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TMI Blog2014 (5) TMI 1185X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant had a permanent establishment in India under Article 5(2)(k) of the Tax Treaty between India and the U.K. The learned Commissioner (Appeals) ought to have appreciated that appellant had no permanent establishment in India. 3. Without prejudice to the above, the learned Commissioner (Appeals) erred in not directing the Assessing Officer to accept the computation provided by the appellant in the Income and Expenditure Account as being the income attributable to the permanent establishment. The learned Commissioner (Appeals) ought to have directed the Assessing Officer to adopt the gross income at GBP 1,56,813, deduction for direct expenditure at GBP 52.445, deduction for overheads GBP 2,623 and net profit at GBP 1,01,745. 4. Without prejudice to the above, the learned Commissioner (Appeals) erred in not directing the Assessing Officer to compute the total income at the number of hours charged at appropriate rates for an Indian lawyer viz. GBP 100 per hour for a partner and GBP 70 per hour for an assistant. 5. The learned Commissioner (Appeals) erred in upholding the action of the Assessing Officer in considering reimbursement of expenditure of GBP 8,03,926.09 (revise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed in other grounds and no arguments whatsoever was advanced for the this ground, therefore, this ground requires no separate adjudication and dismissed. 3. Ground No.2 was stated to be covered by the earlier order of the Tribunal in assessee's own case which is since reported as Linklaters LLP vs. ITO 40 SOT 51. It was the case of the assessee that it did not have any Permanent Establishment(PE) in India under the provisions of Article 5(2) (k) as it was "rendering" services in India, where as per Article 5(2)(k) of DTAA, it was necessary to "Furnish" services in India. The question before Tribunal was that where expressions "rendering" and "furnishing" are somewhat inter changeable in the normal course of business and it will be too pedantic hyper technical approach to narrow down the meaning of expression "furnishing" to exclude rendering of professional services and if the answer of this question is in yes then it was to be held that assessee did not have a P.E in India in terms of Article 5(2)(k) of India UK DTAA, and, accordingly, profits attributable to P.E were taxable under Article - 7 of India UK DTAA and this question was answered in favour of Revenue and against asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... establishment was wholly independent of the general enterprise of which it is P.E. It was argued that such exercise of computing hypothetical profits also warrants adjustment in the bills raised by the general enterprise, in respect of work carried out by the P.E as prevalent market price of similar services as were rendered by the permanent establishment were lower than the rates charged by general enterprises to its clients. It was contended that for the purpose of computing income of the P.E the value of services rendered by the PE is to be taken at market value of such services in India and not the price at which permanent establishment should be taken @ UK Pounds 100 per hour for the partners and UK Pounds 75 for assistance, which at best is the market price of such services rendered in India. It was submitted that when profits attributable to P.E in India are to be computed, one has to take into account the revenue that the P.E in India would have earned, for rendering these services and prevalent market rates in India. These issues were decided against the assessee and thus, it was submitted by Ld. AR that the issues raised in Ground No.3 & 4 are also covered against the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounsel has taken us through meticulous documentation in respect of reimbursement of expenses, and also produced before us samples of supporting evidences in respect of each claim of reimbursement of expenses. He has also extensively referred to the prevailing regulation in the United Kingdom which ensure strict control over possible inflation of such reimbursement claims, as also to the internal control mechanism in respect of these claims. He submits that all requisitions of the authorities below, in respect of supporting evidences for such claims, have been duly complied with, and the CIT(A) has confirmed the partial disallowance only on surmises and conjectures. He urges us to delete the disallowance confirmed by the CIT(A) and hold that the reimbursement of expenses received by the assessee, particularly on the facts of the case, cannot be treated as income in the hands of the assessee. Learned Departmental Representative, on the other hand, relied upon the orders of the authorities below and submits that the onus is on the assessee to produce all the evidences of expenditure and that this onus is clearly not discharged by the assessee. 133. Having heard the rival submission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted that where expenses are incurred not by the later , but someone else, its payment by the former to later to pass it to such third person cannot be considered as reimbursement of expenses to the later so as to push such transaction outside the ambit of provisions of deduction of tax at source. Relying upon this decision it was submitted by Ld. DR that though there is no dispute to the extent that reimbursement of expenses will not fall under the category of receipts on which tax would be deductible at source but the factum of reimbursement has to be established by the assessee and for this purpose matter should be restored back to the file of AO. 5.3 In reply, objecting to the submissions of Ld. DR, it was submitted by Ld. AR that all the facts and circumstances of the case are similar to the facts of assessment year 1995-96. Referring to the aforementioned written submissions filed before Ld. CIT(A), it was brought to our notice that all the papers regarding reimbursement were filed before AO as well as before Ld. CIT(A) and on the basis of similar evidence which was filed in respect of assessment year 1995-96 the Tribunal has decided the issue in favour of the assessee. I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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