TaxTMI 
TaxTMI 
2025 (8) TMI 530
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....10,06,66,731/- received from HSBC Electronic Data Processing (India) Private Limited (HDPI) taxed as fees for technical services (FTS). 2. Whether, on the facts and in the circumstances of the case and in law, the CIT(A) has erred in deleting the addition made by A.O. in the head of reimbursement of expenses of Rs. 4,15,21,759/- received from HSBC Software Development (India) Private Limited (HSDI) taxed as FTS." 3. The relevant facts in brief are that the Assessee is a foreign company incorporated in United Kingdom. The Assessee, a tax resident of United Kingdom, is engaged in providing banking and financial services worldwide. For the Assessment Year 2020-2021, Assessee filed return of income on 05/01/2021 which was revised on 31/05/2021. The case of the Assessee was selected for scrutiny. The Assessing Officer passed Draft Order under Section 143(3) read with Section 144C(1) of the Act on 12/09/2022 proposing (a) addition of INR.10,06,66,731/- in respect of amount received by the Assessee from HSBC Electronic Data Processing (India) Private Limited [for short 'HDPI'] and (b) addition of INR.4,15,21,759/- in respect of amount received by the Assessee from HSBC Softwar....
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....ssessee explained that HDPI had a branch in United Kingdom and for administrative convenience, the expenses in relation to the said branch (such as salary cost of employees, infrastructure cost etc.) were incurred by the Assessee in United Kingdom and subsequently, HDPI reimbursed the said expenses to the Assessee on cost-to-cost basis without any mark-up or income element. The Assessing Officer treated the aforesaid amounts received by the Assessee from HDPI as income of the Assessee on the ground that the Assessee had failed to provide the details of the expenses reimbursed and the relevant supporting documents during the assessment proceedings. The CIT(A) deleted the addition by following the decisions of the Tribunal in the case of the Assessee. Being aggrieved, the Assessee has carried the issue in appeal before the Tribunal. 5. We have considered the rival submission and have perused the material on record in relation to this issue. We find that Ground No.1 raised in the present appeal is similar to Ground No.1 raised in appeal pertaining to Assessment Year 2011-2012. While disposing off the aforesaid appeal vide Order, dated 16/07/2019, passed in ITA No.7386/Mum/2016, the....
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....he rival submissions and perused the material on record. We are inclined to uphold the grievance of the assessee. The reimbursement received by the assessee are in respect of specific and actual expenses incurred by the assessee and do not involve any mark-up and the assessee has furnished sufficient evidence to demonstrate the incurring of said expenses. There is thus, no good reason to make any addition to the income in respect of the reimbursement of expenses. The action of the CIT(A), as the Learned Representative rightly contends, is based on pure surmises and conjectures. 8. Here, we would also like to refer to the judgment of A P Moller Maersk AS (supra). In that case, issue related to a foreign company engaged in shipping business, which was a tax resident of Denmark; that it had agents working for it who booked cargo and acted as clearing agents for the assessee; and, that in order to help all its agents across the globe, the assessee had set up and maintained a global telecommunication facility called Maersk net system which was a vertically integrated communication system. The agents would pay for the usage of system on a pro-rata basis. According to the assesse....
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....g Officer nor the Commissioner (Appeals) had stated that there was any profit element embedded in the payments received by the assessee from its agents in India. Once the character of the payment was in the nature of reimbursement of the expenses, it could not be income chargeable to tax. Moreover, freight income generated by the assessee in the assessment years in question was accepted as not chargeable to tax as it arose from the operation of ships in international waters in terms of article 9 of the DTAA. Once that was accepted and it was also found that the Maersk net system was an integral part of the shipping business which was allowed to be used by the agents of the assessee as well in order to enable them to discharge their role more effectively as agents, and the business could not be conducted without it, it could not be treated as any technical services provided to the agents." 9. Quite clearly, payments by way of reimbursement of expenses incurred on behalf of the payer cannot be construed as income chargeable to tax in the hands of the payee, a proposition which is approved by the Hon'ble Bombay High Court in the case of Siemens Aktiongesellschaft (supra).....
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.... the assessee has provided certain services to group companies. However, such services cannot be said to be in connection with information technology related services. The observations of the departmental authorities that it is in the nature of FTS are more on presumption and surmises, rather, on substantive basis. Further, the allegation of the departmental authorities that necessary documentary evidences have not been furnished is not borne out from the records. Pertinently, while deciding identical issue in assessee's own case in assessment year 2011-12, the Tribunal, in the order referred to above, has deleted the addition holding as under:- "7. xx. 8. xx 9. Quite clearly, payments by way of reimbursement of expenses incurred on behalf of the payer cannot be construed as income chargeable to tax in the hands of the payee, a proposition which is approved by the Hon'ble Bombay High Court in the case of Siemens Aktiongesellschaft (supra). In view of the above discussion, we direct the Assessing Officer to delete the disallowance of expenses sustained by the CIT(A) and hold that no part of reimbursement of expenses received by the assessee on the fact....
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....I for providing FTS and those it claimed as reimbursement of expenses. 3. Whether on the facts and in the circumstances of the case, Ld. CIT(A) has erred in holding that the receipts amounting to Rs. 4,41,05,261/- received by assessee from HSBC Electronics Data Processing (India) Pvt. Ltd. (HDPI) is in the nature of reimbursement and not Fees for Technical Services (FTS) ignoring the fact that, in the same order the Ld. CIT(A) adjudicated that reimbursement of expenses amounting to Rs. 2,65,51,508/- received by the Appellant from HSBC Software Development (India) Pvt. Ltd. (HSDI) are in the nature of FTS thereby upholding the addition made by the AO even though the nature of the receipts from HDPI and HSDI are of similar nature.?" 8. The Tribunal dismissed the above grounds holding as under: "3. Brief facts are that the assessee is a company incorporated in United Kingdom and is a tax resident of UK and does not have any office or place in India. The assessee provides various banking and financial services worldwide. The Assessing Officer during the course of assessment proceedings noted that the assessee has received a sum of INR.4,41,05,261/- from HSBC Electr....
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.... the payer cannot be construed as income chargeable to tax in the hands of the payee. We noted that the facts are exactly identical what was before Tribunal in AY 2011-12. Even otherwise, we find that this issue is squarely covered by Bombay High Court decision in the case of CIT vs. Siemens Aktingesellschaft [2009] 310 ITR 320 (Bombay). Hence, we confirm the order of CIT(A) deleting the disallowance. This common issue of both the appeals of Revenue in ITA No.708 & 709/Mum/2020 for AYs 2010-11, 2008-09 is dismissed ". 9. Thus, we note that the Tribunal has consistently held in the case of the Assessee that payments by way of reimbursement of expenses received by the Assessee were from HDPI in identical facts and circumstance were not liable to tax in the hands of the Assessee. We find that the Revenue has failed to bring on record any facts to persuade us to take a different view of the matter. Therefore, we do not find any infirmity in the order passed by the CIT(A) deleting the addition. Thus, respectfully following the above decisions of the Tribunal in the case of the Assessee, we confirm the order of the CIT(A) deleting the addition of INR.10,06,66,731/- made by the Assessi....