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2017 (5) TMI 580 - AT - Income TaxAmount of travel, group health insurance and other incidental expenses received by way of reimbursement - treated as income of the assessee for the year under consideration - assessee company incorporated in USA is engaged in grading and certification of diamonds entered into agreement GIA India provoding training and technical services - Held that:- Costs and expenses incurred by the assessee on travel and insurance etc on the persons deputed in India for providing training and technical services to GIA India was in the nature of cost incurred over and above the cost of employment. This interpretation is further re-enforced when we read the next clause, i.e. clause 1.3 which says that GIA India shall reimburse to the assessee any expenses incurred on account of thirty party costs. The drafting of the agreement and manner of placements the clauses in the agreement clearly make out a case that FTS is different from the expenses incurred on third party costs. Thus, there is a clear bifurcation in the agreement between the internal cost incurred by the assessee and external cost borne or paid by the assessee on behalf of GIA India. There is no confusion in this regard and the lower authorities have unnecessarily made an issue out of that. whether the expenses incurred on cost to cost basis will also be included in the amount of FTS ? - Taxability of FTS on gross basis, it has been fairly admitted that there is no dispute on the proposition that FTS has to be taxed on gross basis. However, the issue that arise here for our consideration is . We find that this controversy has now been put to rest by Hon’ble Supreme Court by way of its latest judgment in the case of DIT vs A.P. Moller Maersk (2017 (2) TMI 993 - SUPREME COURT ). It is clear that the amount received by the assessee on account of reimbursement which has been received over and above the amount of FTS cannot be included and taxed as part of FTS. Our attention has been drawn on the Transfer Pricing Study report and Transfer Pricing orders passed in the case of GIA India from where it can be made out that no profit element has been included in the expenses reimbursed. Thus, taking into account the totality of facts and circumstances of the case, we find that addition made by the AO is contrary to facts and therefore, is directed to be deleted. - Decided in favour of assessee.
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