Muthoot Fincorp Limited Vs JCIT (ITAT Cochin)
ITAT Cochin dismissed Muthoot Fincorp’s appeal, holding that payments under a 5-year consultancy agreement with its group company were part of a composite contract. TDS must be deducted on the full amount including reimbursements, and the second proviso to Section 40(a)(ia) is not retrospective; In Muthoot Fincorp Limited vs JCIT, ITAT Cochin upheld the disallowance of ₹6.01 crore, rejecting the claim that reimbursements were exempt from TDS. The Tribunal ruled that TDS applies on gross contractual payments, following settled SC precedents; Muthoot Fincorp argued for separate TDS treatment of reimbursements, citing prior AY and the second proviso of Section 40(a)(ia). ITAT Cochin held that composite consultancy contracts attract TDS on gross payments and prospective laws cannot be applied retrospectively. Reimbursements cannot be bifurcated from fees under composite contracts, and non-deduction without a certificate under Section 197 is not justified; The Tribunal ruled against Muthoot Fincorp, emphasizing that the principle of consistency does not override statutory TDS obligations under Section 194C and Section 40(a)(ia); Composite Contract Means Composite TDS – ITAT Rejects Claim of Reimbursement Split- Second Proviso to 40(a)(ia) Not Retrospective – ITAT Cochin Rules Against Assessee order dated 22.08.2025
Assessee had entered into a 5-year consultancy agreement with its group entity, Muthoot Pappachan Consultancy & Management Services (MPCMS) and paid ₹7.33 crores during AY 2006-07, out of which TDS was deducted on only ₹1.32 crores. The balance was claimed as reimbursement of expenses without any profit element, on which no TDS was deducted. AO treated the entire payment as contractual charges attracting TDS u/s 194C, relying on CBDT Circular No. 715 (Q.30) which mandates deduction on the gross bill amount including reimbursements & disallowed ₹6.01 crores u/s 40(a)(ia). CIT(A) confirmed the disallowance.
