Reimbursement of Expenses can’t be treated as Income, No TDS: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT), Chennai bench has held that the reimbursement of expenses cannot be treated as income and therefore, the provisions of TDS cannot be applicable to those payments for the purpose of the Income Tax Act, 1961.

The assesseeis engaged as a dealer in Basmati Rice. In an assessment framed u/s 143(3) on 28.07.2006, the assessee was, inter-alia, saddled with addition of Rs.18.46 Lacs being contract receipts not offered to tax. During appellate proceedings, the assessee submitted that these amounts were received from its principal M/s Satnam Overseas Ltd. towards reimbursement of expenses.

While allowing the plea of the assessee, Judicial Member Mr. V Durga Rao and Accountant Member Manoj Kumar Agarwal found that the assessee has claimed various expenditure from its principal by way of reimbursement.

While allowing the appeal, the two-member bench held that “the copies of relevant bills as well as credit notes issued by M/s Satnam Overseas Ltd. in favor of assessee has also been placed on page nos. 38 to 83 of paper-book. The statement of TDS deducted by assessee’s principal is also on record. Upon perusal of copies of financial statements as placed on record, it could be noted that the Profit & Loss Account has been credited as well as debited for the amount incurred by assessee on behalf of its principal. All these overwhelming evidences, in our considered opinion, support the case of the assessee and there is no concealment of income as alleged by lower authorities. The TDS may have been deducted by the principal while reimbursing the payment to the assessee, nevertheless, the same were mere reimbursements and could not be held to be the income of the assessee from any angle.”

To Read the full text of the Order CLICK HERE

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