No TDS required on reimbursement of the cost of air-tickets and hotel billing: ITAT

In the matter of Mitsubishi Electric Automotive vs ACIT Delhi Income Tax Appellate Tribunal has held that no TDS u/s 195 is required to be deducted on reimbursement of the cost of air-tickets and hotel billing without having any profit element.

In this case total payments of Rs.2,51,66,612 was made to to Mitsubishi Corporation, Japan towards installation charges. The assessee had deducted tax on an amount of Rs.1,65,39,326 by treating it as FTS. However, on balance amount of Rs.86,27,286, the assessee had not deducted any tax on the plea that these are purely reimbursement of cost of air-tickets and hotel billing without having any profit element. From the sample copies of the bills/invoices raised on the assessee, it is observed that in so far as air-tickets and hotel bills are concerned, the payee has raised separate invoices which do not comprise of any amount charged towards installation of equipments. The perusal of invoices clearly indicates that they are towards reimbursement of cost on actual basis without any profit element embedded therein. Therefore, view of tribunal, no part of such expenditure/cost incurred can be apportioned towards technical services and thus assessee was not required to withhold tax under Section 195 of the Act on such expenditure.

Can Depreciation on Capital Expenditure disallowed for Non-Deduction of TDS?

Tribunal Further stated that even otherwise also, the amount in dispute was not claimed as revenue expenditure by the assessee. Rather, the assessee had capitalized the amount in its accounts and has claimed depreciation. In such a scenario, the issue arising for consideration is whether section 40(a)(i) of the Act would be applicable.

Section 40(a)(i) of the Act provides for disallowance only in respect of expenditure which are revenue in nature. Therefore, the provision does not apply to a case of the assessee whose claim is for depreciation.

Tribunal relied on decision of the decision of Hon’ble Karnataka High Court in PCIT vs. Tally Solution Pvt. Ltd. (supra). in this matter

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