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February 2016

Business expenditure – Disallowance u/s. 40(a)(ia) – A. Y. 2008-09 – Reimbursment of service charges is not taxable – Tax not deductible at source from such amount – Expenditure cannot be disallowed u/s 40(a)(ia) of the Act

By K. B. Bhujle Advocate
Reading Time 1 mins
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CIT vs. DLF Commercial Project Corporation; 379 ITR 538 (Del):

For the A. Y. 2008-09, the Assessing Officer made an addition of Rs. 19,09,83,236/- u/s. 40(a)(ia), for non deduction of tax at source on reimbursement of expenditure paid to DLF though the latter entity had deducted tax at source on the payments made by it as a facilitator on behalf of the assessee. The Tribunal deleted the addition.

On appeal by the Revenue, the Delhi High Court upheld the decision of the Tribunal and held as under:

“It is undisputed that DLF deducted tax at source on payments made by it under various heads on behalf of the assessee. Further, it is also not disputed that the assessee deducted TDS on the service charges paid by it to DLF on reimbursement expenses. In such circumstances this Court holds that the entire amount paid by the assessee to DLF is entitled to deduction as expenditure.”

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