NO TDS APPLICABLE ON REIMBURSEMENT OF ACTUAL CAB EXPENSES
The Income Tax Appellate Tribunal (ITAT), Bangalore Bench held that no TDS is applicable on the reimbursement of the actual cab expenses.
The appellant firm, M/s. Sri Balaji Prasanna Travels which is engaged in providing vehicles on hire, filed its return of income declaring income. The appellant’s case was selected for scrutiny and notices were served on it.
The A.O. observed from the profit and loss account that the appellant had not incurred payment towards drivers. The AO therefore held that the appellant was hiring the cars along with the drivers and accordingly, the provisions of section 194C and not section 194I were applicable in the appellant’s case.
However, as the appellant had not deducted TDS on payments above Rs.30,000, the AO disallowed 30% of such payments totaling Rs.4,22,22,161, invoking the provisions of section 40(a)(ia).
Accordingly, the A.O. made a disallowance of Rs.1,26,66,648 being the vehicle hire charges on which TDS had not been deducted. The issue raised in this case was in respect of disallowance of reimbursement of petrol and diesel charges on hired vehicles.
The assessee shown these expenses as reimbursement of petrol and diesel expenses on hired vehicles, which does not have any element of profit and paid directly to the petrol bunks and not to the cab owners. This cannot be subject to TDS and there is no applicability of section 40(a)(ia) of the Act.
On the other hand the Departmental submitted that the claim of the assessee that petrol and diesel expenses were in the nature of reimbursement is also not acceptable for the reason that the provisions of TDS get attracted even in the case of reimbursement.
The Coram headed by the Vice President, N.V. Vasudevan and Accountant Member Chandra Poojari observed that as agreed by and between the assessee and the cab owners, a vehicle was to be provided by the assessee to the parties and thus, the assessee was to bear the vehicle expenses actually incurred by the said cab owners and which will be reimbursed by the parties concerned.
If bills for such expenses incurred by the said cab owners were separately raised by them on the assessee in addition to bills for hire charges and since the amount of bills so raised was towards the actual expenses incurred by them, there was no element of any profit involved in the said bills, the ITAT added.
The tribunal said that it is a clear case of reimbursement of actual expenses incurred by the assessee and the same, therefore, was not of the nature of payment covered by section 194C of the Act requiring the assessee to deduct tax at source therefrom, where bills were raised separately by the cab owners for reimbursement of actual expenses incurred by them.
Therefore, the ITAT held that the provisions of section 194C of the Act were not applicable to the reimbursement of actual expenses and the assessee was not liable to deduct tax at source from such reimbursement. Accordingly, the AO is directed to verify the claim of the assessee.
Copyright © 2019 - All Right Reserved