2015 (9) TMI 3 - AT - Income Tax

Addition of reimbursement of expenses of lotus note charges and other expenses by treating the same as fees for technical services - Held that - Since the assessee has not filed copy of any agreement for providing lotus note book services so as to support assessee s contention regarding reimbursement and not in the nature of fee for technical services, the CIT(A) had confirmed the disallowance. In the absence of such agreement the nature of services rendered and reimbursement of the same cannot be verified, so as to hold that it was not in the nature of fee for technical services. Since it was alleged to be mere reimbursement, onus is on the assessee to demonstrate the actual amount incurred on behalf of the associated enterprises on the basis of entries passed in the books of account and supporting bills/vouchers of such expenses. In the absence of agreement, it cannot be inferred as to whether the invoice raised by the assessee was on account of reimbursement merely or otherwise. We also found that the AO has not given any finding to the effect that it does not partake the nature and character of included services as defined in DTAA on the concept of Article 13(4)(c) of DTAA between Indian and UK. Accordingly, we set aside both the orders of lower authorities and matter is restored back to the file of AO for deciding afresh in terms of our above observations. - Decided in favour of assessee for statistical purposes

Summary

Issues:
Appeal against order of CIT(A) for assessment years 2006-07 to 2008-09 regarding addition of reimbursement of expenses as fees for technical services.

Analysis:
The appeals pertained to the addition of reimbursement of expenses as fees for technical services by the Assessing Officer (AO). The assessee, a UK-based company engaged in the metallurgical industry, received sums in A.Y. 2008-09 and claimed reimbursement of expenses not offered to tax. The AO considered the reimbursement as fees for technical services based on judicial precedents. The CIT(A) upheld the AO's action. The assessee contended that the reimbursement involved no profit element, citing various judicial precedents. The assessee argued that even if considered technical service fee, it did not meet the "make available" concept in the India-UK DTAA. The breakup of expenses was detailed, including Lotus Note Charges and other expenses. The AO questioned the lack of agreement evidence and nature of invoice issued. The Tribunal found the absence of an agreement crucial in determining the nature of reimbursement. The lower authorities' orders were set aside, directing the AO to re-examine the issue. All appeals were allowed for statistical purposes, restoring them to the AO for fresh consideration.