Case Law Details
DCIT Vs Pfizer Products (India) Pvt Ltd. (ITAT Mumbai)
In terms of the agreement with M/s. Pfizer Ltd., assessee was sharing services of certain employees and other facilities which belonged to M/s. Pfizer Ltd. The reimbursement of such expenses due or paid to M/s. Pfizer Ltd. amounts to Rs.14,51,77,000/- and has been included under the aforesaid expenditure heads in the account books of the assessee. Detailed explanation has been filed by the assessee for each of the heads of expenditure and a common point is that the same was on account of reimbursement towards the expenses incurred by M/s. Pfizer Ltd. for and on behalf of the assessee. The aforesaid factual assertions of the assessee have been accepted by the CIT(A) by referring to the terms and conditions of the agreement with M/s. Pfizer Ltd. In para 1.3.2 of his order, the CIT(A) records the confirmation by M/s. Pfizer Ltd. that it had deducted tax at source at the appropriate rates on the payments made to outside vendors/employees wherever applicable and also the fact that M/s. Pfizer Ltd. has not claimed any deduction for the expenditure in question. As a consequence, the CIT(A) has proceeded to conclude that in the absence of any element of income embedded in the reimbursement of expenses to M/s. Pfizer Ltd., there was no requirement of deducting tax at source. Quite clearly, payments by way of reimbursement of expenses incurred on behalf of the payer cannot be construed as income chargeable to tax in the hands of the payee, a proposition which is approved by the Hon’ble Bombay High Court in the case of CIT vs. Siemens Aktiongesellsch aft (supra). Moreover, in a similar situation, the Mumbai Bench of the Tribunal in the case of Bayer Material Science Pvt. Ltd. vs. Addl CIT, (2012) 134 ITD 0582 has noted that where the cost sharing agreement envisaged exact reimbursal of the costs without any mark-up or margin, there was no element of income in the hands of the payee so as to require the payer to deduct tax at source. In our considered opinion, having regard to the fact-situation brought out by the CIT(A), which is not assailed, the ratio of the decision of the Mumbai Bench of the Tribunal in the case of Bayer Material Science Pvt. Ltd. (supra) as well as the reasoning approved by the Hon’ble Bombay High Court in the case of CIT vs. Siemens Aktiongesellsch aft (supra) clearly supports the conclusion drawn by the CIT(A) that there was no default on the part of the assessee in not deducting tax at source on the impugned payments to M/s. Pfizer Ltd. In this view of the matter, we, therefore, find no reasons to interfere with the ultimate conclusion of the CIT(A) in setting-aside the disallowance made by the Assessing Officer by invoking Sec. 40(a)(ia) of the Act. Thus, on this aspect, Revenue fails in its appeal.
FULL TEXT OF THE ITAT JUDGEMENT
This is an appeal filed by the Revenue. The relevant assessment year is 2006-07. The appeal is directed against the order of the Commissioner of Income Tax (Appeals)-22, Mumbai [in short ‘CIT(A)’] and arises out of assessment completed u/s 143(3) r.w.s. 254 the Income Tax Act 1961, (the ‘Act’).
2. The grounds of appeal filed by the Revenue read as under :
Please become a Premium member. If you are already a Premium member, login here to access the full content.
