Case Law Details
Kraft Foods Group Brands LLC Vs ACIT (ITAT Mumbai)
ITAT Mumbai held that receipts taxable under Fees for Technical/ Included Services (FTS/FIS) as assessee failed to prove that it is actual reimbursement as there is no basis of allocation or actual cost incurred for affiliates.
Facts- Vide the present appeal, the appellant has mainly contested against taxability of receipts of INR 7,18,00,340/- as Fees for Technical/ Included Services (FTS/FIS) under the Income Tax Act and Double Taxation Avoidance Agreement between India and The United States of America (DTAA).
Appellant contented that receipts are reimbursement of cost allocation arrangements without any mark-up and hence such reimbursement can neither be taxed under the Income Tax Act nor under the DTAA.
Conclusion- Held that the first hurdle is to prove that these are actual reimbursement and the claim of the exemption under Income Tax or Treaty comes next. The assessee has miserably failed in proving the same and the fact is that they have claimed the cost on adhoc basis without proper allocation as per support service agreement. It is also fact on record that the assessee has provided services to its affiliates in India partly claims them as chargeable to tax and balance not chargeable without any basis. The collection of charges shows that it collected on gross basis or on certain basis without adopting proper method of accounting as agreed in the agreement. When there is no basis of allocation or actual cost incurred for affiliates, it shows that the claim of the assessee is gross and there is no document to support this claim.
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