Tds u/s 194 i on reimburesement of municipal tax

Shivkumar (Manager - Finance) (26 Points)

07 February 2016  

Our company has hired a premises for office purpose. As per the terms of agreement apart from rent our company has to reimburse 50% of Municipal Tax paid by Landlord. Do we need to deduct TDS on this reimbursement? can it actually be termed as reimbursement? One of my colleague has opined that TDS is not applicable taking the reference of CBDT.Circular 718. But my understanding is that Circular 718 talks about taxes on leased property paid by tenant. But in the present case it is actually paid by the landlord and later on part of the same has been billed on tenant. Please advice.