One of our client company reimburses advertisement expenses to its parent company. Parent Company incurs advertisement expenses and makes payment after deduction of TDS. Our client company reimburses its share to the parent company without deduction of TDS. I want to know whether the client company is liable to deduct TDS?
26 December 2014
In Emersons Process Management India (P.) Ltd. v. Addl. CIT [2011] 47 SOT 157 (Mum.), it was held that TDS requirements do not come into play in case of reimbursement of expenses and is a settled law. Undoubtedly, these payments are made for the services rendered but the TDS requirements would come into play at the point of time when payments are made to the person who is rendering the services or to the person with whom contract for rendering of these services is entered into. Here the issue dealt with a situation in which payment is made to a group concern under a cost sharing arrangement and the payment is thus not for services but as reimbursement of expenses. Therefore, TDS requirements do not come into play at this stage. The disallowance was deleted.
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