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2024 (4) TMI 18 - AT - Income TaxAccrual of income - Reimbursement of expenses treated as income of the Assessee - HELD THAT:- We observe that the AO in the assessment order by specifically mentioning “that the Assessee failed to provide party wise details of clinical research and development expenses and support service charges, work orders for major parties, copies of debit note/invoice/vouchers for support service charges, clinical research and development expenses and actual rendering of such income and expenditure and reimbursement details of expenses and evidence in order to show that the expenses have actually been incurred by the Assessee and therefore, the same were reimbursed,” treated the said amount allegedly claimed as reimbursement of expenses, as income of the Assessee. Commissioner though approved the action of the Assessee in treating the expenses incurred which have been reimbursed from Wyeth and its affiliates for clinical trials and not routing the same as pass through cost incidental or ancillary to the primary business activities of the service provider and non- deduction of tax at source, however as it appear from impugned order, it is a fact which though refuted specifically by the AR that Ld. Commissioner failed to examine the party wise details of clinical research and development expenses and support service charges, work orders for major parties, copies of debit note/ invoice/vouchers for support service charges, clinical research and development expenses and actual rendering of such expenditure and any other documentary evidence such as bank details etc. qua reimbursement of expenses that such amount represents reimbursement of cost and does not have any profit element, hence, for the limited purpose for examination of such parameters as noted above, we are inclined to remand the instant issue to the file of the Ld. Commissioner with a direction to verify the aforesaid details/documents as noted above and/or any other corroborative material which the Assessee intends to rely in order to substantiate its claim and recompute the claim of reimbursement accordingly. Resultantly, the Appeal filed by the Revenue department is partly allowed for statistical purposes. Direction given by the Commissioner to the AO to charge a markup of 13% on the said amount on account of payment received from the said entities - HELD THAT:- We observe that though the Assessee on the one side, has claimed that Assessee’s duty is to approach and identify the third party investors who would be willing to perform clinical trial activities and thereafter the Wyeth group is entitled to decide qua the appointment of investors and once such a decision is made and the identified third party investors are assigned the job of performing clinical research, the Assessee shall co-ordinate and supervise the work of such identified third party investors and report the status of work and data collected to the Wyeth group entities. Assessee on the contrary claimed that the Assessee has not performed any value added activities and the role of the Assessee is in the nature of facilitator and/or conduit between the third party Institutions (Investors) and Wyeth group. We also observe that the OECD has also laid down certain guidelines qua mark-up on the cost of the services as reproduced and considered by the Hon’ble Co-ordinate Bench of the Tribunal in the case of Vedanta Limited Vs. ACIT [2020 (9) TMI 1010 - ITAT DELHI] We are in agreement with the Assessee that if no services have been provided, except playing the role of conduit only, then no mark up would be applicable, however where the Assessee has played an active/main role in identifying and selecting the third parties, making the arrangements, controlling and supervising their work and reporting their working to the principal and charged for such services from the alleged reimbursement/external costs, then in our considered opinion mark-up would be necessitated, hence, for the just decision of the case and for substantial justice, we deem it appropriate to remand this issue to the file of Ld. Commissioner for decision afresh.
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