No TDS on reimbursements to directors and on traded goods supplied to client

Last updated: 11 February 2023

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Quick Summary

The ITAT, Mumbai has ruled that tax doesn't need to be deducted at source on amounts reimbursed to company directors for expenses like car hire. Additionally, if a company purchases software as a traded good to be resold to a client, rather than for its own use, tax deduction at source is not required on that purchase. The tribunal also stated that if tax was correctly deducted at source on consultancy services, the revenue department cannot disallow the deduction.

Court :
ITAT, Mumbai

Brief :
The ITAT, Mumbai in the matter of Techknowledgy Interactive Partners P. Ltd. v. ITO [ITA No. 350/MUM/2009 dated January 9, 2023] has held that no tax is required to be deducted at source on amount reimbursed to the director of the company. Further, when tax has been deducted at source by the assessee while receiving software consultancy services, disallowance cannot be done by the Revenue Department. Further, directed the Revenue Department to verify whether the assessee was merely a trader of a software and held that, if the purchases of software is traded goods and supplied to another client and not for the use of the assessee, no tax is required to be deducted at source.

Citation :
ITA No. 350/MUM/2009 dated January 9, 2023

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