ITAT disallows grossing up of TDS deducted on interest paid to AE

Lite-on Mobile India Pvt. Ltd. Vs DCIT (ITAT Chennai)

Facts- TPO in respect of procurement of management services determined NIL arm’s length price by holding that the assessee didn’t bring any evidence on record to suggest that it was in need for services for which it has paid to its AEs. Further, assessee has availed ECB loan from the related parties and paid interest. Assessee grossed up interest payment for TDS portion. TPO has disallowed grossing up of TDS deducted stating that the same is not allowed as deduction u/s 40A(2).

Conclusion- We are of considered view that the assessee has failed to bring on record any evidences to justify the payment of management fees. In our view, the procedure followed by the assessee for grossing up of interest is contrary to agreement between the parties and also contrary to provisions of law. Therefore, we are of the considered view that there is no error in the reasons given by the learned TPO or DRP in disallowing the grossed up portion of TDS deducted on interest paid to AE on External Commercial Borrowings. Hence, we are inclined to uphold findings of the learned DRP and reject ground taken by the assessee

FULL TEXT OF THE ORDER OF ITAT CHENNAI

Please become a Premium member. If you are already a Premium member, login here to access the full content.