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TMI Blog2020 (8) TMI 748X X X X Extracts X X X X X X X X Extracts X X X X ..... HELD THAT:- In the instant case, the appellant has credited in its financial statements towards reimbursement of expenses and offered the same to tax in the return of income filed for the year under consideration. Appellant has debited its financial accounts with expenses incurred on behalf of VGCs and subsequently, on receipt of the credit note from VGCs, it credited the same under the head Other Income in its financial accounts. There is merit in the treatment of the appellant that as the same was in the nature of reimbursement, the same was not included for the purpose of calculation of commission . Appellant has rightly computed its commission income as per the said DR agreements. Therefore, we set aside the order of the Ld. CIT(A) and delete the addition of commission income amounting on the reimbursement of expenses received by the appellant from its AEs. Thus the 2nd ground of appeal is allowed . - ITA No. 3577/MUM/2017 - - - Dated:- 20-3-2020 - Shri Vikas Awasthy (Judicial Member) And Shri N.K. Pradhan (Accountant Member) For the Assessee : Mr. Devendra Gulati, AR For the Revenue : Mr. Udal Raj Singh/Mr. A. Mohan, DR ORDER ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n included in the gross sales for the purpose of computing commission income due to the appellant. The AO further observed that the commission to the appellant was liable to the computed on the basis of achieved/quoted price of the project less discounts given . The AO also concluded that the parts procured locally also formed a part of the overall sales consideration and hence, these costs should have been included in the gross sales for computing the commission receivable to the appellant. The AO, accordingly, included the amount of re-imbursement as a part of the gross sales for the purpose of computing commission due to the appellant. The order of the AO was upheld by the Dispute Resolution Panel (DRP). The assessee preferred an appeal before the Tribunal. We find that the Tribunal restored the matter to the file of the AO with specific directions . In the assessment passed u/s 254 r.w.s 143(3) dated 29.12.2014, the AO has contested the observation of the Tribunal that the earlier assessment order did not take into account the annexures with DRAs (Distribution Agreements) which define that the amount of sale consideration liable to be adopted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant does not include providing non-Varian products as part of its overall obligations without any commission being charged . To summarize, the AO rejected the claim of the appellant that the local component cost should be excluded from the total sales value while computing its commission income. The AO proceeded to compute the commission in line with the order passed earlier . 4. Aggrieved by the order of the AO, the assessee filed an appeal before the Ld. CIT(A). We find that vide order dated 03.01.2017, the Ld. CIT(A) observed that agreements with Varian Spa and Varian BV, Netherlands contain clause relating to modalities of computation of commission and exclusion of local content while computing commission ; the agreement with Varian Germany does not have such clause . In respect of agreement with Varian Spa and Varian BV, Netherland, the Ld. CIT(A) observed that (i) the agreement has a separate annexure detailing the modalities of computation of commission, (ii) while the computation of commission is based on achieved price/list price, it is categorically mentioned that the procurement of local content required to be fulfill the contr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure of clearing charges, freight and insurance are liable to be excluded while determining the commission. Therefore, he upheld the determination of this amount at ₹ 9,91,939/- . To summarize, in respect of Varian BV, the amount is reduced to ₹ 1,71,14,781/-; in case of Varian SPA the amount is reduced to zero and in case of Varian Germany, the amount adopted by the AO is upheld by the Ld. CIT(A) . 5. Before us, the Ld. counsel for the appellant, relying on the agreement with AEs submits that the purchase of local content is liable to be excluded from the sales value for purpose of commission in respect of sale of products supplied by its AEs. Further, it is stated that any expenses incurred for freight, taxes, other charges including procurement of materials by the appellant were reimbursed at cost. Thus it is stated that the appellant was reimbursed at cost only for the amounts which were incurred by it and hence, the amount of reimbursement is separately reflected as other income in its financial statement. Elaborating further, it is stated that the appellant had credited ₹ 1,58,37,595/- in its financial statements towa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture of shipping costs, a genre to which freight and insurance belong. Thus it is stated that shipping costs include a number of other expenses in addition to freight and insurance i.e. demurrage, port expenses, agent expense and hence purchase of local content while installing the instruments at a client s place cannot be said to be includible in the term other charges which specifically relate to charges linked with shipping . The Ld. DR thus supports the order passed by the Ld. CIT(A) . 7. We have heard the rival submissions and perused the relevant materials on record. The reasons for our decisions are given below . As regards the 1st ground of appeal, we find that the AO has made the assessment u/s 254 r.w.s. 143(3) in the name of M/s Varian India Pvt . Ltd.-India Branch . In the Form 35 filed before the CIT(A) dated 06.02.2015, the appellant has clearly stated the name of M/s Varian India Pvt. Ltd.-India Branch . In the grounds of appeal and statement of facts filed before the CIT(A), the assessee has clearly stated the name of M/s Varian India Pvt. Ltd.-India Branch . Therefore, there is no merit in the 1st ground of appeal and the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion and Representation Agreement , has not been examined by the Assessing Officer. Therefore, for the purpose of verification and examining of the content of this schedule, we restore the matter back to the file of AO, to adjudicate this issue afresh in light of the aforesaid document, because it changes the entire colour of the conclusion drawn by the AO. The AO will also examine the fact, whether the commission is on sale of Varian products only or not. The quantum of commission is a question of fact and cannot be imputed or presumed. In case of reimbursement of expenses from Varian Germany also, the matter is set-aside for examining, whether the commission is on gross sales or on the net of sales of the equipments directly procured by the associate enterprises. If the arrangement with this AE is also the same, then the same conclusion should be drawn in this case also. In the result, ground no.1 is treated as allowed for statistical purpose. 7.1 At this moment, we may refer to clause 5(A) of the DR agreement between the appellant and Varian Italy which is as under : A. Sale of Products from Supplier to Contractor shall be at prices establish ..... X X X X Extracts X X X X X X X X Extracts X X X X
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