Case study:
Fact of case : in this case, the assessee running merchant banking business had debited in its accounts reimbursements of expenses made to the parent company against the following:
a) Recovery of insurance charges of director;
b) Cost allocation for use of web area network.
The assessee claimed that such reimbursements were made against actual costs incurred by the parent company. The assessee furnished copies of invoices in this regard received from the parent company for such reimbursements.
Decision of Assessing Officer : The assessing officer without disputing the fact that the amounts were reimbursements went on to hold that such payment would fall under the category “ Other sums chargeable under this Act” mentioned in section 40 (a)(i) of the income tax Act hence would warrant a disallowance.
The commissioner ( Appeals) upheld the disallowance
The ITAT Bench held that reimbursement of expenses cannot be the subject matter of disallowance under section 40 (a)(i)
Full judgment : attached.
CAclubindia
