Taxability of expatriate reimbursements and living allowance turned on consistency with earlier non-taxable treatment and service fee characterisation.

Reimbursement of expatriates' travelling expenses and living allowance were considered in the context of whether they formed taxable income as fees for technical services. The analysis noted that identical receipts had already been treated as non-taxable in earlier years by the Tribunal and that the Dispute Resolution Panel had deleted the additions in later years. Although the Revenue argued that the amounts were part of the service fee because of the related-party service arrangement, the recurring treatment across connected years supported consistency. The receipts were therefore not treated as taxable income in the assessee's hands.

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Issues: Whether reimbursement of travelling expenses of expatriates and living allowance paid to expatriates constituted taxable income in the hands of the assessee as fees for technical services.

Analysis: The assessee's receipts towards travelling expense reimbursement and living allowance were examined in the context of the service arrangement with the Indian group companies. The additions had been deleted in later years by the Dispute Resolution Panel, and identical receipts had also been held non-taxable in earlier years by the Tribunal. Though the Revenue relied on the related-party relationship and urged that the receipts formed part of the service fee, the recurring view taken in connected years supported consistency in treatment of the same receipts. On that basis, the earlier deletion by the first appellate authority was found to be in line with the approach already adopted in subsequent years.

Conclusion: The reimbursement of travelling expenses and the living allowance were not treated as taxable income in the hands of the assessee.

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