CRISIL LIMITED (SUCCESSOR-IN-INTEREST OF INTEREST OF ERSTWHILE CRISIL RISK AND INFRASTRUTURE SOLUTIONS LIMITED ),MUMBAI vs. THE ASSISTANT COMMISSIONER OF INCOME TAX-15(1)(2), MUMBAI

CRISIL LIMITED 2. In various grounds of appeal assessee has challenged disallowance of Rs.1,07,51,004/- u/s. 40(a)(ia) which pertains to reimbursement of expenses made to Crisil Limited on account of non-deduction of tax at source.

The ld. AO, however without considering any submissions made by the assessee and without giving any opportunity of hearing, the ld. AO confirmed the disallowance of Rs.74,57,621/- however deleted the addition / disallowance of Rs.32,93,383/- which was as per the direction of the Tribunal was towards reimbursement of expenditure wherein, no TDS provision would apply.

We have heard both the parties, perused the relevant finding given in the impugned order as well as material referred to before us. First of all from the perusal of the break-up of Rs.1,07,00,000/-, it is seen that the disallowance has been made in the following three categories:- Sr. Particulars Amounts No. (INR) i Reimbursement towards expenditure, 32,93,383 where even if the Appellant had directly incurred such an expenditure, the provisions of tax deduction at source ('TDS') would not apply ii Service tax component with respect to 10,03,947 reimbursement of expenditure iii Balance reimbursement of expenditure 64,53,674 Total 1,07,51,004

The details of expenditure of Rs.32,93,383/- are as under:- Details of Reimbursements towards expenditure, where even if the assessee would have had directly incurred such as expenditure, the provisions of TDS would not apply CRISIL LIMITED Bank Charges 84,720 Books & Periodicals 58,823 Conveyance 2,36,326 Electricity Expenses 7,75,842 Gift 2,205 Inland Travel 84,743 Staff Medical Insurance 30,573 Postage & Mailing Expenses 2,41,249 Rates & Taxes 3,800 Registration/ Listing Fees 7,232 Staff Training Expenses 7,60,607 Staff Welfare Exp 17,484 Staff Welfare Expense Office 2,74,904 Stipend 2,12,672 Telephone Charges 4,95,967 Transport Allowance 3,200 Vehicle Expenses 3,036 Total 32,93,383

Perusal of these expenditures it can be seen that, on none of the payments, the provision of TDS would apply because they are CRISIL LIMITED directly incurred for the purpose of business. Nowhere, any such expenses entail provision for deduction of TDS under the Act, therefore, no disallowance can be made with respect to expenditure of Rs.32,93,383/- which has been reimbursed by the assessee to Crisil Limited.

In so far as service tax component with respect to reimbursement of expenditure of Rs.10,03,947/-, there is a CBDT Circular No.1 of 2024 dated 13/01/2014 wherein, it has been stated that no taxes are required to be deducted on the service tax component. The relevant extract of the Circular reads as under:- "In exercise of the powers conferred under section 119 of the Act, the Board has decided that wherever in terms of the agreement/contract between the payer and the payee, the service tax component comprised in the amount payable to a resident is indicated separately, tax shall be deducted at source under Chapter XVII-B of the Act on the amount paid/payable without including such service tax component."

Thus, no TDS is required to be deducted on the service tax component and the same is deleted.

Coming to the balance reimbursement of expenditure of Rs.64,53,674/-, it is seen from the records that these are reimbursement of expenses towards common expenses such as rent, electricity, repairs and maintenance, postage, printing and stationery, staff welfare, telephone, internet charges, etc. and did not contain any mark up on cost. Primafacie, no tax is deductible at source on most of the payments. At the most TDS is CRISIL LIMITED deductible on these payments/ expenses relating to rent expenses of Rs.13,38,133/- and salary expenses of Rs. 23,18,598/-, however it has been stated that, firstly, it is reimbursement of expenses; and secondly, Crisil Ltd., has considered such receipts in its total income and has paid the tax due thereof and furnished the return of income. For this purpose, copy of certification of Chartered Accountant in Form 26A confirming that Crisil Limited has considered such receipts in its total income, paid the tax thereon and furnished the return of income, then no disallowance can be made u/s. 40(a)(ia), the copy of Form 26A has been placed in the paper book before us at page 11-15. We find that this Form 26A was also filed before the ld. CIT(A) alongwith the submission dated 30/10/2019. Once Form 26A has been filed and Chartered Accountant has confirmed that M/s. Crisil Limited has considered the said receipts in total income and has paid the tax thereof and furnished the return of income, then no disallowance u/s.40(a)(ia) can be made in view of the proviso to Section 201. Accordingly, the entire disallowances confirmed by the ld .CIT(A) is deleted.

In the result, appeal of the assessee is allowed. Order pronounced on 9th January,2025.