Case Law Details
Ayesa Ingenieria Y Arquitectura Vs ACIT (ITAT Delhi)
The case of Ayesa Ingenieria Y Arquitectura (the “assessee”) versus ACIT (Assistant Commissioner of Income Tax) involved two separate final assessment orders for the assessment years 2020-21 and 2021-22, passed under section 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961. These orders were based on the directions of the Dispute Resolution Panel (DRP). The assessee, a company registered in Spain, operated in India through its branch office, providing engineering consultancy services. The branch office solely operated within India.
The primary issue revolved around the disallowance of reimbursements made by the branch office to its head office in Spain for salary expenses of expatriates working in India. The Assessing Officer (AO) proposed to disallow these amounts under Article 7(3) of the India-Spain Double Taxation Avoidance Agreement (DTAA), treating them as fees for technical services (FTS).
The assessee contended that the reimbursements were made on a cost-to-cost basis without any mark-up, and therefore, should not be considered as FTS. Additionally, the expatriates working in India were under the control and supervision of the branch office, and taxes were deducted at source (TDS) under section 192 of the Income Tax Act, 1961, before making payments to them.
The Dispute Resolution Panel (DRP) concurred with the AO’s views, leading to the final assessment orders being passed, adding the reimbursed amounts to the assessee’s income. Aggrieved by this decision, the assessee appealed to the Tribunal.
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