Dear Anuj
As per circular no 715 dated 8 august 1995 applicability of TDS on reimbursement has been discussed therein in Question No 30 which read as under
Question 30 : Whether the deduction of tax at source under sections 194C and 194J has to be made out of the gross amount of the bill including reimbursements or excluding reimbursement for actual expenses ?
Answer : Sections 194C and 194J refer to any sum paid. Obviously, reimbursements cannot be deducted out of the bill amount for the purpose of tax deduction at source.
This treatment is applicable if reimbursement is shown in bill alongwith professional or technical fees or contract amount, thus if separate bill is raised for reimbursement then same is not liable for TDS.
Further service tax to be deducted on gross bill i.e. sum of professional or technical fees and reimbursement,
Further TDS also to be made on service tax component in the absence of any particuar circluar on No TDS on service tax. CBDT has clarified that no TDS to be made on service tax component in case TDS to be made u/s 194I however for other section it has not clarifed the same hence possibility of litigation with Tax Authorities can not be ruled out if no TDS made on service tax component