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Income Tax Appellate Tribunal, DELHI BENCH “F”: NEW DELHI
Before: SHRI AMIT SHUKLA & SHRI L.P. SAHU
O R D E R PER AMIT SHUKLA, J.M.:
The aforesaid appeal has been filed by the revenue against impugned order dated 24.7.2015, passed by Ld. CIT (Appeals) 1, New Delhi for the quantum of assessment passed u/s 143(3) for the assessment year 2011-12. In the grounds of appeal revenue has raised following grounds: -
1. “Deleting the addition of Rs. 46,51,183/- and Rs. 52,55,755/- made by the AO on A/c on non deduction of TDS u/s 40(a) (ia) of Income Tax Act, 1961.
2. Admitting additional evidence in violation of Rule 46A (3) of Income Tax Rules, 1962.”
The facts in brief are that assessee is a wholly owned subsidiary of Aida Greater Asia Pte Ltd., which is a Singapore based company engaged in manufacturing of press machines and stamping machines. Aida presses are used to manufacture a broad range of items including automobile components, appliances parts, electric and electronic components, connectors, terminals and motor laminators. The assessee company is engaged in trading of machine spare parts and provides technical and after sales support service related to its holding company and their customers. AO has made disallowance u/s 40(a)(ia) for sums aggregating to Rs. 46,51,183/- on account of non deduction of TDS for remittances made to the parent company and also disallowed sum of Rs. 52,55,755/- on various remittances made to the parent company. Ld. AO in the assessment order has observed that on various dates and notices issued, there has been no response by the assessee and even on specific queries raised; the assessee could only give part replies. Due to non compliance he has made the said disallowances.
Before the Ld. CIT (A) assessee submitted that all these payments where in the nature of reimbursement of expenses and the actual cost of these expenses have been recovered from Aida 2 India Private Limited. Ld. CIT (A) in so far as disallowance for sums aggregating to Rs. 46,51,183/- is concerned, after taking into consideration the facts and material placed before him observed that these expenses were incurred by the holding company on behalf of the assessee during the year on account of travelling, hotel, conveyance charges, boarding and lodging of the employees deputed to India for providing after sale services. Since assessee has reimbursed these expenses to the parent company for which Form No. 275 of 15CA & CB were filed, therefore, no TDS was required to be deducted. Out of the said disallowance, it was also noted by him that to the extent of Rs. 23,84,841/-, in fact there was no such reimbursement made to the holding company and to reach to this conclusion he also perused the copy of the ledger account of the assessee company as well as the bank statement. Based on these facts, he has deleted the said addition.
In so far as the disallowance of Rs. 52,55,755/-, the said addition had three components, viz.,: (a) Rs.25,92,931/- :- Reimbursement towards payment of custom duty on used machines imported from Aida Stamping Pte Ltd. Singapore. (b) Rs.10,41,111/- :- Reimbursement of purchase of assets and payment of custom duty. (c) Rs.16,21,713/-:- Refund of advance received from the parent company against sales commission.
Ld. CIT (A) noted that assessee has filed Form No. 105 of Form 15CA for which the amount of Rs. 25,92,931/- was remitted to the parent company which is mentioned as reimbursement towards expenses and has also perused the copy of bank statement, copy of the bill of entry and credit note; and for other reimbursement also he has perused the bank statement and copies of bills and vouchers. The relevant observations and finding of the Ld. CIT (A) reads as under:- “In support of its contention, the appellant has filed Form No. 105 of Form 15CA through which the amount of Rs.25,92,931/- was remitted to the parent company. In this form it is mentioned that amount is being reimbursed towards expenses. The appellant has also filed copy of bank statement and copy of the bill of entry and credit note issued by Aida Stamping Pte Ltd. Singapore who has paid custom duty on behalf of the appellant company to the extent of Rs.25,92,931/- in favour of appellant company. The copies of the import duty and credit notes are filed at page 65-85 of the paper book. The appellant has also reimbursement Rs.10,41,111/- towards reimbursement of expenses. This reimbursement has been made towards purchase of assets by Aida Stamping Pte Ltd. Singapore on behalf of the appellant company. The copy of the tax invoice is placed at page 51-52 of the paper book. The appellant has also filed copies of other vouchers which are related to payment of office rental, renovations and purchase of fixed assets which are placed from page 51-64 of the paper book. Since this reimbursement is towards the 4 expenditure incurred by the parent company, therefore, TDS was not required to be made u/s 195 of the I.T. Act and the same was not required to be disallowed u/s 40(a)(ia) of the I.T. Act. The payment of Rs.16,21,713/- relates to the refund of advance commission received by the appellant company. In support of its contention, the appellant has filed copy of bank statement, FIRC which proves that money was received in HDFC Bank A/c on 17.12.2009 which was repaid on 05.05.2010 through MIZUHO Corporate Bank Ltd. The copy of the bank statement of the Mizuho Bank is placed in the file. From the above facts, it is clear that there was no sales commission payment to parent company or any other agent and it was remittance towards reimbursement of expenses incurred by the parent company on behalf of the appellant company and refund of the advance sales commission received by the appellant company in December 2009. Hence, the disallowance made by the AO was not justified and same is deleted.”
Before us, Ld. Counsel submitted that the assessee before the AO had filed following documents:- a. Form 15CB/CAs for the aforesaid amounts b. Bank statement of the assessee c. Details of related party transactions d. Details and invoices for fixed asset additions
He further submitted that the Ld. CIT (A) has perused the nature of the expenditure and also Form 15CA to come to the conclusion that these are purely reimbursement for which no TDS was required to be deducted.
On the other hand, Ld. DR submitted that Ld. CIT (A) has admitted additional evidence in violation of Rule 46A (3)and all these details were not made available to the AO by the assessee during the course of the assessment proceedings, accordingly matter should be remanded back to the file of the AO for examining the nature of reimbursement.
After considering the rival submissions and on perusal of the relevant finding given in the impugned orders and the material placed before us, it is seen that in the assessment order AO has observed that assessee had not provided the details as required from time to time and there has been no response on behalf of the assessee in compliance to various notices issued by him. It is for this reason he has made disallowance u/s 40(a)(ia) for sums aggregating to Rs. 46,51,183/- and sums aggregating to Rs. 52,55,755/- by treating the payment made to the parent company outside India liable for TDS. The assessee’s case has been that the nature of entire payment in dispute was purely reimbursement of expenses, therefore, no TDS was required to be deducted. The reason for deletion by the Ld. CIT (A) can be tabulated in the following manner:-
S.No. Amount Reason for deletion (Rs.) 1 22,66,342 The payment is in the nature of traveling, hotel, conveyance charges, boarding and lodging of employees deputed to India. No TDS is required on reimbursement of expenses. Form 15CA also mentions reimbursement of expenses 2 23,84,841 No payment was actually made. Form 15CA was filed, but the remittance was disputed by the assessee. 3 25,92,931 Reimbursement of custom duty on machinery to Aida Singapore 4. 10,41,111 Reimbursement towards purchase of fixed assets 5. 16,21,713 Refund of advance received from holding company