Case Law Details
Apart from arguing that the payments were in the nature of reimbursement of expenses, the assessee has not explained anything about the pricing of the services, for which the so-called reimbursements were made by the Indian subsidiary to the assessee company. It is the case of the assessee that expenses were reimbursed by the Indian subsidiary at par with the invoices issued by third parties.
But there is nothing on record to show that the price negotiated between the assessee and the third parties and the amounts reflected in the invoices issued by the third parties are prices comparable to similar services provided by international parties. The assessee has not established that it had offered services to the subsidiary company on cost to cost basis at best reasonable and competent prices available at that point of time. Therefore, it is not proper to rule out an element of profit in the invoices raised by third parties themselves, even though what was paid by the subsidiary company to the assessee is the same amount as reflected in the invoices. Therefore, the argument that what has been paid by the subsidiary to the assessee company was only the amount reflected in the invoices issued by the third parties alone, does not go to support the argument of the assessee company that the payments were only reimbursement of expenditure and there was no element of profit in those amounts. As the assessee has not explained the pricing factor with reference to the services reflected in the invoices issued by the third parties, it is not possible to say that the assessee had not rendered any service to its Indian subsidiary in India.
INCOME TAX APPELLATE TRIBUNAL, CHENNAI
ITA No.1733(Mds)/2011 – Assessment Year : 2003-04
M/s.Van Oord ACZ Marine Contractors BV
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