By TIOL News Service

KOCHI, NOV 16, 2016: THE ISSUE IS - Whether transactions of 'hire purchase' & 'reimbursement of expenses', would attract the provision of TDS u/s 194C. NO IS THE VERDICT.

Facts of the case:

The assessee had claimed an expenditure of Rs.1,14,07,877/- under the head plant repairs. According to the AO the assessee firm is liable to deduct tax on this expenditure paid. According to the AO the assesses is having the contract for processing, freezing and storing the marine products for export by the firm, which are mentioned in the agreement. According to the AO, one each of the bill raised item wise charges under various heads are mentioned. The AO concluded that this is the nature of work and on this the assessee is liable to deduct tax at source. Further, she concluded that bills raised by M/s. Geo Acquatic is a consolidated one and hence on the entire amount of tax has to be deducted u/s 194C.The CIT(A) held that the amount paid as plant repairs to M/s. Geo Acquatic (P) Ltd. represent the reimbursement of expenses and hence no tax was deductable at source.

On appeal, the ITAT held:

++ the split up given by the assessee has to be read in conjunction with clause 3(b) to (h) of the agreement. It would be clear that payments are in nature of reimbursement of expenses. Following the decision of ITAT Delhi, and the decision of Kerala High Court, we hold that the payment made to M/s. Geo Acquatic, debited under the head plant repairs does not attract TDS liability;

++ on the issue of deletion of clearing and forwarding charges paid to M/s. Al Mustafa agencies without deduction of tax, the above payments pertains to payment made to statutory authorities, labourers and trailer rent on behalf of the assessee and none of them have accrued to the agent. Accordingly, this payment will not be liable to tax deduction. The assessment order is also not clear or the AO has not quantified what are the exact charges paid;

++ on the issue of deletion of addition made out of vehicle loan hire charges of Rs.3,61,136/- without deduction of tax, This is mainly paid to M/s. Sundaram Finance. Here also this is paid as EMI along with principal payment. Therefore the provisions of TDS are not applicable.

(See 2016-TIOL-1957-ITAT-COCHIN)