarified by the Board
It is felt that if the expenses are claimed through a separate statement there will be no requirement to deduct tax at source, provided the deductor is satisfied that the expenses claimed as reimbursement are only the actual expenses incurred. If there is an element of profit, that is to say that if the reimbursement is not of actual expenses, tax will have to be deducted at source even if the expenses are claimed through a separate statement.
I referred to the case law mentioned by you. Unfortunately, the judgment is on the issue whether the said expense/reimbursement is allowed under 40(a)(ia)
Unfortunately, that has no bearing on the applicability of TDS provisions.
Rather I quote from the very same judgment when the learned bench opined that "the hon'ble court, in ratio, stating that where an expenditure is subject to deduction of tax at source, violation thereof would justify disallowance of the relevant expenditure under section 40(a)(ia) of the Act. We opine accordingly."
Further to your clarification, I would still prefer giving clients a conservative advice. No point in wasting time on litigation upto ITAT level for such trite issues.
Further you didn't mention the last line of your clarification "THIS POSTITION HAS TO BE TESTED"
25 February 2013
Yeah, That case for Allowances 40(a)ia... But Directly Linked with the TDS Issue Only.. as You Know 40 a ia section for what ?
and if you want direct case law then here :-
In this regard, a reference may also be made to the judgement of Delhi Bench of the Tribunal in the case of ITO Vs. Dr.Willmar Schwabe India (P) Ltd. [2005] 95 TTJ 53 (Del). One of the issues before the Hon. ITAT in the above case was TDS in respect of reimbursement of expenses where the consultant had raised a separate bill for such expenses. In this case, as per agreement between the assessee company and M/s.Indochem Techno Consultants Ltd, a vehicle was to be provided by the assessee company to the said consultant for attending to its work and thus, the assessee company was to bear the vehicle expenses actually incurred by the said party. Bills for such expenses incurred by the said consultant were separately raised on the assessee company, in addition to bills for fees payable on account of technical services. It was held by the Hon. Tribunal that since the amount of bills so raised was towards the actual expenses incurred by the consultant, there was no element of any profit involved in the said bills. It was, thus, a clear case of reimbursement of actual expenses incurred by the consultant and the same, therefore, was not of the nature of payment covered by section 194J, requiring the assessee to deduct tax at source therefrom.
25 February 2013
I agree to all the judgments u have quoted, but as a tax con, I prefer not to give an opinion to my clients which is prone to litigation.
Often the cost of litigation is more than the cost of TDS.
25 February 2013
I agree to all the judgments u have quoted, but as a tax con, I prefer not to give an opinion to my clients which is prone to litigation.
Often the cost of litigation is more than the cost of TDS.
I Have Some Practical Cases. Import of Goods is There. In That C&F we are Paying Say 100000/- rs. Then In That More Than 80000 Rs. is reimbursement. In This Case Amount of Reimbursement is Quite High. and Its a Single Transaction. Predict for Whole Year transaction.
Often Cost of Litigation is More than Cost of TDS - But That is True...
Well, Thanks for All Your Participation in This Query. Enjoyed Discussion.
26 February 2013
same here...got to read a few good case laws because of you and see even in your case, the TDS on reimbursements (assuming 194J) is Rs 8,000 much less than the cost of litigation..
CAclubindia
