Pure reimbursement under a service agreement is not taxable as technical fees when no profit element is involved.

Travel and meal reimbursements paid under a service agreement were held not taxable as income or fee for technical services where the training and technical fee was separately identified and the reimbursements were made on actual basis without any profit element. The ITAT Mumbai followed the earlier coordinate bench view in the assessee's own case for prior years and applied the principle that a pure reimbursement, lacking an income component, cannot be brought to tax as technical fees. The addition was therefore unsustainable and was deleted.

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Issues: Whether travel and meal expenditure reimbursed to the assessee under the service agreement could be treated as part of taxable income / fee for technical services.

Analysis: The assessee had a continuing agreement under which the fee for training and technical services was separately identified from reimbursement of travel and allied costs. The reimbursement was on actual basis without any profit element and the same issue had already been decided in the assessee's favour for earlier assessment years. Following the earlier coordinate bench decision and the principle that a reimbursement without income element cannot be brought to tax as fee for technical services, the addition was found unsustainable.

Conclusion: The reimbursement of travel expenses could not be taxed as income of the assessee and the addition was deleted.

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