Case Law Details
American Express (India) Pvt. Ltd. Vs JCIT (ITAT Delhi)
Introduction: The ITAT Delhi recently ruled on the cross appeals between American Express (India) Pvt. Ltd. and JCIT. The primary focus was on the disallowance of relocation expenses under section 40(a)(i) of the Income Tax Act for the assessment year 2014-15.
Detailed Analysis: The case revolved around the reimbursement of relocation expenditure to American Express Travel Related Services Company Inc., USA (AETRSCO). While the assessee deducted tax on salary expenses, the Assessing Officer contended that tax should also apply to certain relocation expenses. The ITAT, referencing past decisions, found discrepancies in the treatment of expenses related to seconded employees and those of the company’s own employees.
The first appellate authority had previously ruled in favor of the assessee for expenses related to its employees. However, the issue was sent back for reevaluation, considering the India-US Double Taxation Avoidance Agreement. The recent ITAT decision aligns with this approach, emphasizing the need for a fresh examination based on the make available clause in the DTAA.
Conclusion: In conclusion, the ITAT Delhi granted relief to American Express (India) regarding the disallowance of relocation expenses. The case highlights the complexity of tax treatment for international transactions and the significance of considering specific clauses in Double Taxation Avoidance Agreements. Companies engaged in cross-border transactions should remain vigilant in adhering to tax obligations to avoid potential disputes.
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