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III. Direct Taxes Case Laws:
1. CIT Vs. DLF Commercial Project Corporation, I.T.A. No. 507/2013, Date of Order: 15.07.2015, High Court of Delhi
Whether non-deduction of TDS on reimbursement expenses would lead to disallowance of such reimbursement expenditure?
Held: No
Brief facts of the case:
The assessee entered in an agreement with M/s DLF Land Ltd. to carry
out activities like maintenance of books of accounts and getting the
accounts audited, maintenance of secretarial records, filing with
various statutory authorities etc. for which M/s DLF Land Ltd. was
entitled to receive service charges @ 5% of such expenditure. During the
year, assessee reimbursed the company for expenditure incurred on its
behalf and also paid service charges @ 5% on it. Assessee duly deducted
TDS on amount paid to M/s DLF Land Ltd. However, the Ld. AO disallowed
such reimbursement of expenditure u/s 40(a)(ia) for non-deduction of
TDS. The Ld. AO contended that the assessee ought to have deducted TDS
on the total amount reimbursed by it to M/s DLF Land Ltd., and the TDS
actually deducted on service charge does not suffice.
Hon’ble
Delhi high court held that neither provision (194C & 194J) obliges
the person making the payment to deduct anything from contractual
payments such as those made for reimbursement of expenses, other than
what is defined as “income”. The court relied on its ruling in
Industrial Engineering Projects Pvt. Ltd 202 ITR 1014 (Delhi) where it
was specifically held that “reimbursement of expenses can, under no
circumstances, be regarded as revenue receipt” and therefore, it is not
liable to income tax. Further, the court also relied upon the Supreme
Court’s decision in CIT v. Tejaji Farasram Kharawalla Ltd., [1968] 67 ITR 95 (SC),
where it was held by the apex court that it is only the amount that
exceeds the expenditure incurred by the agent that would be liable to
tax.
In the result assessee’s appeal is allowed.
(Please click here for judgment)
2. CIT Vs. M/s Dalmia Dyechem Industries, I.T.A. No. 1396/2013, Date of Order: 06.07.2015, High Court of Bombay
Penalty
u/s 271(1)(C) of the Income Tax Act, 1961 cannot be levied merely
because the claim of the assessee is found to be incorrect unless it is
confirmed that the assessee had any mala fide intention.
Brief facts of the case: The
Ld. AO disallowed proportionate interest out of the interest paid for
the borrowed funds and interest free advances given to sister concern.
The matter was upheld by CIT(A) but restored back to the LD. AO by
Hon’ble ITAT. Upon remand, the Assessing Officer again disallowed the
proportionate interest, penalty u/s 271(1)(c) is also levied but no
notice issued to the assessee for such penalty.
Hon’ble
high court held that penalty can be imposed if the authority is
satisfied that any person has concealed particulars of his income or
furnished inaccurate particular of such income. The Ld. AO while
imposing penalty has not rendered a conclusive finding that there was an
active concealment or deliberated furnishing of inaccurate particulars.
Hon’ble High Court placed reliance on the decision of Hon’ble Supreme
Court in the case of CIT v. Reliance Petroproducts Pvt. Ltd. [2012] 322 ITR 158,
where it was held that “the plain language of provision shows that, in
order to be covered by this provision there has to be concealment and
that the assessee must have furnished inaccurate particulars. The Apex
Court held that by no stretch of imagination making an incorrect claim
in law, would amount to furnishing inaccurate particulars”
In the result the appeal of revenue is dismissed.
(Please click here for judgment)
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