TaxTMI 
TaxTMI 
2025 (8) TMI 948
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.... "1. Whether on the facts and circumstances of the case and in law, the Ld CIT(A) erred in deleting the addition made by the A.O on account of reimbursement of expenses of Rs. 3,89,32,214/- relying on judgment of Hon'ble Karnataka High Court in the case of CIT Vs UE Development India Pt Ltd- ITA No. 52,53,54 and 55/2014. 2. Whether on the facts and circumstances of the case and in law, the Ld CIT(A) erred in deleting the addition made by the A.O on account of reimbursement of expenses of Rs. 3,89,32,214/- without considering the fact that the assessee has received the said amount from its Indian A.E. on account of rendering of services from the third party which were of the nature of FTS and are taxable in India." 2. ....
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....submitted that the amount reimbursed cannot be treated as income of the assessee. The AO did not accept the submissions of the assessee and held that the amount received is to be treated as Royalty and Management fee which is subject to tax as per Article 13 of the DTAA between India and Denmark. The AO accordingly made the addition of Rs. 3,89,32,214/- to the income returned by the assessee. The relevant observations of the AO in this regard are extracted below: "5.2 The reply of the assessee is perused. On inspection of Annexure 1 to letter dated 30/11/2017 and enclosed invoice as well as from the explanations of the assessee, it is clear that the expenses incurred by the assessee company are not for employees of the associated c....
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....that the Indian Entity has paid for expenses in consideration of services received that are in nature of "Legal and Professional Services" Therefore as per Article 13 of DTAA with Denmark, same is taxable in India. ****** 5.4 It is observed from the supporting invoice of Kroll Advisory Solutions - Kroll Associates (India) Private Ltd. for Rs. 3,16,90,601/- is for rendering of Legal Services. Further in the annexure to invoice raised by assessee same is termed as Legal and Professional Expenses. Therefore, the nature of receipt by assessee is for providing Legal consultancy service to Indian entity. 5.5 Therefore, based on the above facts and discussion, the claim of the assessee for reimbursement of expenses of Rs....
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.... the delay. The appeal is admitted thus for adjudication. 5. The ld. DR submitted that the nature of service as per assessee's own submission is legal and professional charges and therefore as per Article 13 of the DTAA between India and Denmark the same should be treated as Royalty and Management Fees. The ld. DR argued that the CIT(A) has not examined the claim of the assessee that the receipt is in the nature of reimbursement and has allowed the appeal for the reason that the ALP of the transaction is accepted in the hands of the payer. The ld. DR therefore, argued that the impugned transactions have not beeen properly scrutinized by the CIT(A) before allowing the appeal in favour of the assessee. The ld. DR also submitted that th....
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.... addition on the ground that the ALP is accepted in the hands of the payer and therefore no addition can be made in the hands of the assessee. 8. From the perusal of the findings of the AO as extracted in the earlier part of this order, we notice that the AO has not disputed the claim of the assessee that the impugned payments are in the nature of reimbursements and that it is without mark up. It is also noticed that the AO has observed that the invoice raised by the assessee is supported by the invoice of 3rd party namely Kroll Advisory Solutions - Kroll Associate India Pvt. Ltd. towards rendering of legal services. From these facts, it is clear that the AO himself has given a clear finding that legal and professional services are rende....