2015 (11) TMI 852 - AT - Income Tax

Computation of income under section 44D - Reimbursement of expenses not treated as part of fees for technical services by CIT(A)- Held that - Commissioner of Income-tax (Appeals) while deciding the issue in favour of the assessee has relied on the decision of the hon ble Cuttack Bench in the assessee s own case for the assessment year 2002-03 wherein considering this clause of the agreement with NHAI and the definition of fees for technical services , under the Income-tax Act, as well as, the definition of fees for technical services , under the Double Taxation Avoidance Agreement, the receipts in the nature of reimbursement of expenses, cannot be treated as, fees for technical services - Decided in favour of assessee.

Summary

Issues:
1. Interpretation of section 44D - Whether reimbursement of expenses should be considered as part of 'fees for technical services' under section 44D of the Income-tax Act.

Detailed Analysis:
1. The appeals filed by the Revenue were against the order of the Commissioner of Income-tax (Appeals) for the assessment years 2007-08 and 2008-09. Both parties agreed that the facts and circumstances for both years were similar. The main issue was whether reimbursement of expenses should be treated as 'fees for technical services' under section 44D. The Assessing Officer held that the expenses should be considered as part of income, but the Commissioner of Income-tax (Appeals) decided in favor of the assessee, following the decision of the Income-tax Appellate Tribunal in a previous case.

2. The Assessing Officer argued that section 44D does not allow deduction of any expenditure in computing income from royalty or fees for technical services. The Revenue supported this view. However, the authorized representative of the assessee contended that the issue was already decided in the assessee's favor by the Cuttack Bench of the Income-tax Appellate Tribunal for the assessment year 2002-03. The Commissioner of Income-tax (Appeals) had previously ruled in favor of the assessee in a similar case, excluding reimbursable expenses from the gross receipt for taxing 'fees for technical services'.

3. The Tribunal noted that the issue revolved around the interpretation of section 44D. The Revenue's argument was based on disallowing any expenditure while computing income under section 44D. However, the Tribunal found that the Commissioner of Income-tax (Appeals) had correctly relied on the decision of the Cuttack Bench in the assessee's favor for the assessment year 2002-03. The Tribunal also observed that the Revenue failed to provide any evidence that the previous decision had been overturned or that there were significant differences in the present case. Consequently, the Tribunal dismissed the Revenue's appeal, upholding the decision of the Commissioner of Income-tax (Appeals).

4. In summary, the Tribunal dismissed the appeals of the Revenue for both assessment years 2007-08 and 2008-09, as the facts and circumstances were similar to the previous case where the reimbursement of expenses was held not to be part of 'fees for technical services' under section 44D. The Tribunal's decision was based on the precedent set by the Cuttack Bench of the Income-tax Appellate Tribunal and the lack of new evidence or distinguishing features presented by the Revenue.