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ITAT affirmed the CIT(A)'s deletion of the AO's addition, holding that amounts received by a non-resident company from its Indian AE constituted pure reimbursements for third-party legal and professional services, without markup, and therefore did not constitute assessable income in India. The AO's own findings and supporting third-party invoices established that services were supplied by the third party and accepted as arm's-length by the TPO in the AE's hands. Applying the principle that bona fide reimbursements are not revenue taxable in the hands of the reimburser, the Tribunal held the AO erred in invoking Article 13 of the DTAA; the addition was annulled in favour of the taxpayer.
ITAT affirmed the CIT(A)'s deletion of the AO's addition, holding that amounts received by a non-resident company from its Indian AE constituted pure reimbursements for third-party legal and professional services, without markup, and therefore did not constitute assessable income in India. The AO's own findings and supporting third-party invoices established that services were supplied by the third party and accepted as arm's-length by the TPO in the AE's hands. Applying the principle that bona fide reimbursements are not revenue taxable in the hands of the reimburser, the Tribunal held the AO erred in invoking Article 13 of the DTAA; the addition was annulled in favour of the taxpayer.
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