Remibursement of Expenses

[CABIJENDERKUMAR BANSAL]

Dear All,

Our company is joint venture company associated with Japan.

A Service Agreement is to be executed between both company that Japan Company will provide technical support to Indian JV Company . No cost will be charges for it.

They will send 2 Japanese Technical person to India for providing Technical Support. To whom Indian Company will give Rs. 2 Lac for their monthly expense.
These expenses will be reimbursed to Indian company by Japanese Company. I.e No impact on Profit & Loss of Indian company.

Our query is that whether there is tax liability in case of giving advance to Japanese technical persona and  getting reimbursement of these expense from Japan. Whether TDS or Service tax on Reverse mechanism will be apply to these reimbursement transactions.

Thanks in advance.

AI Summary

Service tax on reimbursements may hinge on pure agent characterization and reverse charge applicability for overseas technical personnel.
Whether reimbursements by an Indian JV to foreign technical personnel and subsequent reimbursement by the foreign parent are taxable or non-taxable depends on characterization: payments may be treated as non-taxable reimbursements if the foreign company is a pure agent, as suggested by a cited Intercontinental decision, or as taxable consideration if services are rendered in India and consumed by the JV, attracting service tax under the reverse charge mechanism. Separate uncertainty exists about TDS obligations and FEMA compliance on advances and reimbursements.