Reimbursement of expense received in connection with the rendering of consultancy services not taxable as ‘fees for technical services’

Dy. Director of Income-tax (International Taxation)- I Vs. Louis Berger International Inc. (ITAT Hyderabad)– Reimbursable expenses being received in connection with the rendering of consultancy services is not taxable as ‘fees for technical services’ in accordance with clause (vii) of sub-section (i) of Section 9 of the I.T. Act, 1961 read with Part 4 of Article 12 of the DTAA with USA.

IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCH ‘A’, HYDERABAD

BEFORE SHRI G.C. GUPTA, VICE PRESIDENT AND SHRI AKBER BASHA, ACCOUNTANT MEMBER

ITA No. 242/Hyd/10 :

Asst. Year- 2004- 05

ITA No. 243/Hyd/10 :

Asst. Year- 2005- 06

Dy. Director of Income-tax (International Taxation)- I, Hyderabad.

V/s.

M/s. Louis Berger International Inc. Hyderabad
( PAN – AAACL 4067 F)

Appellant by :     Shri Diwakar Prasad

Respondent by : Shri S.Rama Rao

Date of Judgement: 03.06.2011

O R D E R

Per G.C.Gupta, Vice President:

These two appeals by the Revenue for the assessment years 2004-05 and 2005-06 are directed against a common order of the Commissioner of Income-tax(Appeals). Since common issues are involved, these two appeals are being disposed off by this common order for the sake of convenience.

2. There is a delay of three days in filing the present appeals before the Tribunal by the Revenue. We have heard the parties on the issue of condonation of delay and after considering their submissions, we are of the view that this is a fit case for condonation of delay in the filing of these appeals by the Revenue. Accordingly, the delay in the filing of these appeals before the Tribunal is condoned.

3. Identical ground of appeal No. 1 in both these appeals is general in nature and needs no adjudication.

4. Identical ground of appeal No. 2 of the Revenue is as under-

“The learned CIT(A) ought to have appreciated the fact that the reimbursable expenses being received in connection with the rendering of consultancy services is taxable as ‘fees for technical services’ in accordance with clause (vii) of sub-section (i) of Section 9 of the I.T. Act, 1961 read with Part 4 of Article 12 of the DTAA with USA. “

5. We have heard the parties. The issue involved in the above ground of the Revenue in these appeals is covered in favour of the assessee with the decision of the Tribunal dated 30th June, 2010, in assessee’s own case for the earlier assessment years, viz. 2001-02 to 2003-04 in ITA Nos.1073-1074/Hyd/2004 and ITA Nos.720-721/Hyd/2005 respectively, wherein it was held that reimbursement of expenditure received by the assessee could not form part of its total income. We, being in agreement with the decision of the coordinate Bench of the Tribunal in assessee’s own case dated 30th June, 2010, decide the issue in favour of the assessee and accordingly ground No.2 in both these appeals before us, is rejected.

6. Identical ground of appeal No.3 of the Revenue in both these appeals is as under-

“The learned CIT(A) erred in holding that the assessee is eligible for exemption u/s. 10(6A) of the IT Act.”

7. We have heard the parties. The issue involved in ground of appeal No.3 of the Revenue in these appeals is covered in favour of the assessee with the decision of the Tribunal dated 30th June, 2010, in assessee’s own case for the earlier assessment years, viz. 2001-02 to 2003-04 in ITA Nos. 1073-1074/Hyd/2004 and ITA Nos.720-721/Hyd/2005 respectively, wherein it was held that specific approval in this case may not be required for claiming exemption under S.10(6A) of the Act. We being in agreement with the decision of the coordinate Bench of the Tribunal in assessee’s own case dated 30th June, 2010, decide the issue in favour of the assessee and accordingly ground No.3 in both these appeals before us, is rejected.

8. Identical grounds of appeal No.4 and 5 of the Revenue in both these appeals is as under-

“4. The learned CIT(A) erred in holding that the assessee is eligible for exemption u/s.10(6A) of the I.T. Act.

5. The learned CIT(A) ought to have appreciated that the fees for technical services received by the assessee is taxable @ 20% in the light of Advance Rulings in the case of P.No. 13 of 1995(IN Re) reported in 228 ITR 487.”

9. We have heard the parties. The issue involved in grounds of appeal No.4 and 5 of the Revenue in these appeals is covered in favour of the assessee with the decision of the Tribunal dated 30th June, 2010, in assessee’s own case for the earlier assessment years, viz. 2001-02 to 2003-04 in ITA Nos.1073-1074/Hyd/2004 and ITA Nos.720-721/Hyd/2005 respectively, wherein it was held that tax has to be levied only at 15% and not at the rate of 20%. We, being in agreement with the decision of the coordinate Bench of the Tribunal in assessee’s own case dated 30th June, 2010, decide the issue in favour of the assessee and accordingly grounds No.4 and 5 of the Revenue in both these appeals before us, are rejected.

10. In the result, both the appeals of the Revenue are dismissed.

Order pronounced in the court on 03-06-2011.