Amount received by liaison office over and above the expenses actually incurred is taxable

There cannot be any dispute with the legal contention of the learned counsel that the reimbursement of the expenses can never be income. Hon’ble Jurisdictional High Court has also held that the reimbursement of expenses can under no circumstances be regarded as a revenue receipt. However, in this case, as a matter of fact, what the Assessing Officer taxed is the amount received by the assessee over and above the reimbursement of the expenses.

In fact, from the  amount received from the head office, the Assessing Officer had deducted the expenses incurred by the assessee and it is only the excess amount received by the assessee which has been treated as income. That in the above mentioned case, Hon’ble Jurisdictional High Court has upheld the order of the ITAT because in that case, the amount received by the assessee from the foreign company was equal to the expenses incurred. Thus, the actual expenditure incurred by the assessee was reimbursement by the foreign company and no sum in excess of the expenses incurred was reimbursed. But, the facts are altogether different in the case of the assessee. In the case under appeal before us, in all the three years, the liaison office received more amount than the expenses actually incurred by the liaison office. The Assessing Officer himself has not treated reimbursement of expenses as income. The amount received by liaison office over and above the expenses actually incurred, year after year, was treated as income. To that extent, the above decision of Hon’ble Jurisdictional High Court would in fact support the case of the Revenue rather than the assessee.

Liaison Office of a foreign company is taxable when such foreign company is registered with ROC.

INCOME TAX APPELLATE TRIBUNAL, DELHI

BEFORE SHRI G.D.AGRAWAL, VICE PRESIDENT AND

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