(2010) TIOL 545 ITAT (Mum.)
Utility Powertech Ltd. v.
ACIT
A.Y. : 2005-06. Dated :
19-4-2010
9. S. 40(a)(ia) — When there
is no element of income and the payment is only as a reimbursement of expenses
incurred by the payee, then no disallowance can be made u/s. 40(a)(ia).
Facts :
The assessee-company, a
joint venture between BSES Ltd. and NTPC Ltd., was engaged in the business of
undertaking construction, erection, renovation, modernisation and other project
management activities in the power sector. The AO noted that the assessee had
made payment of Rs. 12,00,000 being office rent and Rs. 7,66,246 being office
upkeeping expenses to Reliance Energy Ltd. The assessee deducted TDS on payment
made towards office rent, but did not deduct tax from payment towards
office upkeeping. The AO disallowed Rs. 7,66,246 u/s.40(a)(ia).
Aggrieved the assessee
preferred an appeal to the CIT(A) who confirmed the disallowance made by the AO.
Aggrieved, the Revenue
preferred an appeal to the Tribunal.
Held :
The Tribunal noted that the
AO has not given a finding that the expenses for office upkeeping were revenue
receipt in the hands of Reliance Energy Ltd. and not a pure reimbursement of
expenses. The Tribunal, following the decision of the Bombay High Court in the
case of CIT v. Siemens Aktiongesellschaft, (2008 TIOL 569 HC-Mum.), held that it
is a settled proposition that when there is no element of income and the payment
is only a reimbursement of expenses incurred by the payee, then no disallowance
can be made u/s.40(a)(ia). It decided the ground in favour of the assessee and
against the Revenue.