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TMI Blog2015 (5) TMI 708X X X X Extracts X X X X X X X X Extracts X X X X ..... rticle 12 of the Double Taxation Avoidance Agreement entered into with India and the USA ('the Treaty'). (b) That on the facts and in the circumstances of the case, the learned AO and the learned Panel erred in not appreciating that the aforesaid receipt of Rs. 26,80,32,271 represents merely reimbursement of expenses incurred by the Appellant on behalf of ITIPL. 2(a) That on the facts and in the circumstances of the case, the learned AO and the Panel has erred in treating the amount of Rs. 1,59,68,374 received from ITIPL on account of cross charge of IT programmes as 'Royalty' under section 9(1)(vi) of the Act read with Article 12 of the Treaty. (b) That the learned AO and the learned Panel erred in not treating the aforesaid receipt of Rs. 1,59,68,374 as mere reimbursement of expenses not liable to tax. 3(a) That on the facts and in the circumstances of the case, the learned AO and the Panel erred in considering the reimbursement of relocation of expenses of Rs. 7,31,91,290 as part of Fee for Technical Services ('FTS')/Fees for Included Services ('FIS'). b) That on the facts and in the circumstances of the case, the learned AO and the Panel has erred in not appreciating the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0/- on account of relocation and related expenses. He observed that these sums have not been included in the taxable income of the assessee. Therefore, the AO asked the assessee to furnish details regarding these transactions. The authorized representative of the assessee appeared and contended that during the financial year 2006-07, the assessee-company has received an amount of Rs. 6,85,17,312/- towards reimbursement of software expenses. It was submitted that the assessee procured software license in respect of certain computer aided design software from third parties and the same is used by various Intel entities globally and the cost of such software license is cross charged to the respective entities based on the usage of each entity. He submitted that the assessee raised invoices on respective entities based on number of users in each entity and in support of his contention, copies of invoices raised by the assessee as regards the amount cross charged to ITIPL was also enclosed. It was thus submitted that the receipts represent mere reimbursement of expenses and hence cannot be brought to charge. Without prejudice to these contentions, the learned AR of the assessee also mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmitted that these decisions have been considered by the Mumbai Bench of the Tribunal in the case of Dy.Director of Income-tax (Intl. Taxation) vs Solid Works Corporation reported in (2012) 152 TTJ 570 (Mum) wherein it has been held that the payment for mere right to use of shrink wrapped software cannot be held as royalty. He, therefore, prayed that the decision of the Mumbai Bench of the Tribunal be followed. 6. Ms.Priscilla Singsit, learned Departmental Representative, however, supported the orders of the authorities below and submitted that the CIT(A) has taken note of the decision of the Hon'ble Karnataka High Court in the case of Samsung Electronics Co. Ltd. (cited supra) and followed the same and therefore there is no illegality in the order of the CIT(A). 7. Having heard both the parties and having considered the rival contentions as well as the material on record, we find that to substantiate the claim of the assessee that the expenses received from Indian counterpart of the assessee-company are reimbursement of expenses; the assessee has not filed copies of any of the agreements. In the absence of any evidence to the effect that the assessee has supplied software licens ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i.e. M/s.ITIPL to render certain services as per the Agreement dated 1-4- 2002 and in terms of this Agreement, these employees have to be relocated by the assessee-company and the assessee-company has incurred certain expenses for their travel and conveyance and hotel etc. It was submitted that these expenses have been reimbursed by the Indian company only on cost to cost basis and therefore it does not amount to any income in the hands of the assesseecompany. The assessee also filed a detailed note before the authorities below citing the decisions on which it placed reliance upon. The AO was, however, not convinced with the contentions of the assessee. The AO asked the assessee to furnish details of employees towards whom these costs were incurred and also to furnish working and break-up of this cost along with appropriate supporting documents. Since the assessee failed to produce evidence before the AO, the AO held that the assessee could not prove that these receipts are mere reimbursement of expenses from ITIPL. Thereafter he considered that as per clause 3.4 of the Agreement, the Indian company has to bear all the costs of expat employees and fees for technical services and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ind that the assessee has filed sample evidence relating to April and May 2004 in support of its claim of relocation and related expenses. From these details, it is clear that the Indian company has incurred expenses on account of employees who are deputed to Indian company. Whether these reimbursements are cost to cost basis and whether these also form part of the fees for technical services needs to be examined by the AO in the light of the evidence produced by the assessee. As the additional evidence filed before us goes to the root of the matter, we are inclined to admit the same and remand the same to the file of the assessing authority with a direction to reconsider the issue de novo. The assessee may file all the required details before the assessing authority. 13. The learned counsel for the assessee has also drawn our attention to the decision of Bangalore 'A' Bench of this Tribunal in the case of M/s.Global E-Business Operations Pvt. Ltd. Vs. Dy.DCIT in ITA Nos.643 & 644/Bang/2010 dated 4-7-2012 wherein the Tribunal had considered the difficulties felt by the assessee-company therein to file evidence relating to the entire expenses and has accepted the sample invoices fi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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