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TMI Blog2017 (6) TMI 236X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the income tax authorities to take a position and infer notionally about recovery of mark-up or profit element in the hands of assessee. It has also been brought out that it is a standard practice in the I.T. Industry to recover out of pocket expenses incurred during the course of providing services for the clients on a cost to cost basis. Under these circumstances, in our view, the Transfer Pricing Officer erred in proceeding to infer a non-existent understanding between assessee and its associated enterprises so as to impute income qua the instant transaction in terms of section 92(1) of the Act. - Decided in favour of assessee. - ITA No.872/Mum/2017, And S.A.No.292/Mum/2017 - - - Dated:- 25-5-2017 - SHRI R.C.SHARMA, AM AND SHRI P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ricing adjustment in relation to the international transactions of reimbursement of expenses received by the assessee from its Associated Enterprises. In brief, the relevant facts in order to appreciate the said controversy can be summarized as follows. During the year under consideration, assessee had incurred certain expenses on behalf of its associated enterprises, which was subsequently recovered from the associated enterprises on cost to cost basis without any mark-up. Such reimbursements, which totalled to ₹ 31,95,12,842/-, were in the nature of cost of travel, accommodation, visa expenses, per diem and other day to day expenses. On being show caused by the Transfer Pricing Officer as to why such recoveries be not subject to ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h costs, assessee initially incurred the expenditure but later on recovered it from the associated enterprise and that there was no service element involved so as to justify earning of any service charge. Before us, Ld. Representative for the assessee also referred to voluminous material placed in the Paper Book, which was also available to the lower authorities, to point out that there was no profit-element in such arrangement of recovery of out of pocket expenses.. 13.2 On the other hand, Ld. Departmental Representative appearing for the Revenue emphasised that there was a considerable time lag between the incurring of such expenditure by the assessee company and its ultimate recovery from the associated enterprises and, therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rprises alongwith copies of the corresponding debit notes raised by the associated enterprises on the ultimate clients. The aforesaid was canvassed by the assessee to substantiate that there was one to one co-relation and that the entire exercise did not involve any element of profit or mark-up in the hands of the associated enterprises. The aforesaid material is placed at pages 518 to 612 of the Paper Book and which was also before the lower authorities. At the time of hearing, the Ld. Representative for the assessee had also referred to page 613 to 645 of the Paper Book, wherein are placed copies of assessee's arrangement with the associated enterprises and also the sample agreements between the associated enterprises and the ultimate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -12 and found that exactly similar issue was dealt by the Tribunal and addition made on transfer pricing adjustment was deleted by observing that it was simply reimbursement of expenses. 6. Learned DR did not raise any objection with regard to issue being covered by the order of the Tribunal. Respectfully following the order of the Tribunal, we direct the AO to delete the addition so made on account of reimbursement of expenses of ₹ 2,43,21,305/-. In the result, appeal of the assessee is allowed in part in terms indicated hereinabove. S.A.No.292/Mum/2017: 7. As we have already decided the appeal of the assessee on merit, the stay application becomes infructuous therefore, dismissed in limini. 8. In the result, appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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