Whether TDS to be deducted on Reimbursement Expenses

This query is : Resolved 

02 June 2011

1.Whether TDS to be deducted on reimbursement payments.
2.If service tax added to those reimbursements payments whether TDS to be deducted.

I saw one cilent where on Reimbursement payments service tax are added.
Total Reimbursements are Rs 10000 in one case and Rs 50000 in another case. Service tax in 1st case is Rs 1030. service tax in 2nd case is Rs 5150.
Total Reimbusrsement value is Rs 11030 and Rs 55150 in 2nd case.
Whether TDS to be deducted on above payments.

Rakesh Jain (Expert)
02 June 2011

Dear Dileep,

TDS on reimbursement is not required to be made if separate bills are raised one is for professional fee and the other is for reimbursement of expenditure.

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.

And TDS should be deducted on the gross amount.

With Regards,

Dileep (Querist)
03 June 2011

Thank You sir.

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