TDS query
This query is : Resolved
07 April 2009
I have a Carrying and forwarding agreement with one of the CHA & he is taking the reimbusement of the rent charged by the warehouse (bill in the name of CHA)
1)whether i m suppose to deduct TDS as its a reimbursement only
2) Can i deduct contractor TDS instead of warehouse
1)whether i m suppose to deduct TDS as its a reimbursement only
2) Can i deduct contractor TDS instead of warehouse
07 April 2009
In case of any Reimbursements TDS need not be deducted. However you must ensure that it is a reimbursement and that there is no loading the Rent by CHA. Accordingly you may ask him to attach the receipt or original bill from Customs for warehouse rent and proceed paying without TDS.
08 April 2009
But there seems an issue as the TDS law says tds to be deducted on any sum paid to payee
Do we have any case law on it /section/ clause supporting the above
Do we have any case law on it /section/ clause supporting the above
28 July 2025
You’ve rightly pointed out a common confusion in TDS treatment for **reimbursements**, especially in the context of **Clearing & Forwarding (C\&F) or CHA agents**. Let’s break it down with legal reasoning and case law references.
---
## ✅ **Your Situation:**
* You have a **CHA (Customs House Agent)** agreement.
* The **warehouse rent** is:
* **Invoiced in the name of the CHA**
* And is **reimbursed** by you (payer) to the CHA
* Query: Whether **TDS** is to be deducted on this reimbursement.
---
## 🔍 Legal Perspective: TDS under the Income Tax Act
The key provision is:
> **Section 194C** – TDS on payment to contractors/sub-contractors.
> TDS must be deducted **on any sum paid** to a resident contractor for carrying out any work (including supply of labor) **in pursuance of a contract**.
So, **technically**, if the amount is **paid to a contractor/agent**, and the bill is in his name, **TDS may be attracted**, unless it is a **pure reimbursement** with no profit element or value addition.
---
## 🔖 CBDT Clarification
> **Circular No. 715 dated 8 August 1995**, Q.30:
**Q:** If the bills are raised by a consultant, including fees as well as reimbursement of travelling expenses, whether the TDS is to be deducted on the **gross amount** or **only on the fees**?
**A:** TDS is to be deducted on the **gross amount**, since reimbursement is also part of the payment to the consultant.
➡️ This suggests that **TDS is applicable even on reimbursements**, **unless**:
* The reimbursement is supported by **third-party bills**, and
* The agent **does not raise the invoice in his own name**, or there is a clear **disclosure** that it’s a **pure reimbursement** with no markup.
---
## 🧾 Key Case Law Support
### 📌 **DCIT v. Bain & Company India (P) Ltd. (2011) 10 taxmann.com 97 (Delhi ITAT):**
* Held that **no TDS is required on pure reimbursements**, where:
* The expenditure was incurred by the agent on behalf of the payer,
* Bills were in the name of the payer,
* There was **no markup**, and
* Supporting bills were produced.
### 📌 **CIT vs. Siemens Aktiongesellschaft \[2009] 310 ITR 320 (Bom):**
* **No TDS on reimbursement**, as the agent had not derived **any income** from the reimbursement.
---
## 🔎 Summary Answer to Your Questions:
### **1) Whether you are supposed to deduct TDS on reimbursement?**
✔️ **Yes, you should deduct TDS** **if:**
* The **invoice is in the name of the CHA**, and
* It’s not separately identified as a **pure reimbursement** without markup
❌ **No TDS required**, **if:**
* The CHA provides **separate supporting bills** (e.g., from the warehouse),
* You can verify that there’s **no value addition or profit element**, and
* Ideally, the **invoice should be in your name**
### **2) Can TDS be deducted u/s 194C (contractor) instead of 194I (rent)?**
✔️ Yes — if the **payment is being made to the CHA (a contractor)**, and **not directly to the warehouse**, then **TDS under Section 194C** is applicable **on the gross bill**, unless it qualifies as a **pure reimbursement**.
---
## ✅ Best Practice:
* Ask the CHA to provide:
* **Separate invoice** for reimbursement
* Attach a **copy of the original rent invoice**
* Ensure **no profit** is added on reimbursed rent
* Maintain **documentation** for justification if not deducting TDS
---
If you'd like, I can also help you draft a **sample format** of such a reimbursement invoice to avoid TDS issues.
---
## ✅ **Your Situation:**
* You have a **CHA (Customs House Agent)** agreement.
* The **warehouse rent** is:
* **Invoiced in the name of the CHA**
* And is **reimbursed** by you (payer) to the CHA
* Query: Whether **TDS** is to be deducted on this reimbursement.
---
## 🔍 Legal Perspective: TDS under the Income Tax Act
The key provision is:
> **Section 194C** – TDS on payment to contractors/sub-contractors.
> TDS must be deducted **on any sum paid** to a resident contractor for carrying out any work (including supply of labor) **in pursuance of a contract**.
So, **technically**, if the amount is **paid to a contractor/agent**, and the bill is in his name, **TDS may be attracted**, unless it is a **pure reimbursement** with no profit element or value addition.
---
## 🔖 CBDT Clarification
> **Circular No. 715 dated 8 August 1995**, Q.30:
**Q:** If the bills are raised by a consultant, including fees as well as reimbursement of travelling expenses, whether the TDS is to be deducted on the **gross amount** or **only on the fees**?
**A:** TDS is to be deducted on the **gross amount**, since reimbursement is also part of the payment to the consultant.
➡️ This suggests that **TDS is applicable even on reimbursements**, **unless**:
* The reimbursement is supported by **third-party bills**, and
* The agent **does not raise the invoice in his own name**, or there is a clear **disclosure** that it’s a **pure reimbursement** with no markup.
---
## 🧾 Key Case Law Support
### 📌 **DCIT v. Bain & Company India (P) Ltd. (2011) 10 taxmann.com 97 (Delhi ITAT):**
* Held that **no TDS is required on pure reimbursements**, where:
* The expenditure was incurred by the agent on behalf of the payer,
* Bills were in the name of the payer,
* There was **no markup**, and
* Supporting bills were produced.
### 📌 **CIT vs. Siemens Aktiongesellschaft \[2009] 310 ITR 320 (Bom):**
* **No TDS on reimbursement**, as the agent had not derived **any income** from the reimbursement.
---
## 🔎 Summary Answer to Your Questions:
### **1) Whether you are supposed to deduct TDS on reimbursement?**
✔️ **Yes, you should deduct TDS** **if:**
* The **invoice is in the name of the CHA**, and
* It’s not separately identified as a **pure reimbursement** without markup
❌ **No TDS required**, **if:**
* The CHA provides **separate supporting bills** (e.g., from the warehouse),
* You can verify that there’s **no value addition or profit element**, and
* Ideally, the **invoice should be in your name**
### **2) Can TDS be deducted u/s 194C (contractor) instead of 194I (rent)?**
✔️ Yes — if the **payment is being made to the CHA (a contractor)**, and **not directly to the warehouse**, then **TDS under Section 194C** is applicable **on the gross bill**, unless it qualifies as a **pure reimbursement**.
---
## ✅ Best Practice:
* Ask the CHA to provide:
* **Separate invoice** for reimbursement
* Attach a **copy of the original rent invoice**
* Ensure **no profit** is added on reimbursed rent
* Maintain **documentation** for justification if not deducting TDS
---
If you'd like, I can also help you draft a **sample format** of such a reimbursement invoice to avoid TDS issues.
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