Income Tax Update-No TDS on Reimbursement of expenses

In income tax act, there is practice not to deduct TDS on reimbursement of expenses, if there is no income element.  However, time and again assessing officers try to add reimbursement of expenses to income of the assesse

In recent judgement,  same view was upheld by  ITAT Kolkata in case of Assistant Commissioner of Income Tax vs Devendra Kumar Dugar

Below are the facts of the case.

View of the Department

Assessing officer disallowed the expense of INR 49.5 Lacs for assessment year 2009-2010 on following grounds:

• The payment on account of reimbursement expenses made by the assesse to its vendor was shown as income in the books of vendor and relevant expenditure was claimed
• The assesse was not able to produce the supporting for the reimbursement
• The nomenclature of the payment made by the assesee to its vendor was changed in assessment year 2009-2010

View of the Assessee

• Income tax was duly deducted on transactions wherever services was availed
• Many of the disallowance made by Assessing officer are towards utilities expenses, which is not covered in scope of TDS
• Vendor incurred expense on behalf of the assessee, therefore no TDS will be applicable

View of the ITAT

ITAT referring to other cases in this matter concluded that when there is no element of income and there is mere reimbursement made there is no question of deduction of tds