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DDIT (IT) -2 (1) , Mumbai Versus M/s. Saipen S.A. C/o. Deloitte Haskins & Sells CAs

2016 (6) TMI 692 - ITAT MUMBAI

Reimbursement of travelling expenses of expatriates received from its clients and also “living allowance” paid by the clients to expatriates (employees deputed by the assessee) - whether such receipt do not constitute income in the hands of the assessee? - CIT(A) deleted the addition - Held that:- It is an admitted fact that the DRP has held in AY 2006-07 and 2007-08 that these receipts, viz., reimbursement of travelling expenses and living allowance paid to expatriates, are not to be considered .....

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de by the assessing officer has been deleted by DRP in AY 2006-07 and 2007-08. Identical additions made in AY 2003-04 and 2004-05 have also been deleted by the Tribunal, even though there was misunderstanding about the facts. But the fact remains that the order of the Tribunal passed for AY 2003-04 and 2004-05 remains in operation as of now. We are dealing with AY 2005-06, which falls in between the above said years. Even though there is merit in the contentions of the Ld D.R yet, in order to ma .....

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nst the order dated 14.12.2010 passed by learned CIT(A)-11, Mumbai and it relates to A.Y. 2005- 06. 2. The Revenue is aggrieved by the decision of learned CIT(A) in holding that the reimbursement of travelling expenses of expatriates received by it from its clients and also living allowance paid by the clients to expatriates (employees deputed by the assessee) do not constitute income in the hands of the assessee. 3. Facts relating to the above said issue are stated in brief. The assessee, a for .....

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panies cited above, Indian group Companies are required to reimburse travelling expenses of the personnel and also they are required to give living allowance to those personnel. The assessee did not consider those payments as its income and accordingly did not offer them also in its return of income. The Assessing Officer, however, held that both the above said amounts should taken as forming part of fee for services received by the assessee and accordingly held that they are liable for taxation .....

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eceived a total amount of ₹ 38,46,666/- as reimbursement of travel expenses and ₹ 1,23,95,185/- as payment of living allowance of these employees who have provided the personnel and management services to NME and HCE. Since, these expenses were incurred on the employees who were providing the management services, it forms part of the receipt in respect of technical services provided by the assessee company. 4.5 It has been held by the Authority for Advance Ruling in the case of Danfo .....

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no difference between the fees for engineering services and the fees relatable to living allowances or traveling charges of the employees who would rendered the services. 4.7 It has been held in the case of Cochin Refineries Ltd. ( 222 ITR 354) by the Kerala High Court that the services rendered by the foreign company which were in the nature of technical services and the nature of reimbursement of payments made to the personnel, no different situation would be available because these payments .....

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rds the charges for providing free boarding, lodging and transport facilities to the engineers was also taxable u/s 9(1 )(vii) of the Income-tax Act, 1961. 4.8 Furthermore, looking to the details filed by the assessee in the course of these proceedings the following points are worth of mention. A single invoice is raised by the assessee on the Indian company showing the total amount. For eg, the assessee has produced a copy of the Invoice No. 6080401443 which reads as under: Date: 19.11.2004 INV .....

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single invoice which is raised which supports the conclusion that these expenses are nothing but a part of the fees for technical services rendered by the assessee. Subsequently, it has been sought to segregate the travel expenses from gross amount and claim that the same is not chargeable to tax. Furthermore, there in the absence of the global accounts of the assessee it is not possible to verify whether the alleged reimbursements are in fact expenses which have been actually paid by the assess .....

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; 38,46,666 as reimbursement of travel expenses and ₹ 1,23,95,185 as payment of living allowance which is reimbursed by HME and HCE to the assessee company is treated as fees for technical services and charged to tax a 10% on gross basis. 4. In the appellate proceedings learned CIT(A) noticed that the Dispute Resolution Panel has held in the succeeding year, i.e., in AY 2006-07 and 2007-08 that reimbursement of travelling expenses is not liable to tax in assessee s hand. The DRP placed rel .....

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f the living allowance to the expatriates. It is not a case where living allowance is a component of the fee paid to the assessee. The issue regarding taxability of living allowance paid by the Indian companies will arise in the hands of the expatriates and not in the hands of the assessee. It was the obligation of the Indian company to pay living allowance in term of the above said agreement between the appellant and the Indian company. Accordingly, the reimbursement of expenses to the assessee .....

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examining the legal position on this issue, I am of the view that this is a covered issue in view of the judgment of the Hon'ble Mumbai High Court in the case of CIT v. Siemens Aktiongesellschaft [2009] (310 ITR 320)(Bom), therefore, the Assessing Officer is directed to delete the addition made and this ground of appeal is allowed. Aggrieved by the order passed by Ld CIT(A), the revenue has filed this appeal before us. 5. The Ld D.R submitted that the assessee herein and the two Indian comp .....

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owance of employees and reimbursement of travelling expenses of employees. Accordingly he submitted that the assessing officer was justified in treating the reimbursement of travelling expenses as well as living allowances given to the employees as part of fee received by the assessee . He submitted that the decisions rendered by Hon ble Bombay High Court in the cases of Krupp Udhe GMBH (ITA No. 2626 of 2009) and Seimens Aktiogesellschaft (310 ITR 320) are not applicable to the facts prevailing .....

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several components like Fees, living allowances and reimbursement of expenses should be ignored and entire receipts should be taken as forming part of fees only. 6. On the contrary, the Ld A.R submitted that the DRP has held in the subsequent years that these two items cannot be considered to be the receipts of the assessee. He submitted that the contract entered by the assessee with the Indian Companies provided that the travelling expenses of the expatriates shall be borne by the Indian Compan .....

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