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2018 (2) TMI 1628 - ITAT DELHITDS u/s 195 - Disallowance of expenses u/s 40(a)(i) - reimbursement of expenses - Held that:- There is no appearance from the side of the assessee despite notice. We are, therefore, proceeding to dispose of this appeal ex parte qua the assessee but on merits. Admitted position as emanating from the impugned order that the aforesaid payment made by the assessee represents its share in the expenses incurred by the group companies on cost to cost basis. No material has been brought on record by the ld. DR to demonstrate that it was not a reimbursement but a payment made with some mark-up having profit element. It is a settled legal position that when reimbursement of expenses is made which does not include any mark up or profit element, there can be no question of taxing such amount in the hands of the recipient. Once a particular amount is not chargeable to tax in the hands of the non-resident recipient, the question of applicability of section 195 does not arise. Recently, the Hon’ble Supreme Court in DIT(I.T.) VS. A.P. Moller Maersk A/S (2017 (2) TMI 993 - SUPREME COURT) has held that once payment is in the nature of reimbursement of expenses, that is, it is a cost sharing arrangement, it cannot be income chargeable to tax in the hands of recipient. Similar view was earlier taken in DIT VS. Wizcraft International Entertainment P. Ltd. (Bom) (2014 (5) TMI 149 - BOMBAY HIGH COURT) holding that payment by way of reimbursement of expenses is not taxable in India. In view of the fact that the amount paid by the assessee to non-residents is not chargeable to tax in their hands and, as such, the provisions of section 195 of the Act are not attracted, there can be no question of applying section 40(a)(i) for making disallowance in the hands of the assessee. - Decided against revenue.
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