15 July 2009
TDS is deducted on the Income generated by one person from other. The person who is the source of income is responsible to deduct TDS. Reimbursement of expenses by no means can be treated as income in the hands of the assessee, so no case of TDS deduction comes into picture.
In CIT v. Siemens Aktiongesellschaft, 310 ITR 320 (Mumbai), the High Court held that the amount received by way of reimbursement cannot be regarded as revenue receipt particularly when the ITAT had found that the assessee company had received no sums in excess of the expenses incurred. Accordingly, the HC held that the amount was not liable to tax in the hands of the assessee company.
Since Section 194C refers to “any sum paid”, if the bill contains reimbursement of expenses also, the TDS is applicable on the reimbursements also. [Circular No.715 dt.8-8-1995]. However, if there are separate bills for contract payments and reimbursement of expenses, then, TDS is not required to be made on reimbursement of expenditure.
In the case of advertising contracts, tax needs to be deducted only when the client makes payment to the advertising agency and not when the advertising agency makes payment to the media (includes both print and electronic media). [Circular No.715 dt.8-8-1995]
So from above if you have a separate bill for advertisement reimbursement and the same does not contain any element of profit, then NO TDS is required.
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