ITAT Referral of the case to the AO

Salary reimbursement - ITAT - AO - taxscan

The Income Tax Appeal Tribunal (ITAT), Mumbai Bench, referred the case to the assessment agent in the case of adding reimbursement of salary to the seconded employee under Section 40(a)(ia) of the Income Tax Act.

The appellant, HCC Samsung Joint Venture, is a joint venture between M/s Hindustan Construction Company Ltd. (HCC) and Samsung C&T Corporation to execute the design and construction of tunnels under Delhi Metro Rail’s Delhi MRTS project. Company. The appellant filed his tax return based on a set of audited financial statements showing a claim of a loss of ₹24,31,31,346/-.

During the valuation by scrutiny, the Valuation Officer set aside Rs. 5,65,933/- under Section 40(a)(ia) for non-deduction of withholding tax, on the reimbursement of the salary of the replacement staff paid to a sister company, Alphine Samsung HCC Joint Venture. On appeal, the CIT(A) upheld the addition. Consequently, the aggrieved appellant filed an appeal with the ITAT.

Counsel for the appellant argued that there was no employer-employee relationship between the employee and the appellant and that the assessee was reimbursed on a cost-to-cost basis. It was further argued that the tax was deducted at source pursuant to Section 192 of the Act by the employer M/s Alphine Samsung and taxable in the hands of salaried employees. Furthermore, counsel for the appellant indicated that he was prepared to file the necessary evidence to support that the tax was properly deducted from the salary paid to the seconded employee, Mr. Srivastav.

The Coram of Mr. Aby T Varkey (Judicial Member) and Mr. Om Prakash Kant (Accounting Member) has been returned to the file of the Assessing Officer for verification, if the tax has been deducted by the employer M/s Alphine Samsung HCC JV regarding the amount of salary refunded by the assessee regarding the employee Mr. Srivastav or the tax has already been paid by the seconded employee on the refund amount.

Mr. HP Mahajani and Mr. Kailash Kanojia appeared on behalf of the Appellant and the Respondent respectively.

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HCC Samsung Joint Venture vs Asst. ICT

Counsel for the Appellant: Mr. HP Mahajani

Counsel for the Respondent: Mr. Kailash Kanojia