TaxTMI 
TaxTMI 
2018 (6) TMI 1107
X X X X Extracts X X X X
X X X X Extracts X X X X
....led its return of income on 29th November 2014, declaring total income of Rs. 1,29,27,970. During the assessment proceedings, the Assessing Officer while examining the details of income shown by the assessee in the return of income and notes appended thereto found that the assessee, though, has received an amount of Rs. 15,43,815, towards travel cost, however, the amount has not been offered to income stating that it is in the nature of reimbursement of travel and meals cost without any profit element, hence, not liable to tax. In support of such claim, the assessee had also relied upon certain judicial precedents. The Assessing Officer not being convinced with the claim of the assessee issued a show cause notice directing the assessee to explain why the amount received towards reimbursement of cost should not be taxed as was done in the earlier assessment years. Though, the assessee through elaborate submissions justified its claim, however, the Assessing Officer rejecting the submissions of the assessee held that the amount claimed to have been received towards reimbursement of cost is in the nature of income of the assessee, hence, taxable. Accordingly, he framed the draft asses....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eceived towards services rendered and amount to be received towards reimbursement of cost have been specifically demarcated and provided for in the agreement. Therefore, there is a clear bifurcation of the amount to be received towards services rendered and reimbursement of cost. He submitted, while deciding identical issue in assessment year 2009-10 and 2011-12, the Tribunal after going through the terms of the agreement has held that the reimbursement of cost cannot be considered to be part of fee for technical services, hence, is not taxable. He submitted, facts being identical, the decision of the Tribunal in assessee's own case for preceding assessment years would be binding. 6. The learned CIT (DR), Shri Samuel Darse, though, agreed that in the preceding assessment years, the Tribunal has decided the issue in favour of the assessee, however, strongly relying upon the observations of the Assessing Officer and the DRP, he submitted that the Tribunal while deciding the issue in the preceding assessment years has not correctly appreciated the facts. He submitted, when there is a single agreement between the assessee and Indian company and when the receipts under the said agree....
X X X X Extracts X X X X
X X X X Extracts X X X X
....voice Customer the fees due for the services and Customer will pay such invoices within forty-five(45) days after receipt of the invoice. Such invoices may be monthly or quarterly as specified by Service Provider. 1.3. Reimbursement of Third Party Costs Customer will reimburse Service Provider for (i) fees paid by Service Provider to third party service providers, advisors and consultants in connection with or related to the performance of the services rendered under the Agreement, including without limitations accountants, attorneys, marketing consultants and agencies and information technology service providers, etc) and (ii) software, materials and items paid for by service Provider in connection with or related to the performance of the Services (collective, (i) and (ii) are referred to as "Third Party Costs"). If Third Party Costs are incurred by Service Provider for the benefit of Customer and other customers, then Service Provider will allocate the Third Party Costs between and among Customer and such other customers in a manner determined by Service Provider in its sole discretion. Service Provider will invoice Customer the third Party Costs and Customer will pay s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ave unnecessarily made an issue out of that. 12. With regard to the taxability of FTS on gross basis, it has been fairly admitted by the Ld. Counsel of the assessee that there is no dispute on the proposition that FTS has to be taxed on gross basis. However, the issue that arise here for our consideration is whether the expenses incurred on cost to cost basis will also be included in the amount of FTS. We find that this controversy has now been put to rest by Hon‟ble Supreme Court by way of its latest judgment in the case of DIT vs A.P. Moller Maersk 392 ITR 186 (SC). Relevant part of the judgement is reproduced hereunder:- "10. The facts which emerge on record are that the assessee is having its IT System, which is called the Maersk Net. As the assessee is in the business of shipping, chartering and related business, it has appointed agents in various countries for booking of cargo and servicing customers in those countries, preparing documentation etc. through these agents. Aforementioned three agents are appointed in India for the said purpose. All these agents of the assessee, including the three agents in India, used the Maersk Net System. This system i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....profit element has been included in the expenses reimbursed. Thus, taking into account the totality of facts and circumstances of the case, we find that addition made by the AO is contrary to facts and therefore, is directed to be deleted." 8. On a careful reading of the order of the Co-ordinate Bench reproduced herein above, it is evident that the Tribunal after analyzing the different terms of the agreement and examining the facts on record have recorded a factual finding that the agreement clearly envisages that fee for technical services is different from the expenses incurred on third party cost. Further, it has recorded a finding of fact that there is a clear bifurcation in the agreement between the internal cost incurred by the assessee and external cost borne or paid by the assessee on behalf of GIA India. Thus, on the basis of aforesaid facts, the Tribunal has applied the ratio laid down by the Hon'ble Supreme Court in case of DIT v/s A.P. Moller Maersk, 392 ITR 186 (SC) and held that the amount received towards reimbursement of cost cannot be taxed at the hands of the assessee. Therefore, the observation of the learned DRP that Tribunal has not addressed the issue ....