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TDS Applicability on Reimbursable expenditure

CA.Anuj kumar sharma (Service in Public Ltd. Co.) (99 Points)

07 March 2008

hi Friends

Pls Clarify My Doubt.

We are paying consultancy charges to TCE Consulting engineers limited. we are reimbursing out of pocket expenses plus 12.36% service tax on out of pocket expenses..Out of pocket expenses, TCE is treated as consultancy charges and they are charging Service tax @ 12.36% on out of pocket expenses . whether i have to deduct TDS on reimbursable expenditure or not.please give advise.

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14 Replies

CA SASHIKANT PATI (Job) (159 Points)
Replied 07 March 2008

No TDS om reimbursabel Exp. TDS is deducted on the Income of payee.Reimbursement of Out of pocket exp is not taxable income in the hand of payee.

CA.Anuj kumar sharma (Service in Public Ltd. Co.) (99 Points)
Replied 08 March 2008

Hi dear, plz let me know whether the consultant can charge service tax on out of pocket expenses or not?

O.D.SHARMA (DGM-F & A) (1734 Points)
Replied 08 March 2008

Dear,Deduct TDS on this whole amount. U are not liable to deduct TDS ,Provided no service tax is charged then no tds.That will be simple reiumbersement.

O.D.SHARMA (DGM-F & A) (1734 Points)
Replied 08 March 2008

Dear,Deduct TDS on this whole amount. U are not liable to deduct TDS ,Provided no service tax is charged then no tds.That will be simple reiumbersement.

CA. GOPAL SONIKA (CHARTERED ACCOUNTANT) (1426 Points)
Replied 08 March 2008

Please go thru circular No.715 of 1995 wherein it is clearly stated that reimbursement exps caanot be deucted from the bill for levy of TDS.

CA BHAVNA (JOB) (23 Points)
Replied 12 June 2008

Dear Friends,

plz. let me know is there any liability to deduct TDS on reimbursement of freight advance paid by the supplier to the transport party, or we have to deduct TDS only on the freight amount paid the company.

with reference to provisions of Income tax act.

Regards,

Bhavna.

CA BHAVNA (JOB) (23 Points)
Replied 12 June 2008

Dear Friends,

Plz. let me know is there any liability to deduct TDS on reimbursement of freight advance paid by the supplier to the transportor, or we have to deduct TDS only on the freight amount paid the company.

with reference to provisions of Income tax act.

Regards,

Bhavna.

(Guest)

Originally posted by :SASHIKANT PATI
"	No TDS om reimbursabel Exp. TDS is deducted on the Income of payee.Reimbursement of Out of pocket exp is not taxable income in the hand of payee.	"

(Guest)

Hi,

Agreed that TDS is not deductable on re-imbursement of expenses, but who certifies that these expenses were actually incurred or not? In the absence of any such certification, the amount claimed as expenses incurred, would be arbitary and would tatamount to income in the hands of the assessee.

I am referring to a construction contract where within one year, the architect has claimed INR 150,000 as expenses incurred which has been re-imbursed by us. Is this amount justifiable in the 1st year for a 3 year project?

Regards

Parkash (Business) (30 Points)
Replied 14 October 2008

TDS is applicable or not on reimbursment of lease line rent paid by sub broker to broker on NSE (give ans. with decided case law)

Pankaj Jhawar (Service) (534 Points)
Replied 16 October 2008

Originally posted by :CA. GOPAL SONIKA
"	Please go thru circular No.715 of 1995 wherein it is clearly stated that reimbursement exps caanot be deucted from the bill for levy of TDS.	"

But if seperate bills are there than i believe that TDS will not be their on the reimbursement part

(Guest)

Originally posted by :O.D.SHARMA
"	Dear,Deduct TDS on this whole amount. U are not liable to deduct TDS ,Provided no service tax is charged then no tds.That will be simple reiumbersement.	"

Santosh Madanlalji Malu (Certified Public Accountant Chartered Accountant Company Secretary) (121 Points)
Replied 22 July 2010

Dear Anuj

As per circular no 715 dated 8 august 1995 applicability of TDS on reimbursement has been discussed therein in Question No 30 which read as under

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.

This treatment is applicable if reimbursement is shown in bill alongwith professional or technical fees or contract amount, thus if separate bill is raised for reimbursement then same is not liable for TDS.

Further service tax to be deducted on gross bill i.e. sum of professional or technical fees and reimbursement,

Further TDS also to be made on service tax component in the absence of any particuar circluar on No TDS on service tax. CBDT has clarified that no TDS to be made on service tax component in case TDS to be made u/s 194I however for other section it has not clarifed the same hence possibility of litigation with Tax Authorities can not be ruled out if no TDS made on service tax component

Y M Doshi (Chartered Accountant) (148 Points)
Replied 12 August 2011

This is a question on which no clear direction is available and keeping in line with the general trend of tax judgments there are conflicting views held by the various courts and Tribunals in the country. In the case of mere reimbursement of expenses, TDS need not be effected as ruled in the case of reimbursement of out of pocket expenses to a noted Law firm. Clifford Chance 82 ITD 106(Mum). The most important recent Judgment in Mahindra & Mahindra’s case reported in 10 SOT 896 Mumbai ITAT has also held that reimbursement of expenses not having the character of income chargeable to tax under the provisions of the IT Act cannot be subject to WHT However where the cost of services is charged and recovered by way of reimbursement, even without any profit element TDS will be applicable as ruled in the case of Arthur Andersen & Co by the Mumbai tribunal reported in 94 TTJ 736 (Mum) There are also judgments which reflect that TDS under Section 195 will be applicable even on mere reimbursement of expenses. This view finds support in the decisions given by Cochin Refineries 222 ITR 354 (Kar) and HNS VSAT Inc 95 ITD 157 (Del ITAT) and also in Hindalco 278ITR 125 (AT)