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2019 (8) TMI 1723 - AT - Income TaxIncome accrued in India - Reimbursement of rebate and discount in nature of Royalty - as per AO reimbursement of rebate and discount received by the Appellant from Braitrim India Private Limited ('BIPL') is for the use of the brand 'Braitrim' and is assessable to tax as 'Royalty' under section 9(1)(vi) of the Act/Article 13 of the India-United Kingdom tax treaty - HELD THAT:- We find that the assessee is required to give a rebate/discount to the retailers based on the volume/units of sales to garment suppliers achieved by the Braitrim group. Subsequently, the proportionate share of rebate/discount is recovered by the assessee from its group companies, including BIPL, based on the relative sales of those group companies to the respective retailers. The assessee has, accordingly entered into a reimbursement agreement with BIPL, whereby BIPL has acknowledged its obligation to reimburse its proportionate share of the discount/rebate to the assessee based on sale volumes/units achieved by it. As per the Cost Reimbursement Agreement (CRA), such reimbursements are depicted as 'Administration charges' by BIPL in its books of account. 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 [2008 (11) TMI 74 - BOMBAY HIGH COURT]. In view of the above discussion, we direct the Assessing Officer not to treat any part of reimbursement of expenses received by the assessee as income of the assessee. The assessee gets the relief accordingly on Ground no. 2 of the aforesaid appeal.
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