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DEPUTY COMMISSIONER OF INCOME-TAX & ASSISTANT COMMISSIONER OF INCOME-TAX Versus SHELADIA ASSOCIATES INC.

2015 (11) TMI 852 - ITAT AHMEDABAD

Computation of income under section 44D - Reimbursement of expenses not treated as part of 'fees for technical services' by CIT(A)- Held that:- Commissioner of Income-tax (Appeals) while deciding the issue in favour of the assessee has relied on the decision of the hon'ble Cuttack Bench in the assessee's own case for the assessment year 2002-03 wherein considering this clause of the agreement with NHAI and the definition of 'fees for technical services', under the Income-tax Act, as well as, the .....

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dent. ORDER The order of the Bench was delivered by 1. Anil Chaturvedi (Accountant Member).-These two appeals filed by the Revenue are against the order of the Commissioner of Income-tax (Appeals), Gandhinagar, Ahmedabad dated December 1, 2010 and November 11, 2011 for the assessment years 2007-08 and 2008-09 respectively. 2. At the outset, before us, both parties submitted that though the appeal of the assessee relates to two different assessment years but the facts and circumstances of both th .....

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engineering services for various infrastructure projects in India. The assessee filed its return of income for the assessment year 2007-08 on March 29, 2008 declaring total income of ₹ 7,23,59,010. The case was selected for scrutiny and thereafter the assessment was framed under section 143(3) vide order dated December 29, 2009 and total income was determined at ₹ 8,99,54,322. Aggrieved by the order of the Assessing Officer the assessee carried the matter before the learned Commissi .....

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e course of assessment proceedings, the Assessing Officer noticed that the assessee had undertaken various projects in pursuance of agreements with the Governments entered into after March 31, 1996 but before April 1, 2003. He also noticed that the assessee had received income by way of royalty or fees for technical services which were assessable under section 44D(b) of the Act. The Assessing Officer also noticed that the assessee has considered the amount of ₹ 5,40,05,878 as fees for tech .....

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per the provisions, no deduction in respect of any expenditure under sections 28 to 44C shall be allowed therefore the expenditure of ₹ 6,98,39,579 which was shown by the assessee under the head "consulting fee, management fee, exchange profit/loss and reimbursement of expenses" received was liable to be held as "fees for technical services" for the purpose of section 44D of the Act. He accordingly held the same as part of income. Aggrieved by the order of the Assessin .....

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but also is on actual basis. The hon'ble Income-tax Appellate Tribunal, Cuttack Bench has decided in favour of the assessee in the assessment year 2002-03 on this issue when it confirmed the order of the Commis sioner of Income-tax (Appeals) on similar facts where reimbursement of expenses was held to be not part of 'fees for technical services'. The facts of the case in Cochin Refineries Ltd. v. CIT [1996] 222 ITR 354 (Ker) relied on by the Assessing Officer are distinguishable beca .....

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tted by the Assessing Officer. In the light of the above, following the decision of the hon'ble Income-tax Appellate Tribunal, Cuttack Bench in the assessee's case, I hold that reimbursement of expenses is not part of 'fees for technical services' under section 44D of the Income-tax Act. Therefore, the Assessing Officer is directed to recompute the 'fees for technical services'. This ground of appeal is therefore allowed." 5. Aggrieved by the aforesaid order of the l .....

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tly disallowed by the Assessing Officer. She thus supported the order of the Assessing Officer. The learned authorised representative on the other hand reiterated the submissions made before the Assessing Officer and the learned Commissioner of Income-tax (Appeals) and further submitted that the facts in the present case are identical to the facts of the case for the assessment year 2002-03 and the issue in the present case is directly covered in the assessee's favour by the decision of the .....

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e Revenue's contention is that while computing the income under section 44D, no deduction of expenditure is to be allowed. We find that the learned Commissioner of Income-tax (Appeals) while deciding the issue in favour of the assessee has relied on the decision of the hon'ble Cuttack Bench in the assessee's own case for the assessment year 2002-03. We find that the learned Commissioner of Income-tax (Appeals) vide order dated December 12, 2005 for the assessment year 2002-03 had dec .....

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ch expenses would be reimbursed and at what rate. Considering this clause of the agreement with NHAI and the definition of 'fees for technical services', under the Income-tax Act, as well as, the definition of 'fees for technical services', under the Double Taxation Avoidance Agreement, the receipts in the nature of reimbursement of expenses, cannot be treated as, fees for technical services. Hence, I hereby direct the Assessing Officer to exclude ₹ 75,56,398 being reimburs .....

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the paper book). During the course of hearing, the Bench inquired from both the parties as to whether the aforesaid order of Cuttack Bench in the assessee's own case for the assessment year 2002-03 has attained finality or has been reversed by the higher authorities to which the learned authorised representative submitted that on the case being transferred from the Deputy Commissioner of Income-tax, Bhubaneswar to Ahmedabad, the assessee vide letter dated June 6, 2013 addressed to the conce .....

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