TDS not applicable on Seconded Employees If the Same is Deducted by Holding Company: ITAT [Read Order]

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TDS - Company - ITAT - AO - Taxscan

The Income Tax Appellate Tribunal (ITAT), Mumbai Bench while remitting the matter back to AO ruled that the TDS not applicable on seconded employees if the same is deducted by holding Company.

The only issue challenged by the assessee, Hexagon MIDCO India Private Limited, was against the order of CIT(A) confirming the disallowance made by Assessing Officer in regard to reimbursement of salary cost paid to its associate party on the ground that no taxes have been withheld by invoking the provisions of section 40(a)(ia) of the Act.

The Assessing Officer as well as CIT(A) during the course of assessment proceedings and appellate proceedings noted that the assessee has made payment to its holding company MIDCO Ltd under the head salary but no TDS was deducted. The Assessing Officer noted that the employees on the payroll of the holding company were deputed for working in the assessee company and the cost of the said employees was reimbursed to the holding company without deduction of TDS.

The assessee contended that the cost of salary was reimbursed of actual salary without any markup and as the TDS was deducted by the holding company with the MIDCO company on the salary component. Therefore, the assessee claimed that no additional TDS was deducted but the assessee failed to provide the details before the Assessing Officer as well as before CIT(A), hence, the lower authorities made disallowance and confirmed the disallowance by invoking the provisions of section 40(a)(ia) of the Act.

The coram headed by the Vice President held that once the holding Company MIDCO Limited has deducted TDS on salary to seconded employees, the assessee is not required to deduct TDS on the same salary because there is no markup.

Therefore, the ITAT remitted the the issue back to the file of the Assessing Officer just for the purpose of verification that the holding company MIDCO Limited is deducted the TDS and the assessee is able to prove that the holding company MIDCO Limited has deducted the TDS then no disallowance is to be made but assessee has to produce the evidence before the Assessing Officer.

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