Section 263 - Debatable Issue
A. Tax is not required to be deducted from reimbursement of actual expenses under any of the provisions of the Act
B. Once it is a debatable issue, provisions of section 263 of the Act, i.e. revision proceedings cannot be initiated
1. CIT-10, Mumbai issued Show Cause Notice (SCN) dated 22.09.2014 stating that the assessment framed under section 143(3) dated 06.03.2013 is erroneous and prejudicial to the interest of Revenue for the reason that the assesse has reimbursed bank guarantee expenditure of Rs. 21,31,28,528/- to Nimbus Communication Ltd. (NCL) without deduction of TDS u/s194C of the Act
2. The CIT observed that NCL has acquired telecast right from BCCI in respect of matches to be played in India and in terms of that agreement entered into between BCCI and NCL, NCL was not obliged to provide bank guarantee of Rs. Two thousand crores
3. Subsequently, NCL entered into an agreement with the assessee on 27.11.2007 and assessee agreed to reimburse 80% of the bank guarantee to NCL
4. BCCI was not a party to the agreement between the assessee and NCL
5. Accordingly, as per the CIT, the assessee was under obligation to deduct TDS @2% on such reimbursement of expenses but was not done by the assesse
6. Similarly, another issue in this revision proceeding is that the assessee has paid a sum of RS.45 lakhs to Noida Software Technology Park Ltd. for technical and professional services without deduction of TDS @ 10% under section 194J of the Act. According to him tax was deducted @ 2% u/s 194C of the Act
7. In response to the SCN, the assessee replied that as per TDS assessment order under section 201(1)/(1A) of the act dated 18.03.2012 the assessee has deducted TDS and paid before the due dates and also filed details before the AO
8. Accordingly to the assessee, the AO framed assessment after considering all the facts and if at this stage this issue would be raised it will tantamount to change in opinion, but the CIT was of the view that the assessee has not deducted TDS on reimbursement and there is shortfall of TDS in respect of payments to Noida Software Technologies Park Ltd amounting to Rs.45 lakhs and hence the assessment frames by the AO is erroneous and prejudicial to the interest of Revenue
9. Aggrieved, assesse preferred appeal before the Tribunal
10. Tribunal decided issue in favour of the Assessee
Now the question arises whether the reimbursement of bank guarantee charges paid by assessee to NCL falls under section 194C of the Act or not. We find that bank guarantee charges paid by assessee to NCL was neither payment for carrying out any work nor it is made towards broadcasting and telecasting services. From the agreement entered into by the assessee with NCL, it is clear that bank guarantee is to be provided to BCCI as joint and several liability of both the parties and therefore reimbursement of bank guarantee commission to NCL is with respect to the guarantee provided by the bank to BCCI for which payment is made by NCL and subsequently 80% is reimbursed by the assessee. We find that NCL has not carried out any work for assesse and since the payment is towards reimbursement of actual expenditure and hence the same cannot be presumed to be covered under section 194C of the Act.In view of these facts and the Board Circular No. 715 and payment made by the assessee of Rs. 21,31,25,582/- to NCL by way of reimbursement of actual expenditure incurred by NCL on payment of bank guarantee commission is merely a reimbursement. In the light of the above, we are of the view that tax is not required to be deducted from bank guarantee commission in the absence of agent/principal relation. Consequently tax is not required to be deducted from reimbursement of actual expenses by assessee as incurred by NCL under any of the provisions of the Act.
Even otherwise in view of the decision of the Hon'ble Calcutta High Court in the case of S.K. Tekriwal, supra wherein it has been held that if there is any shortfall due to any difference of opinion as to taxability of an item or nature of payment falling under various provisions of TDS, the only solution left with this is that the assessee can be declared as assessee in default under the provisions of section 201 of the Act but no disallowance can be made by invoking provisions of section 40(a)(ia) of the Act. This clearly shows that it is a highly debatable issue. Once it is a debatable issue, provisions of section 263 of the Act, i.e. revision proceedings cannot be initiated.
Cases referred to