2018 (3) TMI 1991 - HC - Income Tax

Income taxable in India - Liability to tax on interest - Reimbursement of expenses - Data processing fees paid by the assessee to its overseas branch at Singapore is in the nature of interest - HELD THAT - The question as proposed has became academic in view of the fact that the alternative submission made by the respondent before the authorities was that the payment made to its overseas branch at Singapore in respect of the data processing fees was really in the nature of reimbursement. The impugned order of the Tribunal has on facts found that the payment made by the respondent assessee to it overseas branch at Singapore was in the nature of reimbursement of expenses. The aforesaid findings of fact by the Tribunal is not the subject matter for challenge before us by the Revenue. It is also an agreed position between the Counsel that the issue of reimbursement of expenses is now in similar circumstances been held to be not chargeable to tax A.P. Moller Maersk A/S 2017 (2) TMI 993 - SUPREME COURT - No substantial question of law.

Summary

Issues:
Challenge to order of Income Tax Appellate Tribunal regarding Assessment Year 2006-07 - Nature of payment of data processing fees to overseas branch at Singapore - Whether payment is in the nature of interest and liable to tax.

Analysis:
The High Court of Bombay heard an appeal under Section 260A of the Income Tax Act, 1961, challenging the order passed by the Income Tax Appellate Tribunal for Assessment Year 2006-07. The main issue raised by the Revenue was whether the payment of data processing fees to the overseas branch in Singapore should be considered as interest and be subjected to tax. However, it was noted that the respondent had argued before the authorities that the payment was actually a reimbursement of expenses. The Tribunal had found that the payment was indeed a reimbursement, and this finding was not contested by the Revenue. The Court highlighted that the issue of reimbursement of expenses had been previously held to be not chargeable to tax by the Apex Court in a specific case. As a result, since the main question of law was deemed academic, the Court concluded that it did not give rise to any substantial question of law and therefore dismissed the appeal without any order as to costs.