Itxa/776/2013 Of Director Of Income Tax, (It) - I v. Hindustan Petroleum Corpn. Ltd

sas IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL (LOD) NO.1462 OF 2012 Director of Income Tax (IT)-II, Mumbai ..Appellant. V/s. Hindustan Petroleum Corporation Ltd...Respondent. Mr. Tejveer Singh for the appellant. Mr. P.J.Pardiwala, senior Advocate with Atul K.Jasani for the respondent. CORAM : J.P. DEVADHAR AND M.S. SANKLECHA, JJ. DATED : 28TH JANUARY, 2013 P.C. :- 1. In this appeal filed by the revenue for the assessment year 2005-06, the following question of law has been formulated for consideration of this Court. “ Whether on the facts and the circumstances of the case and in law, the ITAT was correct in upholding the decision of CIT(A), without appreciating the fact that the expenses met out by the assessee company is to be grossed up with fees for technical 2.The respondent-assessee entered into an agreement with M/s. Axens, a French Company, for supply of process technology along with training of technical personnel. The respondent-assessee filed an application to the assessing officer under Section 195 of the Income Tax Act, 1961 (the Act) for issue of no objection certificate for payment of US$ 41.56 lakhs to M/s. Axens for grant of licence and towards fees for technical services after withholding tax at 10% + 2%. While disposing the above application on 13[th] December, 2004 the assessing officer while granting no objection to withhold tax on US$ Rs.41.56 lakhs also directed the respondent-assessee to include the expenses incurred by it on the personal of M/s.Axens and after grossing the amounts to withhold the tax at 10% + 2%. 3.In the first Appeal, the CIT (A) allowed the respondent-assessee's appeal in view of the decision of the Tribunal and this Court in the matter of Indian Rayon Ltd. Thus, the CIT(A) directed the assessing officer not to include the expenses incurred by the assessee on the employees of M/s. Axens in India, while deducting tax at source on the amount to be paid to M/s. Axens. In appeal by the revenue, the Tribunal by its order dated 9[th] May, 2012 followed its decision in the matter of Indian Rayon Industries Ltd. dated 6[th] November, 2003 wherein similar issue was considered by them. The Tribunal in that case held that reimbursement of expenses could not be considered to be income of the foreign company and, therefore, no deduction was called for. To the same effect is the decision of this Court in the matter of CIT V/s. Siemens Aktiongesellschaft reported in 310 ITR 320 (Bom). The counsel for the respondent emphasis that in this case, the expense are incurred by them directly and it is not a case of reimbursement. Thus, the expenses in this case have been incurred by the assessee and, therefore, while making payment of fees for technical services to M/s. Axens, there is no question of deducting tax on the 'expenditure' incurred by the assessee. 5. The expenses incurred by the respondent-assessee on the foreign technicians in India is not subject to tax deductionas as held by this court in the matter of Siemens Aktiongesellschaft (supra). Consequently, no occasion to apply Section 195 of the Act in respect of expenses incurred by the respondent-assesee can arise. Therefore, we see no reason to entertain the present appeal. Accordingly, the appeal is dismissed with no order as to costs. (M.S. SANKLECHA, J.) (J.P. DEVADHAR, J.)