The assessee reimbursed advertisement, marketing, etc., expenses to its sister concerns based on a calculated percentage of net sales realisations without deducting tax at source, treating the same as reimbursement of expenses. The disallowance made by the AO under section 40(a)(ia) by treating such payments as contractual was upheld by the CIT(A) and the Tribunal. High Court upheld the disallowance, holding that activities like advertising, sales promotion, handling and storage fall within the definition of “work” as outlined under the relevant provisions. The payments that are predetermined percentages of sales, with no direct connection to actual costs incurred, are more akin to commissions or service fees, which are subject to TDS obligations under the relevant provisions. The obligation under Section 40(a)(ia) is a substantive statutory requirement, independent of the subsequent tax compliance by the payees. The payments in question, being contractual and not genuine reimbursements, squarely fall within the scope of Section 194C. The failure to deduct TDS in these circumstances justifies the disallowance under Section 40(a)(ia). (AY. 2005-06)