TaxTMI 
TaxTMI 
2022 (5) TMI 1520
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.... the assessee company Timken India Ltd (TIL). In the assessment proceedings, Ld. AO noted from Form 3CEB that the assessee company has made payment of Rs. 2,38,26,680/- (Rs. 73,19,280 + Rs. 1,65,07,400) towards reimbursement of expenses and actual cost of services to M/s. Timken Inc, USA incurred by it on behalf of TIL. By taking a view that section 195 speaks of any sum and not income, Ld. AO held that assessee was obliged to deduct tax at source while making payment towards reimbursement of expenses. Since the claim of expenditure of Rs. 2,38,26,680/- by the assessee in computing the profits and gains of business and profession is without deduction of tax at source, Ld. AO disallowed the same by applying the provisions of section 40(i)(a) of the Act and added it back to the total income of the assessee. Aggrieved, assessee went in appeal before the Ld. CIT(A). 4. On appeal, the Ld. CIT(A) deleted the impugned addition made by the Ld. AO by following the finding given at Para 11 in the earlier order dated 07.09.2017 of the Coordinate Bench of ITAT Ranchi in assessee's own case in ITA Nos. 176-177- 178/Ran/2014 & CO Nos. 10-11-12/Ran/2014 for AYs 2005-06, 2006-07 and 2007-08. Aggr....
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....low for the sake of clarity and ease of reference:- "11. We have heard the rival submissions, perused the orders of lower authorities and materials available on record. In the instant case, the assessee has claimed to have made reimbursement of expenses of Rs. Rs.47,08,040/for assessment year 200506 and Rs. Rs.l,68,16,412/for assessment year 200708. The Assessing Officer disallowed deduction for the same for the respective assessment years on the ground that no TDS was deducted u/s.195(2) of the Act. The contention of the assessee is that since the assessee had made reimbursements of expenses and as there was no profit element embedded in those payments, therefore, no TDS was required to be deducted u/s.195(2) of the Act from the payments of Timken Company, USA. For this, reliance was placed on the decision of Hon'ble Supreme Court in the case of GE India Technology Centre Pvt. Ltd., (supra). Ld A.R. of the assessee has pointed out from the assessment order in the case of Timken Company, USA for assessment years 200506 and 200708 that in the assessment made for assessment year 200506, the Assessing Officer has himself admitted Rs. 41,52,635/towards reimbursement of expenses a....
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....7 (supra) were reiterated and the appeals of the assessee were allowed. 8. On a specific query by the Bench to the Ld. Counsel to demonstrate his claim that there is no element of income involved in the impugned chargeback payments, it was submitted that this matter from the side of payee i.e. Timken Inc, USA for the same year under consideration travelled before the Hon'ble Co-ordinate bench of ITAT Kolkata in ITA Nos. 387 & 388/Kol/2010 and CO Nos. 32 & 31/Kol/2010 for AYs 2002-03 and 2003- 04. He submitted that receipts of Rs. 2,38,26,680/- (Rs. 73,19,280 + Rs. 1,65,07,400) by Timken Inc, USA towards reimbursement of expenses and actual cost of services from the assessee were treated as 'fees for technical services' (FTS) by the concerned Ld. AO which the Hon'ble Co-ordiante Bench of ITAT Kolkata was pleased to hold in Para 31 vide its order dated 29.11.2017 that. 'We are of the view that there is no basis for the AO to conclude that the payment of reimbursements were in the nature of FTS.' 8.1 On perusal of the order of the coordinate bench of ITAT Kolkata in the case of Timken Inc, USA i.e. the payee placed on record, we find that it is a detailed order analyzing the full fa....
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....er to control their businesses across the globe perform many functions for their counterparts in the other country in order to manage, supervise, guide, coordinate the activities of the group entities. These activities are referred to as intra group services, which are performed by the parent company for their group companies or vice versa. These services may also be performed by anyone of the group companies for its fellow group company. These services are referred to as "Home Office Allocation receipts" in the order of assessment and the submissions made by the Assessee before the revenue authorities as well as the Tribunal. Such services rendered to group companies are generally referred to as "Intra Group Services" (IGS). 22. Now we shall deal with the grounds raised by the revenue in its appeals viz.,challenging the correctness of the order of CIT(A) deleting the addition of Rs.87,65,928 in AY 200203 & a sum of Rs.l,65,07,4001- in A Y 2003- 04 on the ground that the aforesaid sums paid by Tirnken India Limited (TIL) a subsidiary of the Asssessee by way of reimbursement of certain expenses incurred out of India which were paid by the Assessee and which were reimbursed by TIL....
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....llows: "3. The Company has received reimbursements from Timken India Limited (TIL) on account of certain services rendered to TIL by some third parties for which the company has acted only as a conduit. The amount received/receivable from TIL was only reimbursements and without any mark upon the amounts charged by such third parties. Such reimbursements, without having any element of income is not taxable in India." 25. The AO was not satisfied with the aforesaid claim of the Assessee. He observed that expenses claimed as reimbursement included Legal expenses, Inspection & Survey Exp., and airfare, local conveyance, fooding & lodging charges etc. incurred on behalf of employees of TIL who went abroad to attend various Workshop or Seminars, Business Meetings, Training Courses imparted / conducted by the Assessee or its associated enterprises. He was of the view that the fees received for imparting Training, certainly made available technical knowhow, experience, skill etc., and therefore was nothing but fees for included services within the meaning of Article 12 of the respective Treaty. He also held that Legal expenses and Inspection & Survey Expenses were incurred for provid....
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....e of commission charges, mobile expenses, Airlines Tickets, VISA CHARGES, Hotel expenses, Apartment rental etc. He held that the above sums were clearly reimbursements and therefore do not contain the profit element. He also observed that the AO in AY 200405 has treated them as reimbursement and not subjected them to tax. The CIT(A) held that the expenses claimed as reimbursement of actual expenses of Rs.8765928/and Rs.1,65,07,400l for AY 200203 & 200304 cannot be categorized as technical services or any other services rendered for the purpose of making profit. Accordingly, he held that taxing them was not justified. The A.O. was directed to delete the addition of Rs.87,65,928/and Rs. l,65,07,400/for the assessment Years 200203 and 200304 respectively. 31. We have considered the submissions of the ld.DR and are f the view that there is no merit in this appeal by the Revenue. A perusal of the details in Annexure3 & 4 to this order would go to show that it was third parties who had rendered services to TIL. The actual billed by the third parties were paid by the Assessee in USA and later on reimbursed by TIL to the Assessee in India. We are of the view that there is no basis for t....