ACIT, CIRCLE- 3(1), NEW DELHI vs. APCO WORLDWIDE (INDIA) PVT. LTD., NEW DELHI

PDF · subscribers
ITA 5614/DEL/2017Status: DisposedITAT Delhi09 September 2020AY 2013-146 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the payments represented reimbursement of expenses on a cost-to-cost basis and were not subject to TDS under Section 195. Therefore, the disallowance under Section 40(a)(ia) was not attracted.

What were the facts?

The assessee, engaged in consultancy services, claimed group charges of Rs. 1,48,81,966/- paid to overseas group companies. The Assessing Officer (AO) disallowed this amount under Section 40(a)(ia) for non-deduction of TDS.

What were the issues?

Whether reimbursement of expenses to overseas group entities on a cost-to-cost basis requires TDS deduction, and if not, whether such expenses are disallowable under Section 40(a)(ia).

Which sections of the Income-tax Act were involved?

Section 40(a)(ia),Section 195

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI

Before: MS SUSHMA CHOWLA & SH. ANIL CHATURVEDI

For Appellant: Ms. Rakhi Vimal, Sr. D.R
For Respondent: Shri Ajay Vohra, Sr. Adv, Shri Gaurav Jain, Adv
Hearing: 04/08/2020Pronounced: 09/09/2020

ORDER

PER ANIL CHATURVEDI, AM:

1.

This appeal filed by the Revenue is directed against the order dated 07.06.2017 of the Commission of Income Tax (A)-I, New Delhi relating to Assessment Year 2013-14.

ACIT vs. APCO Worldwide (India) Pvt. Ltd. A.Y. 2013-14 2 2. The relevant facts as culled from the material on records are as under:

3.

Assessee is a company which is stated to be engaged in the business of providing management, public relationship consultancy and other similar services to its overseas group companies and to the Indian clients. Assessee filed its return of income for A.Y. 2013-14 on 29.11.2013 declaring loss of Rs.7,33,725/-. The case was taken up for scrutiny and thereafter, assessment was framed u/s 143(3) r.w.s 153 and 153B of the Act vide order dated 23.05.2016 and the total income was determined at Rs.1,41,48,241/-. Aggrieved by the order of AO, assessee carried the matter before CIT(A) who order dated 07.06.2017 in Appeal No.148/16-17 allowed the appeal of the assessee. Aggrieved by the order of CIT(A), Revenue is now before us and has raised the following grounds: “

1. On the facts and in the circumstances of the case, the Ld CIT(A) has erred in deleting the disallowance of Rs.1,48,81,966/- made by the AO u/s 40(a)(ia) of the Income-tax Act, 1961 due to non- deduction of TDS on reimbursement of expenses to overseas group entities.

2. The appellant carves leave to reserving the right to amend, modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal.”

4.

During the course of assessment proceedings, AO noticed that assessee had claimed expenses of Rs.1,48,81,966/- on account of “Group charges”. The assessee was asked to show-

ACIT vs. APCO Worldwide (India) Pvt. Ltd. A.Y. 2013-14 3 cause as to why the aforesaid expenses not be disallowed as the TDS was not deducted while making the payment. Assessee made detailed submission inter alia stating that the aforesaid amount represents the amount paid to various overseas group companies towards recoupment of actual cost incurred by them on behalf of assessee on various corporate administration, finance support, information technology support etc. It was submitted that the amount received by those overseas companies cannot be considered as income of the recipient as no profit element was involved. It was further submitted that with holding of tax was only required when the payment were chargeable to tax in India. It was therefore, submitted that the payments were not subject to deduction of tax u/s 195 of the Act. The submission of the assessee was not found acceptable to AO. The AO was of the view that since the assessee has not deducted tax on group charges paid to non-resident companies, the provision of section 40(a)(ia) are attracted. He accordingly disallowed the amount and made addition of Rs. 1,48,81,966/-. Aggrieved by the order of AO, assessee carried the matter before the CIT(A) who after considering the submission of the assessee, deleted the addition by holding that assessee was not required to deduct TDS on the reimbursement of the expenses made to overseas entities. Aggrieved by the order of CIT(A), Revenue is now before us.

5.

Before us, Learned DR supported the order of AO. Learned AR on the other hand, reiterated the submissions made before the ACIT vs. APCO Worldwide (India) Pvt. Ltd. A.Y. 2013-14 4 CIT(A) and submitted that identical issue arose before the Tribunal in assessee’s own case in A.Y. 2010-11, 2011-12 & 2012-13. He pointed to the copy of the aforesaid orders placed in the paper book and submitted that the Tribunal after noting the fact that the payment made by the assessee represented its share of expenses incurred by the group companies on cost to cost basis and that it being reimbursement and therefore, the assessee was not required to deduct TDS and the applicability of Section 195 does not arise. He stated that there are no change in the fact of the case for the year under consideration and that of earlier years and therefore, no interference to the order of CIT(A) is called for.

6.

We have heard the rival contentions and perused the materials available on record. The issue in the present ground is with respect to disallowance of expenses u/s 40(a)(ia). The expenses were disallowed by the AO for the reason that on the amount of expenses which have been claimed by the assessee, no TDS was deducted by it. We find that CIT(A) has given finding that the assessee was not required to deduct TDS on the reimbursement of the expenses made to the overseas entities as it was on cost to cost basis. We further find that the coordinate Bench of Tribunal while deciding the identical issue in assessee’s own case in A.Y. 2010-11, 2011-12 & 2012-13 has held that the provision of section 195 are not attracted on the amounts paid by assessee to its overseas group Companies as it was mere

ACIT vs. APCO Worldwide (India) Pvt. Ltd. A.Y. 2013-14 5 reimbursement and that no disallowance u/s 40(a)(ia) are attracted. Before us, Revenue has not pointed out any distinguishing features in the fact of the case for the year under consideration and that of earlier years nor has placed any material on record to demonstrate that the order of Tribunal in assessee’s own case for A.Y. 2010-11 to 2012-13 has been set aside/ stayed or overruled by higher judicial forum. In view of the aforesaid facts, we find no reason to interfere with order of CIT(A). Thus ground of appeal of Revenue is dismissed.

7.

In the result, appeal of the Revenue is dismissed. Order pronounced in the open court on 09.09.2020

More judgments on Section 40(a)(ia)

All 7,300 judgments and leading authorities on Section 40(a)(ia) →

Recent GST High Court judgments

Search GST case law →