No TDS on Cost paid to Holding Company on Reimbursement of Mobilisation and Demobilisation: ITAT [Read Order]

The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has held that Tax Deducted at Source (TDS) would not be applicable on cost paid to holding companies on reimbursement of mobilisation and demobilisation.

The assessee, Van Oord ACZ India Pvt. Ltd. was a resident corporate entity, wholly owned subsidiary of Van Oord ACZ BV, Netherlands (VOAMC). As stated, the assessee was engaged in the business of dredging, contracting reclamation and marine activities.

For the assessment year under dispute, the assessee filed its return of income declaring loss, after claiming deduction in respect of reimbursement of mobilisation and demobilisation cost of dredgers incurred by holding company on behalf of the assessee.

While framing the original assessment under Section 143(3) of the Income-tax Act, 1961 the Assessing Officer disallowed the amount representing reimbursement of mobilisation and demobilisation cost paid to the holding company.

Neeraj Jain, on behalf of the assessee submitted that the assessee holding company was not liable to pay any tax in India, had been accepted by Income Tax Authorities. Therefore, there was no requirement to deduct tax at source.

Virendra Singh, appeared on behalf of the revenue.

The two-member bench of G.S. Pannu (President) and Saktijit Dey (Judicial Member) allowed the appeal and deleted the disallowance made under Section 40(a)(i) of the Income Tax Act holding that there was no legal obligation under section 195(1) of the Income Tax Act on the assessee to deduct tax at source under Section 195(1) of the Income Tax Act on the reimbursement of mobilisation and demobilisation cost to the holding company (VOAMC).

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