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TMI Blog2012 (8) TMI 307X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to provide the following services to the assessee. 1. Workforce development services 2. Logistics services 3. IT Support services 4. Financial services support 5. Facilities management services 6. Relocation services 7. Tax services 8. Stationery charges 9. Overseas travel services 10. Other services that may be rendered from time to time The consideration payable by the assessee to HP,A P(HK) to provide the aforesaid services is mentioned in clause-II of the agreement and it reads as follows; "Costs, billing, payment; The costs of services (costs) are the total direct and indirect costs incurred by service provider to perform the services. Such costs are incurred by the service provider in cost of sales or operating expense accounts. Billing for services may be based partly or wholly on forecast costs, provided adjustments are made thereafter to reflect actual costs. Service provider will invoice user monthly (or, if agreed to in writing, quarterly) for the compensation due hereunder or on some other periodic basis agreed to by the parties. User shall make all remittances under this agreement within 30 days of receipt of an invoice, or in accordance w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her words, the subject payment were mere reimbursement of expenses incurred by some overseas HP group entity on behalf of the Assessee which HP AP(HK) identified as payable by Assessee and cross charged under the General services agreement referred to in the earlier part of this order. Reimbursement of employees awards was explained by the Assessee as a part of the rewards and recognition policy of HP that it adopts for recognizing certain behavioural attributes and traits like, achievement and contribution, employee referral, meaningful innovation, passion for customers, teamwork, commitment to quality, leadership, speed and agility, uncompromising integrity, adaptive/change management etc. Although, the recommendations, referrals, people evaluation etc. is done by each country and under a particular legal entity, the E-award scheme is administered centrally. For example the subject E-awards, which were received by the employees was administered from HP AP(HK). The E-awards work on a point system and at the time when the people manger nominates en employee for such award, he also allots points and depending on the points collected by the employee, the employee can choose an award ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #39; for technical services and hence, not subject to tax withholding u/s 195 of the Act. 8. On the above facts, the question before the AO was to whether amounts in question are reimbursement of expenses having no element of income embedded in such payments and whether the aforesaid payments consisted payment in the nature fees for technical services rendered (FTS) which is chargeable to tax in India in the case of HP, AP(HK). 9. The AO was of the view that the relocation expenses were in the nature of FTS and he observed in this regard as follows; "6.1 Relocation Expenses: During the course of hearing, the AR submits that India employees have been deputed to the foreign company and M/s HP, ( has incurred certain expenditure towards relocation of the Indian employees. These employees are 1)Mr.Ganesh Panchanathan 2) Ritu Nagpal 3) Seigfried Schoen 4) Sumeet Batra 5) Vivek Nagar Katti 6) Sanjay Singh etc. As per the AR's submission the foreign company has arranged the accommodation and other logistics services to the above said employees. For this purpose, the non-resident has to search for appropriate locations to accommodate these employees. Sometimes it has to rely on thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore, the question of reimbursement does not arise. Since the payments were made towards workforce development, the remittance can be categorized as towards workforce development services and accordingly, falls in the category of FTS. The assessee company has camouflaged the whole remittance in the name of reimbursement instead of FTS. Thus, the remittance made by the Indian company chargeable to tax as FTS". 10. On the question whether the payments were in the nature of reimbursement of expenses, the AO held as follows; "6.3 Issue of reimbursement: The AR of the assessee contends that this is only cost to cost reimbursement and no element of income embedded in it. As per services agreement it is clear that the foreign company has charged cost + 10% as charges towards the above services rendered by it. However, during the course of hearing the AR was asked to submit necessary supporting in support of its claim of reimbursement. The assessee could only furnish few supporting which are not matching with the remittances made by the Indian company. Secondly, the AR was also asked to confirm whether any independent audit was carried in support of its claim and the AR could not co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by entities of the HP group worldwide on behalf of the Assessee which have been collated by HP,AP(HK). The details of sample employees like invoices for reimbursement made to sample employees have been given. These are contained in pages 16-18 of the assessee paper book. Perusal of the same reveals the nature of reimbursement. For example: Shri Vivek Nagar Katti, had gone to Houston, USA. He was provided with a house and furniture for his living in USA. Expenses had been incurred in the form of house rents, furniture hire charges etc. M/s. HP,AP(HK) raised invoices on the assessee for the actual expenses incurred on behalf of the assessee with reference to the employee Shri Vivek Nagar Katti. It is thus clear from the sample invoices filed before us that the payments made by the assessee to HP, AP(HK) were reimbursement of actual expenses incurred by the entities of the HP Group on behalf of the assessee. No doubt, the agreement between the assessee and the HP,AP(HK) contemplates 10% mark up on the actual cost, but as far as the payments made during the previous year are concerned, no such mark up has been made and the disputed payments are purely reimbursement of actual expense ..... X X X X Extracts X X X X X X X X Extracts X X X X
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