TDS u/s 195 not deductible as payment to sister concern in USA is purely reimbursement of expense

DCIT Vs Trusted Aerospace Engineering Pvt Ltd (ITAT Chennai)

ITAT Chennai held that there is no obligation to deduct tax at source u/s 195 of the Income Tax Act as payment made to sister concern in USA is purely reimbursement of expense and doesn’t involve any element of income.

Facts- The sole grievance of the Revenue in this appeal is against order of the Ld.CIT(A) in deleting disallowance made by the ld. Assessing Officer amounting to Rs.4,95,20,000/- u/s.40(a)(ia) of the Act, by overlooking the fact that remittance was made towards fee for technical services chargeable to tax u/s.9((1)(vii) of the Act.

Conclusion- We notice that in the alleged payments made by the assessee to its sister concern TASE USA, there is no element of income and it is purely re­imbursement of expenses and as held by the Hon’ble Supreme Court in the case of GE India Technologies Pvt. Ltd. Vs. CIT, obligation to deduct tax at source u/s 195 of the Act does not arise at the moment the payment is made to a non­resident but arises only when such remittances is a sum chargeable to Income Tax u/s 4, 5 and 9 of the Act, the same ratio applies on the facts of the instant case and, therefore, no tax was deductible by the assessee company on the alleged payments.

FULL TEXT OF THE ORDER OF ITAT CHENNAI

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