2018 (11) TMI 1777 - AT - Income Tax

TPA - treating the reimbursement of the travel expenses as income for the year - HELD THAT - Through the order of the Tribunal and found that same agreement continued during the year under consideration therefore respectfully following the order of the Tribunal in assessee s own case 2018 (6) TMI 1107 - ITAT MUMBAI for the very same issue we do not find any justification for taxing the travelling expenses reimbursed to assessee by its AE. Appeal of the assessee is allowed.

Summary

Issues Involved:
1. Validity of re-assessment proceedings under Section 148 of the Income-tax Act, 1961.
2. Treatment of reimbursement of travel expenses as income.

Issue-wise Detailed Analysis:

1. Validity of Re-assessment Proceedings:
The assessee contested the re-opening of its assessment under Section 148 of the Income-tax Act, 1961, arguing that it was in excess of jurisdiction and bad in law. The appellant submitted that the proceedings were not in accordance with law and should be struck down. However, the judgment did not provide a detailed analysis or ruling on this issue, focusing instead on the treatment of travel expense reimbursements.

2. Treatment of Reimbursement of Travel Expenses as Income:
The main contention was whether the reimbursement of travel expenses received by the assessee from GIA India Laboratory P. Ltd. should be treated as income. The Assessing Officer and the Dispute Resolution Panel (DRP) had treated these reimbursements as income. The assessee argued that these reimbursements were on an actual cost basis without any profit element and should not be taxable.

The Tribunal referenced its own previous decisions in the assessee’s case for assessment years 2009-10, 2011-12, and 2014-15, where similar issues were decided in favor of the assessee. The Tribunal noted that the agreement under which the reimbursements were made had been in place since November 1, 2008, and continued through the relevant assessment year. The agreement clearly demarcated fees for services and reimbursements for costs like travel and meals.

The Tribunal emphasized that the reimbursement of costs did not include any profit element and should not be considered part of the fee for technical services. The Tribunal cited the Supreme Court's decision in DIT vs A.P. Moller Maersk, which held that reimbursements without profit elements are not taxable. The Tribunal concluded that the reimbursement of travel expenses should not be taxed as income, following its previous rulings and the Supreme Court's precedent.

Conclusion:
The Tribunal allowed the appeal of the assessee, ruling that the reimbursement of travel expenses should not be treated as income. The decision was based on the consistent application of the agreement terms and judicial precedents, particularly the Supreme Court's ruling. The Tribunal directed the deletion of the addition made by the Assessing Officer concerning the reimbursement of travel expenses. The issue of re-assessment proceedings was not elaborated upon in the judgment. The appeal was partly allowed, with the primary relief granted on the treatment of travel expense reimbursements.