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Income Tax Appellate Tribunal - Hyderabad

Income Tax Officer, Ward-17(2), ... vs Fusol Advisory Services Private ... on 20 February, 2019

             THE INCOME TAX APPELLATE TRIBUNAL
              HYDERABAD BENCH "B", HYDERABAD

      BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER
     AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER

                     ITA No. 1581/Hyd/2018
                    Assessment Year: 2013-14

Income-tax Officer, Ward -        vs.    Fusol Advisory Services Pvt.
17(2), Hyderabad.                        Ltd., Secunderabad.

                                         PAN - AABCF1490M

          (Appellant)                             (Respondent)

                     Revenue by :        Shri Phani Raju
                    Assessee by :        Shri M.V. Anil Kumar

                Date of hearing   :     07-02-2019
        Date of pronouncement     :     20-02-2019

                             O RDE R
PER S. RIFAUR RAHMAN, A.M.:

This appeal filed by revenue is directed against the order of CIT(A) - 5, Hyderabad, dated 11/05/2018 for AY 2013-14 wherein the revenue has raised the following grounds of appeal:

1. The learned CIT{A) has erred both in law on facts of the case.

2. The learned CIT{A) erred in allowing the appeal of the assessee holding that the amount of Rs 72,73,534/ - is not liable for TDS ignoring CBDT circular no.715 dated 08.08.1995 according to which, TDS should be deducted on total payment including reimbursement of expenses.

3. The learned CIT(A) erred in allowing the appeal of the assessee without considering the judgment of Delhi bench of the tribunal in the case of ITO Vs Dr.Wilmar Schwabe India (P) ltd [2005] 95TTJ 53(Del) wherein it was held that TDS need not to be deducted in respect of reimbursement of expenses where the consultant had raised a separate bill for such expenses.

However, in the present case, no separate bill was raised for such expenses, hence liable for TDS.

Fusol Advisory Services Pvt. Ltd., Sec'bad.

4. Any other ground{s) that may be urged at the time of hearing."

2. Brief facts of the case are that the Assessee a Company dealing in man power supply to software companies, filed its Return of Income for the A.Y. 2013-14 on 30.09.2013 admitting total income of Rs. 1,25,620/-. The Return of Income was taken up for scrutiny under CASS. The Assessing Officer, during the course of verification of expenditure, observed that the a ssessee company made payment of Rs. 81,58,808/- under the head 'Operating Expenses' to one M /s. Adecco Flexione Workforce Solutions Ltd., without effecting TDS on the said payment. As the assessee did not produce Form No 26A as per Rule 31ACB of the Income Tax Rules, the Assessing Officer disallowed an amount of Rs. 72,53,534 /- paid to M/s Adecco Flexione Workforce Solutions Ltd.

3. Aggrieved by the order of AO, the assessee preferred an appeal before the CIT(A).

4. The CIT(A) following his predecessor's decision in assessee's own case for AY 2011-12, (which was upheld by the ITAT in ITA No. 369/Hyd/2017 dated 16/02/2018), allowed the appeal of the assessee.

5. Aggrieved by the order of CIT(A), t he revenue is in appeal before us.

6. Considered the rival submissions and perused the material on record. Similar issue came up for consideration before the coordinate bench of this Tribunal in assessee's own case for AY 2011-12, wherein the coordinate bench has held as under:

"7. We have heard both the sides, perused the record, gone through the orders of the authorities below. The only issue involved in this appeal is whether the amount of Rs. 1,43,36,108/- paid by the assessee constitutes 'reimbursement of expenses' or 'salaries'. According to the assessee, there is an agreement between the assessee-company and M/s. Adecco Flexione Workforce Solutions Pvt Ltd. The said company, M/s. Adecco Flexione Workforce Solutions Pvt Ltd., agreed to supply employees to the assessee and the assessee-company has to reimburse the salaries and pay the service 3 ITA No. 1581 /Hyd/2018 Fusol Advisory Services Pvt. Ltd., Sec'bad.

fees to M/s. Adecco Flexione Workforce Solutions Pvt Ltd., apart from statutory dues like Service Tax. The Ld. CIT(A) examined the said agreement at length and gave a finding that according to clause-(b) of the agreement, the amount paid by the assessee to M/s. Adecco Flexione Workforce Solutions Pvt Ltd., is 'reimbursement of expenses' and not 'salaries'. In so far as the case law relied upon by the Ld. CIT(A) i.e., the decision of Hon'ble Bombay High Court in the case of CIT vs. Siemens Aktonogesellschaft(supra) is relevant for the proposition that payment by way of reimbursement of expenses incurred on behalf of payer is not income chargeable to tax in the hands of the assessee. In the case of CIT vs. Industrial Engineering Products (P) Ltd (supra), Hon'ble Delhi High Court held that reimbursement of expenses can, under no circumstances, be regarded as revenue receipt. As well, in the case of CIT vs. DLF Commercial Project Corp (supra), Hon'ble Delhi High Court observed that the reimbursement of expenses do not have the character of income, there is no obligation to deduct TDS. By following the ratios laid down by various High Courts (supra), Ld. CIT(A) has held that the assessee is not under obligation to deduct TDS. Relevant para from the CIT (A)'s order is extracted as under:-

"In the case of assessee, perusal of invoices show that the salaries, service fee, service tax and education fees are raised in a consolidated invoice. Out of the total expenditure of Rs. 1,48,58,752/-, the service fees constitutes Rs. 5,22,644/- and is therefore, liable for deduction of tax. The remaining amount is the reimbursement of salary and statutory payment. In the instant case, which was reimbursement by the assessee, was the actual salary of the deputed personnel. Therefore, for each deputed personnel, the amount received by it was income chargeable under the head salary. In the case of ASK Wealth Advisories Pvt Ltd., it was held that where no tax would be deducted at source in respect of expenditure incurred by holding company and no disallowance could be made with reference to such expenditure in hands of subsidiary company while reimbursing same to holding company."

8. Thus, considering the facts and circumstances of the case as well as by following the ratios laid down by the various High Courts (supra), Ld. CIT(A) held that the assessee is not liable to deduct TDS. Therefore, we find no infirmity in the order passed by the Ld. CIT(A) and the same does not call for interference."

As the issue in this AY IS similar to AY 2011-12, following the decision therein, we uphold the order of CIT(A) and dismiss the grounds raised by the revenue.

Fusol Advisory Services Pvt. Ltd., Sec'bad.

7. In the result, appeal of the revenue is dismissed.

Pronounced in the open court on 20 th February, 2019.

                Sd/-                                 Sd/-
       (P. MADHAVI DEVI)                     (S. RIFAUR RAHMAN)
       JUDICIAL MEMBER                      ACCOUNTANT MEMBER

Hyderabad, Dated: 20 th February, 2019.
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Copy to:-

1) The ITO, Ward - 17(2), 9 th Floor, Signature Towers, Kondapur, Hyderabad - 500 084

2) M/s Fusol Advisory Services Pvt. Ltd., 78, P&T Colony, Vikrampuri, Secunderabad - 500 009.

3) CIT(A) - 5, Hyderabad.

4) Pr. CIT - 5, Hyd.

5) The Departmental Representative, I.T.A.T., Hyderabad.

6) Guard File