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TMI Blog2023 (1) TMI 1325X X X X Extracts X X X X X X X X Extracts X X X X ..... the certain reimbursement of expenses as royalty. The relevant grounds raised in the assessment year 2006-07 reads as under : 1. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) erred in confirming the learned Assessing Officer's holding that Rs. 32,00,533 comprising of Rs. 5,37,266 as business development training programme (Rs. 4,49,446) and marketing training meet (Rs. 87,830) and Rs. 26,63,267 comprising of Rs. 9,12,727 as lotus note charges and Rs. 17,50,540 general service charges (GSC), as not reimbursement of expenses. He ought not to have done so. 1.1. The learned Commissioner of Income-tax (Appeals) further erred in this connection, in holding that the issue, whether the afore said expenses constitutes reimbursement, is beyond the scope of his power under section 250. He ought not to have done so. 1.2. The learned Commissioner of Income-tax (Appeals) further erred in this connection in holding that Rs. 5,37,266 is fees for technical services. He ought not to have done so. 1.3. The learned Commissioner of Income-tax (Appeals) further erred in this connection in not applying the India-UK Double Taxati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services as defined in the Double Taxation Avoidance Agreement on the concept of article 13(4)(c). The relevant observations and findings of the Tribunal for all the three assessment years reads as under : "10. We have considered rival contentions, carefully gone through the orders of the authorities below and found that the assessee's claim of reimbursement of expenses was treated by the Assessing Officer as fees for technical services, whereas the contention of the assessee was that it was merely a reimbursement of expenses incurred on lotus note book and various expenses incurred by the assessee on behalf of its principal. Since the assessee has not filed copy of any agreement for providing lotus note book services so as to support the assessee's contention regarding reimbursement and not in the nature of fees for technical services, the Commissioner of Income-tax (Appeals) had confirmed the disallowance. In the absence of such agreement the nature of services rendered and reimbursement of the same cannot be verified, so as to hold that it was not in the nature of fees for technical services. Since, it was alleged to be mere reimbursement, onus is on the assessee to de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e was one would form part and parcel of the fees charged by the appellant. The case law on ITO v. Alstom (supra) relied by the authorised representative has no application as in that case the holding company was making payment as per specific agreement entered in to between holding company and supplier of software of lotus note software for which it has received the apportioned expenses. In the instant case, the appellant has not filed any such agreement before the Assessing Officer nor before the under signed. Further the lotus note belongs to the appellant hence against which the appellant has received payments. Further some expenses were received from providing managerial training services to Indian company therefore the fact of the appellant case are distinguishable from the case law relied by the appellant.' 11. It is clear from the above that in the absence of agreement, it cannot be inferred as to whether the invoice raised by the assessee was on account of reimbursement merely or otherwise. We also found that the Assessing Officer has not given any finding to the effect that it does not partake the nature and character of included services as defined in the Double Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aining programme as also covered Explanation 2 to section 9(1)(vii) of the Act as fees for technical services are added to the total income. Since the assessee has furnished inaccurate particulars of its income penalty proceedings under section 271(1)(c) of the Act is initiated on this ground (Addition of Rs. 5,37,266 (Rs. 4,49,436 + Rs. 87,830))." 9. Similar findings have been given on the issue of royalty on account of payment for use of software lotus notes in the assessment years 2007-08 and 2008-09 also. 10. The learned Commissioner of Income-tax (Appeals) in the assessment year 2006-07 has observed as under : "12. The decision now is whether same is or royalty fees for technical services. Detailed justification is provided by the Assessing Officer in the assessment order to hold as royalty. The appellant has filed a lengthy submission before me. I have on technical grounds held that the assessment as royalty is impermissible in this case. 13. The hon'ble Income-tax Appellate Tribunal outlined scope of action by the Assessing Officer. He is to decide as to whether the impugned sum is fees for technical services or not. Any action beyond same is not in conformance wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2006-07 where appellate order was passed on February 12, 2019 (No. CIT(A)-56/10266/2016-17). On account of same records same decision applies. Accordingly, A. The claim that the sum of Rs. 23,61,203 is reimbursement of expenses is rejected. B. The Assessing Officer is directed to re examine and come only to a decision as to whether the impugned sum of Rs. 23,61,203 is fees for technical services or not confining to article 13(4)(c) of the India-UK Double Taxation Avoidance Agreement. No assessment as royalty can be made. C. Tax on fees for technical services is to be determined as per the Double Taxation Avoidance Agreement rates in case final decision of the Assessing Officer is to treat the sum of Rs. 23,61,203 as income chargeable to tax under head fees for technical services. 12. Before us, the learned counsel submitted that, firstly, in this case in so far as reimbursement of expenses are concerned, the Transfer Pricing Officer to whom matter was referred for determination of arm's length price for all the international transaction including the reimbursement of expenses, has found to be at arm's length price and no adjustment has been made. Now here is a situa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied as reimbursement of expenses in form 3CEB, because there is no markup nor assessee had any right as envisaged in article 13(3) nor it can be held that the reimbursement of expenses on account of software or there is any availability of technology as stipulated under article 13(4)(c). 15. He further submitted that in so far as amount of Rs. 5,37,276 for the assessment year 2006-07 is also similar to issue of Rs. 72,054 for the assessment year 2007-08. These were marketing expenses and professional fee paid outside India which cannot be treated as fees for technical services, leave alone applicability of "make available clause" under article 13(4)(c). Nowhere the learned Commissioner of Income-tax (Appeals) has held that whether this reimbursement of expenses of marketing falls within the ambit of fees for technical services under the Double Taxation Avoidance Agreement. 16. On the other hand, the learned Departmental representative submitted that matter should be restored back to the file of the Assessing Officer to decide whether the payment made to the associated enterprises for use of software and global certificates (GSC) is fee for article 13(4) as Assessing Officer has n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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