The Delhi Bench of Income Tax Appellate Tribunal has held that the payment towards social security schemes outside India for Expat employees would not come under salary and no Tax Deduction at Source (TDS) shall be applicable.
The assessee RATP Dev Transdev filed a return for the Assessment Year 2012-13 declaring the loss. The notice u/s 143(2) of the Act followed by notice u/s 143(2)/143(2)(1) of the Act Income Tax Act 1961 were issued. The assessment order came to be passed on 25/03/2015 by making an addition being difference between receipts as per 26AS and as per books of accounts/audited accounts, was income of the assessee u/s 28 of the Act,
AO also disallowed the miscellaneous expenses of car running and maintenance disposal and also disallowed under Section 40(a)(ia) of the Act due to non-deduction of tax at source on salary paid to expats.
The Commissioner of Income Tax (CIT(A)) partly allowed the appeal by deleting the disallowance made by the A.O. u/s 68 of the Act and also deleted the disallowance made by under Section 40(a)(ia) of the Act on non-deduction of the tax at source.
Alkesh Babbar,on behalf of the revenue submitted thatCIT(A) had committed an error in deleting the disallowance made by the A.O. under Section 28 and 40(a)(ia) of the Act on account of deduction of tax at source on amounts paid for its expat employees and relied on the assessment order.
K. K. Mishra, on behalf of the assessee, relied on the order of the Ld.CIT(A).
B. R. R. Kumar (Accountant Member) and Yogesh Kumar U.S. (Judicial Member) dismissed the appeal filed by the revenue observing that,
“In our considered opinion, the social security contributions do not constitute income from salary in the hands of expatriate employees and the employees do not have any right over such contributions. The same will not take care of the character of salary in the year of contribution. Therefore, in our opinion, the deletion of the disallowance made by the CIT(A) to the tune of Rs. 63,57,485/- made by the A.O. u/s 40(ia) of the Act on account of non-deduction of tax at source on amounts paid for the expat employees.”
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