I have an query so please give me clarification on the below case.
we usually paid to C&F agent for commission and some reimbursement(custom duty, port dues) also & he produced only singly bill for reimbursement & commission portion for both but he charged service tax on his commission income only not reimbursements.
Kindly suggest me whether we are liable to deduct TDS on whole bill along with reimbursement.
10 March 2012
The term "Reimbursement" has not been defined in the Act and hence its meaning has to be understood as in common parlance. As per Black’s Law Dictionary the term "reimburse" means to pay back, to make restoration, to repay that is expended, to indemnify or make whole. As per the Concise Oxford Dictionary the term "reimburse" means repay (a person who has expended money) or repays (a person’s expenses). The above definitions make it clear that a pure reimbursement should not constitute a reward or compensation paid for a service rendered. Hence, a mere reimbursement of expenses cannot be construed as a "fee" for services rendered since what is achieved by a reimbursement is a mere repayment of what has been already spent and is not a reward or a compensation for services rendered. However beside above we have to think about the concept of lifting the veil, if the reimbursed expenditure is under the purview of TDS then no one should take shelter of this reimbursement theory. For example if we follow thumb rule that TDS on reimbursement will not be applicable then each one will start paying through reimbursement mode all the professional & other payment and will not deduct TDS hence there is no thumb rule that on reimbursement TDS will not be applicable. If the expenditure on other side of veil is subject to TDS then the person paying this ultimately will labile for TDS. Here some debate is that if middle man is paying the TDS then ultimate person will not pay but my view is different because in PL A/c there is no head in the name of "Reimbursement Expense" there is always a specific head and you have to book the expense in to that relative head and in this expense head if TDS is applicable then you have to deduct and pay TDS even the payment mode is through reimbursement channel.
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