TDS on Re-imbursement

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Vishal Bharuka (Querist)
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17 June 2008 There is a service provider 'T' which provides services to 'X' for which there is a contract between 'X' & 'T'. 10% of the total service charges are paid by 'Y' to 'T' on behalf of 'X'. 'Y' an independent party to 'X'. 'Y' deducts TDS on the same and deposit to govt. Rest of the 90% is paid by 'X' and TDS deducted accordingly. Later 'X' reimburses 'Y' the gross amount paid by 'Y'. Question is whether this re-imbursement by 'X' to 'Y' would again be liable to TDS. In my opinion as the required amt is deposited with the govt. and there is merely a re-imbursement of actual cost and so TDS is not required. Could you plz substantiate your answer with some decided case laws/circulars.