2014 (8) TMI 796 - AT - Income Tax

Fees for Technical Services - Business support services rendered - Article 12 Indo-Netherlands DTAA Held that - Following the assessee s own case as decided in Shell International BV. Carel Van Bylandtlaan Versus Income Tax Officer 2013 (8) TMI 446 - ITAT AHMEDABAD - what were the contents of those documents are yet to be examined - The terms such as commercial support, Logistic , Public-affairs Human resources etc. as listed by the assessee are very general in nature - it is not clear that what technicality was involved in providing that knowledge - Whether that technical knowledge is so intricate that even in such long period it could not be understood by the recipient - All these questions can only be answered by a thorough investigation at the level of the assessment - The AO shall therefore examine the bills and vouchers prepared by the assessee in support of the claim of expenditure to ascertain the nature of services rendered and then find out that whether could have been made available for the business purpose of those parties thus, the matter is liable to be remitted back to the AO Decided in favour of Assessee. Reimbursement of expenses Scope of criterial of reimbursement Held that - Following the assessee s own case as decided in Shell International BV. Carel Van Bylandtlaan Versus Income Tax Officer 2013 (8) TMI 446 - ITAT AHMEDABAD - this ground was not decided by CIT(A) and the question of claim of reimbursement of expenditure was not made before the AO - The assessee has required to establish that those expenditures were first incurred out of pocket expenses then only the question of reimbursement can be decided - The assessee is also required to furnish the details of the bills through which the reimbursement was claimed since all those facts were not earlier examined by the Revenue Authorities thus, the matter is to be remitted back to the AO for fresh adjudication Decided in favour of Assessee.

Summary

Issues:
1. Whether amounts received by the Appellant for rendering business support services qualify as 'Fees for Technical Services' under the India-Netherlands Tax Treaty.
2. Whether reimbursement of expenses not covered by specified criteria would be taxed as fees for technical services under the India-Netherlands Tax Treaty.

Analysis:
Issue 1: Business Support Services
The appeal was filed by the assessee against the order of Ld. CIT(A) regarding the taxation of amounts received for business support services. The AO added the business support services amount to the income of the assessee as fees for technical services. Ld. CIT(A) upheld the AO's decision, stating that the services provided were technical in nature. The assessee argued that a similar issue in a previous year was decided in their favor by the Tribunal. The Tribunal, after examining the facts, directed the AO to investigate the nature of services rendered and the technical knowledge involved. The Tribunal restored the issue back to the AO for further examination. The present case being similar, the Tribunal followed the previous decision and allowed the appeal for statistical purposes.

Issue 2: Reimbursement of Expenses
Regarding the reimbursement of expenses, the AO considered the reimbursed expenses as taxable income, as they were related to services rendered. Ld. CIT(A) emphasized the need for the appellant to prove that the receipts were actual reimbursements and not part of taxable income. The appellant was directed to provide detailed evidence to establish the nature of expenses and their connection to the services rendered. The Tribunal noted that the issue was not decided by Ld. CIT(A) and directed the AO to re-examine the matter, emphasizing the need for proper verification and cooperation from the appellant. Following the previous decision on a similar issue, the Tribunal restored the matter back to the AO for further assessment, allowing the appeal for statistical purposes.

In conclusion, the Tribunal allowed the assessee's appeal for statistical purposes in both issues, directing the AO to conduct further investigations and verifications based on the specific directions provided in the judgments of the Tribunal in similar cases.