2016 (3) TMI 920

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....e at Rs. 5,05,23,090/-. 2. Effective ground of Appeal filed by the AO is about disallowance of reimbursement of expenses of Rs. 97.95 Crores. During the assessment proceedings, the AO found that the assessee had made certain payments to its overseas group companies, that it had not deducted tax at source with regard to such payments. He observed that payments made by the assessee were in nature of the Technical/Managerial services, that the assessee was liable to deduct tax as per the provisions of section 195(1)r.w.s.9(1)(vii)of the Act. He issued a notice to the assessee asking it as to why not same should be disallowed as per the provisions of Section 40(a)(ia)of the Act and be added back to its total income. After considering the submi....

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....nce cost, that the overseas group companies initially incurred the expenses by way of payment to third parties, that the payment were made on behalf of the assessee, that the expenses were booked at cost and there was no mark-up, that no income had accrued to the overseas group companies from the amounts reimbursed by the assessee. It was further stated the complete details of reimbursement of expenses to overseas group companies were submitted vide letter dated 28.11.2009 and 30.11.2010, that the reimbursement of expenses had also been reported in the Form 3CED, that the TPO had examined the nature of reimbursement of expenses while passing the transfer pricing order on 9.10.2010, that the TPO had found that the transactions were not hit b....

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....hat there was no element of income/ profit embedded in such payments, that the provisions of section 195(1)were not attracted. Finally, he held that the disallowance made by the AO by invoking provisions of section 40 (a) (ia) of the Act was not sustainable. 4. During the course of hearing before us, the departmental representation (DR) supported the order of the AO and relied on the case of Virolo International(42 Taxman.com 286). The authorised representative(AR)relied upon cases of Seimens Aktiongesellschaft (310 ITR 320, WNS Global Services Ltd (214Taxman317)and made the same submissions that were made before the FAA. 5. We have heard the rival submissions and perused the material before us.We find that the assessee had incurred an ex....

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....ra). The learned Division Bench of the Delhi High Court was pleased to hold that reimbursement of expenses can, under no circumstances, be regarded as a revenue receipt and in the present case the Tribunal had found that the assessee received no sums in excess of expenses incurred. A similar issue had also come up for consideration before the Division Bench of the Calcutta High Court in CIT vs. Dunlop Rubber Co. Ltd. (supra). The learned Division Bench was answering the following question : "Whether, on the facts and in the circumstances of the case, the amounts received by the assessee (English company) from M/s Dunlop Rubber Co. (India) Ltd. (Indian company) as per agreement dt. 29th Jan.,1957 constituted income assessable to tax ?" ....