JCIT, CHENNAI V. C.H.Robinson Worldwide Freight India P Ltd., CHENNAI

ITA 1181/CHNY/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4344 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 1 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-06-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 29-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P RADHAKRISHNAN
• Assessee Lawyers: T BANUSEKAR
• Keywords: Capital asset; Recovery proceedings; Double taxation relief; Permanent establishment; Advance ruling

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: CHENNAI . . . , !.. $ , ) BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI D.S.SUNDER SINGH, ACCOUNTANT MEMBER ./ ITA NO.1181/MDS/2016 * * /ASSESSMENT YEAR: 2008-09 THE JT. COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE-1(2), CHENNAI-600 034. VS. M/S.C.H.ROBINSON WORLDWIDE FREIGHT INDIA PVT. LTD., LOKESH TOWERS 2 ND FLOOR, NO.18, KODAMBAKKAM HIGH ROAD, NUNGAMBAKKAM, CHENNAI-600 034. [PAN: AACCC 9617 L ] ( - /APPELLANT) ( ./- /RESPONDENT) - 0 / APPELLANT BY : MR.P. RADHAKRISHNAN, JCIT ./- 0 /RESPONDENT BY : MR.T. BANUSEKAR, CA 0 /DATE OF HEARING : 18.04.2017 0 /DATE OF PRONOUNCEMENT : 08.06.2017 / O R D E R PER D.S.SUNDER SINGH , ACCOUNTANT MEMBER : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER DATED 15.02.2016 OF COMMISSIONER OF INCOME TAX (APPEALS)- 1, CHENNAI, IN ITA NO.109/CIT(A)-1/2013-14 (OLD ITA NO.13-14/13-14/A-1 ) FOR THE AY 2008- 09 AND RAISED THE FOLLOWING GROUNDS: ITA NO.1181/MDS/2016 :- 2 -: 1. THE ORDER OF THE LEARNED CIT(A) IS CONTRARY TO LAW, FACTS AND CIRCUMSTANCES OF THE CASE. 2.1 THE LEARNED CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO DELETE THE DISALLOWANCE OF RS.1,09,80,639/- AND RS.17,76,496/- MADE U/S.40(A)(I) RESPECTIVELY. 2.2 THE LEARNED CIT(A) FAILED TO CONSIDER THE FACT THAT THE ASSESSEE HAS DEDUCT WITHHOLDING TAXES AS PER ACT IN THE ABSENCE OF SPEC IFIC ARTICLES IN THE DTAA OF THE COUNTRIES OF DUBAI, HONG KONG, MUSCAT, PAKISTAN, SW ITZERLAND AND TAIWAN. 2.3 THE LEARNED CIT(A) FAILED TO APPRECIATE THAT AS PER THE PROVISIONS OF SEC.90, THE BENEFIT OF DTAA IS AVAILABLE ONLY IF THE SPECIFIC A RTICLES PROVIDE THE BENEFIT TO THE PERSON RENDERED THE SERVICES OF AIRFREIGHT AND SUCH OTHER RELATED SERVICES AND IN THE ABSENCE OF THE SAME, THE ASSESSEE IS LIABLE TO WITHHOLD TAX U/S.195. 2.4 WITH REGARD TO THE PAYMENTS MADE TO AIR OPERATORS T OWARDS OTHER REIMBURSEMENT AMOUNTED TO RS.17,76,496/-, THE LEARNED CIT(A) FAILE D TO APPRECIATE THE DECISION OF AUTHORITY FOR ADVANCE RULING IN THE CASE OF TATA TI MKEN LTD (273 ITR 67) AND DANFOSS INDUSTRIES PO LTD (268 ITR 1) WHEREIN IT HAS HELD THAT THE REIMBURSEMENT OF COST IS SUBJECT TO TDS. 3. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE LEARNED CIT(A) MAY BE SET ASID E AND THAT OF THE ASSESSING OFFICER RESTORED. 2.0 IN THIS CASE, THE ASSESSMENT WAS PASSED U/S.143(3) BY AN ORDER DATED 31.12.2010, BY MAKING THE DISALLOWANCE U/S.4 0(A)(I) RELATING TO THE AIR FREIGHT AND THE REIMBURSEMENT OF EXPENSES AMOUN TING TO RS.1,09,80,639/- AND RS.17,76,496/- RESPECTIVELY. SUBSEQUENTLY, THE ASSESSEE FILED THE PETITION U/S.154 WHICH WAS REJEC TED BY THE AO. THE ISSUE TRAVELLED UP TO ITAT AND ITAT ALSO DISMISSED THE APPEAL OF THE ASSESSEE. SUBSEQUENTLY, THE ASSESSEE FILED APPEAL BEFORE THE CIT(A) ON THE ISSUE WHICH WAS SOUGHT FOR RECTIFICATION U/S.15 4 IN REGULAR APPEAL WITH A PETITION FOR CONDITION OF DELAY. THE LD.CIT(A) C ONDONED THE DELAY AND ENTERTAINED THE APPEAL OF THE ASSESSEE. 3.0 THE FIRST ISSUE IN THIS CASE IS DISALLOWANCE U/S.4 0(A)(I) IN RESPECT OF THE PAYMENTS MADE TO NON-RESIDENT TOWARDS THE AIR T RANSPORT. THE AO MADE THE ADDITION FOR LACK OF PROOF REGARDING NON-E XISTENCE OF PE IN INDIA. ITA NO.1181/MDS/2016 :- 3 -: ACCORDING TO THE AO, THE TRANSACTION IS COVERED BY SEC.9(1)(I) OF IT ACT AND THE ASSESSEE REQUIRED TO DEDUCT THE TAX AT SOUR CE. SINCE THE PAYMENT IS TAXABLE IN THE HANDS OF THE RECIPIENT AND THE AS SESSEE FAILED TO DEDUCT THE TAX AT SOURCE U/S.195 OF IT ACT, THE AO MADE TH E ADDITION OF RS.1,09,80,639/-. THE AO DEALT WITH THE ISSUE IN PA RA NOS.2 & 3 OF THE ASSESSMENT ORDER WHICH IS EXTRACTED AS UNDER: 2. THE ASSESSEE HAS MADE OVERSEAS REMITTANCES OF RS .21.17 CRORES TOWARDS FREIGHT AND RELATED REIMBURSEMENTS AND TDS WAS NOT DEDUCTED ON IT ON THE PRETENCE THAT PAYMENT WERE MADE EITHER TO NON-RESIDENT SHIPPING COMPANIES OR TO THE RESIDENT AGENTS OR TO THE REPRESENTATIVES AND DOES NOT COME UNDER THE PURVIEW OF WITHHOLDING TAX U/S.195 OR CONTRACT U/S.194C BY VIRTUE OF SEC.172(1). IT IS ACC EPTABLE THAT SEC. 172 GOVERNS LEVY AND RECOVERY OF TAX FROM NON-RESIDENT SHIPPING COMPANIE S AND HENCE, TDS NEED NOT BE DEDUCTED IN RESPECT OF PAYMENTS MADE TO THOSE SHIPP ING COMPANIES. HOWEVER, ON VERIFICATION, IT IS SEEN THAT THE FREIGHT AND ALLIE D PAYMENTS OF RS.21.17 CRORES WAS NOT PAYMENT TO SHIPPING COMPANIES IN ITS ENTIRETY AND A COMPONENT WORTH RS.9,85,47,395/- WAS PAID TOWARDS AIR FREIGHT AND OTHER RESIDUARY PA YMENTS AND REIMBURSEMENTS WHICH IS OUTSIDE THE PURVIEW OF SEC.172. WHILE ONLY SHIPPING COMPANIES ARE IMMUNIZED BY THIS SECTION, AIR TRANSPORT IS OUTSIDE ITS PURVIEW. THE SAME WAS APPRAISED TO THE AUTHORIZED REPRESENTATIVE AND FROM THE BOOKS OF ACCOUNTS, THE DETAILS OF PAYMENT TOWARDS AIR FREIGHT WERE GATHERED. 3. PAYMENT HAD BEEN MADE SUBSTANTIALLY TOWARDS AIR FREIGHT AND ADDITIONAL PAYMENTS ENCOMPASS FUEL AND SECURITY SURCHARGE, TERMINAL FEE S, TRANSPORT FEES, CUSTOMS FEES, FOB CHARGES, INSURANCE, RISK SURCHARGE, AWB FEE, HANDLI NG CHARGES, AIRPORT PICK UP CHARGES, AIRLINE TRANSFER FEE AND OTHER REIMBURSEMENTS. THE OTHER REIMBURSEMENTS CONSTITUTES A VALUE OF RS.17,76,496/-. THE PAYMENTS TOWARDS AIR F REIGHT WERE VERIFIED WITH REGARD TO THE COUNTRY OF RESIDENCE OF THE RECIPIENTS AND FOUND TH AT OUT OF 40 COUNTRIES, 34 COUNTRIES WERE COVERED UNDER ARTICLE 7 OF DTAA WITH THOSE RESPECTI VE COUNTRIES. HOWEVER, IN RESPECT OF THE PAYMENTS MADE TO AIR TRANSPORT COMPANIES WHICH ARE RESIDENTS OF DUBAI, HONG KONG, MUSCAT, PAKISTAN, SWITZERLAND AND TAIWAN, THE SAME IS NOT COVERED UNDER DTAA AS NO SUCH AGREEMENT EXISTS BETWEEN THE REPUBLIC OF INDIA AND THOSE COUNTRIES. THE AIR FREIGHT AND OTHER REIMBURSEMENTS MADE WITH SUCH COUNTRIES WITH WHOM DTAA DOES NOT EXIST IS RS.1,09,80,639/-) THE AUTHORIZED REPRESENTATIVE HAD NOT BROUGHT ON RECORD THAT THE SAID PAYMENT TOWARDS AIR FREIGHT WAS DIRECTLY MADE TO TH EM OR TO ANY RESIDENT AGENT OR REPRESENTATIVE IN INDIA. IN THE ABSENCE OF THE RELE VANT PROOF REGARDING THE NON-EXISTENCE OF PE IN INDIA, THE TRANSACTION IS GOVERNED BY SEC 9(1 )(I) SINCE THE INCOME HAS ARISEN DIRECTLY THROUGH THE BUSINESS CONNECTION IN INDIA AND THE SO URCE OF INCOME IS IN INDIA. THEREFORE, THIS SUM OF RS.1,0980,639/- IS DISALLOWED U/S. 40(A )(I) AND BROUGHT TO TAXATION. 4.0 AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE WEN T ON APPEAL BEFORE THE CIT(A) AND THE LD.CIT(A) ALLOWED THE ASS ESSEES APPEAL HOLDING THAT THE PAYMENT IS NOT COVERED U/S.9(1)(I) OF IT A CT AND NO TDS IS ITA NO.1181/MDS/2016 :- 4 -: ATTRACTED U/S.195 OF IT ACT. FOR READY REFERENCE, W E EXTRACT THE RELEVANT PART OF THE LD.CIT(A)S ORDER AS UNDER: 12. I HAVE GONE THROUGH THE FACTS IN ISSUE, ARGUMEN TS ADVANCED BY THE APPELLANT AND MATERIAL ON RECORD THE APPELLANT ADMITTEDLY IS A TH IRD PARTY LOGISTICS ENTITY WHICH RENDERED SERVICES OF FACILITATING MOVEMENT OF GOODS FOR ITS CLIENTS ESTABLISHED IN INDIA AND OUTSIDE INDIA. IN ORDER TO MAKE AVAILABLE THE SERVICES, IT NEGOTIATED WITH HANDLING AGENTS BOTH DOMESTIC AS ALSO IN FOREIGN COUNTRY BY WAY OF NEGOT IATION FOR GOODS TRANSPORTED FROM FOREIGN DESTINATION TO INDIA. THE APPELLANT NEGOTIA TES THE TERMS AND CONDITIONS AND COORDINATES WITH THE FOREIGN ENTITY TILL THE DELIVE RY OF GOODS TO THE CLIENT AND CHARGES THIS TOWARDS FREIGHT TO ITS CLIENT. AFTER REALIZING TH E FREIGHT CHARGES IT DEFRAYS THE EXPENSES TO FOREIGN HANDLING AGENTS ON TERMS AGREED UPON. 13. THE DISPUTE IN THIS ASSESSMENT RELATES TO THE E XIGIBILITY OF TAX IN RELATION TO THE PAYMENT MADE BY THE APPELLANT TO THE FOREIGN ENTITI ES FOR THE SERVICES RENDERED IN VARIOUS FOREIGN DESTINATIONS. IT IS IN THIS CONTEXT THAT TH E EXIGIBILITY OF TAX TO THE PAYMENT HAVE TO BE EXAMINED AS TO WHETHER THE TAX LIABILITY IS TRIG GERED IN TERMS OF SEC.9(1)(I) R.W.S.5 OF THE INCOME TAX ACT. 14. IT IS SETTLED LAW WHEN SERVICES ARE RENDERED BY A NON-RESIDENT WHO HAS NO BUSINESS CONNECTION OR PRESENCE BY WAY OF PERMANENT ESTABLIS HMENT IN INDIA, THE INCOME WOULD BE TRIGGERED IN THE COUNTRY OF RESIDENCE WHERE THE SER VICES WERE RENDERED. THE RATIO IN THE CONTEXT OF COMMISSION AGENT LAID DOWN BY THE JURISD ICTIONAL COURT IN THE CASE OF CIT V. FAIZAN SHOES P LTD 367 ITR 155 APPLIES MUTATIS MUTA NDIS. 15. NOW COMING TO THE FACTS OF THE CASE, DURING THE PERIOD UNDER CONSIDERATION, THE APPELLANT ENGAGED THE SERVICES OF 10 ENTITIES WHO A RE RESIDENTS OF HONGKONG, SWITZERLAND, TAIWAN, PAKISTAN AND DUBAI. THESE ENTITIES WHO HAVE RENDERED SERVICES ADMITTEDLY HAVE NO PRESENCE IN INDIA BY WAY OF PERMANENT ESTABLISHMENT AND NO BUSINESS CONNECTION IN AS MUCH AS THAT THE SERVICES WERE RENDERED OUTSIDE IND IA. IT WOULD SUFFICE TO HOLD THAT THE BASIC INGREDIENT TO TRIGGER THE OPERATION OF SEC.9( 1)(I) ARE CONSPICUOUS IN THEIR ABSENCE IN SUCH SERVICES. IT WOULD THEREFORE MAKE NO DIFFERENC E WHETHER OR NOT ANY OF THE ENTITIES ARE RESIDENT IN THE JURISDICTION WHICH HAS DTAA WITH IN DIA OR NOT. PAYMENT(S) MADE TO THEM WOULD NOT BE EXIGIBLE TO TAX UNLESS AND UNTIL A CAS E HAS BEEN MADE OUT THAT THEY ARE IN THE NATURE OF THE SERVICES WITHIN THE MEANING OF SEC. 9 (1)(VI) OR 9(1)(VII) BEING ROYALTY OR TECHNICAL SERVICES. 5.0 APPEARING FOR THE REVENUE, THE LD.AR ARGUED THAT T HERE IS NO DTAA WITH THE COUNTRY OF DUBAI, HONGKONG, MUSCAT, PAKIST AN, SWITZERLAND AND TAIWAN AND IN THE ABSENCE OF SPECIFIC ARTICLES IN D TAA THE ASSESSEE HAS TO DEDUCT THE TAX AT SOURCE ON THE PAYMENTS. AS PER SE C.90, THE BENEFIT IS AVAILABLE ONLY, IF THE DTAA PROVIDES SPECIFIC ARTIC LES TO THE PERSON RENDERED THE SERVICES OF AIR FREIGHT AND SUCH OTHER THE RELATED SERVICES. IN THE ABSENCE OF THE SAME, THE ASSESSEE IS LIABLE TO WITHHOLD THE TAX U/S.195 ITA NO.1181/MDS/2016 :- 5 -: OF INCOME TAX ACT. ON THE OTHER HAND THE LD.AR SUPP ORTED THE ORDERS OF THE LD.CIT(A). 6.0 WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MAT ERIAL PLACED BEFORE US. THE AO DISALLOWED THE AIR FREIGHT MADE T O THE PARTIES IN COUNTRIES WITH WHOM THERE IS NO DTAA FOR THE REASON THAT THE ASSESSEE HAS NOT FURNISHED THE PROOF WITH REGARD TO NON-EXISTENCE OF PERMANENT ESTABLISHMENT IN INDIA AND THE TRANSACTION IS GOVER NED BY SECTION.9(1)(I), SINCE THE INCOME HAS ARISEN DIRECTLY THROUGH THE BU SINESS CONNECTION IN INDIA AND THE SOURCE OF INCOME IS IN INDIA. . 6.1 IN THE ASSESSEES CASE, THE SERVICES ARE RENDERED OUTSIDE INDIA AND THERE IS A DTAA IN RESPECT OF PAYMENTS MADE TO THE PARTIES LOCATED IN DUBAI, MUSCAT & SWITZERLAND AND THERE IS NO PERMANE NT ESTABLISHMENT IN INDIA. IN RESPECT OF PAYMENT MADE TO HONGKONG, TAI WAN AND PAKISTAN FOR TAXING THE PAYMENT U/S.9(1)(I) INCOME IS DEEMED TO ACCRUE AND ARISE IN INDIA, IF IT ACCRUES AND ARISES DIRECTLY THROUGH OR FROM ANY BUSINESS CONNECTION IN INDIA OR ANY PROPERTY IN INDIA OR ANY ASSET OR SOURCE OF INCOME IN INDIA OR THROUGH TRANSFER OF CAPITAL ASSE T IN INDIA. FOR READY REFERENCE, WE EXTRACT THE RELEVANT PROVISIONS OF SE C.9(I)(I) OF IT ACT AS UNDER: ITA NO.1181/MDS/2016 :- 6 -: 9. 34 (1) THE FOLLOWING INCOMES SHALL BE DEEMED 35 TO ACCRUE OR ARISE IN INDIA : 36 ( I ) ALL INCOME ACCRUING OR ARISING, WHETHER DIRECTLY OR INDIRECTLY 37 , THROUGH OR FROM ANY BUSINESS CONNECTION 37 IN INDIA, OR THROUGH OR FROM ANY PROPERTY 37 IN INDIA, OR THROUGH OR FROM ANY ASSET OR SOURCE OF INCOME IN INDIA, 38 [* * *] OR THROUGH THE TRANSFER OF A CAPITAL ASSET SITUATE IN INDIA. 6.2 ADMITTEDLY, THESE ENTITIES WHO HAVE RENDERED THE S ERVICES HAVE NO PERMANENT ESTABLISHMENT OR BUSINESS CONNECTION IN I NDIA THEREFORE, LD.CIT(A) HELD THAT THE INCOME IS NOT TAXABLE AS PE R SEC.9(1)(I) OF IT ACT AND FOLLOWED THE DECISION OF THE HONBLE JURISDICTI ONAL HIGH COURT IN THE CASE OF FAIZEN SHOES 366 ITR 154. DURING THE APPEA L HEARING, THE LD.DR DID NOT BRING ANY EVIDENCE TO PROVE THAT THE ENTITI ES WHO HAVE RENDERED THE SERVICES OUTSIDE INDIA OR HAVING PERMANENT ESTA BLISHMENT IN INDIA OR BUSINESS CONNECTION IN INDIA TO HOLD THAT THE INCOM E IS TAXABLE U/S.9(1)(I) OF IT ACT. THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD.CIT(A) AND THE REVENUE APPEAL ON THIS GROUND IS DISMISSED. 7.0 THE NEXT ISSUE IS THE ADDITION OF RS.17,76,496 /- IN RESPECT OF REIMBURSEMENT OF EXPENSES. DURING THE ASSESSMENT PR OCEEDINGS, THE AO FOUND THAT THE ASSESSEE HAD MADE THE OVERSEAS PAYME NTS AND A SUM OF RS.17,76,496/- TOWARDS THE REIMBURSEMENT EXPENSES. THE AO WAS OF THE VIEW THAT IN RESPECT OF THE PAYMENTS MADE TO AIR OP ERATORS WHICH ARE RESIDENT OF COUNTRIES WITH WHOM DTAA SUBSISTS, PAYM ENTS TOWARDS FREIGHT AND OTHER ALLIED CHARGES ARE COVERED BY ARTICLE 7 O F DTAA AND HENCE, THESE PAYMENTS ARE OUTSIDE THE PURVIEW OF WITHHOLDI NG TAX. HOWEVER, IN RESPECT OF OTHER REIMBURSEMENTS AMOUNTING TO RS.17, 76,496/-, THE NATURE ITA NO.1181/MDS/2016 :- 7 -: OF PAYMENT AS PER THE DETAILS PROVIDED BY THE ASSE SSEE, DOES NOT PERTAIN TO FREIGHT AND ASSOCIATED EXPENDITURE. THE AO WAS O F THE VIEW THAT THE PAYMENT OF REIMBURSEMENTS COULD INCLUDE TECHNICAL CHARGES OR EVEN INTEREST WHICH FALLS UNDER THE PURVIEW OF TAXATION U/S.9(1) OF IT ACT, 1961 AND COULD INCLUDE THE PROFIT ELEMENT AND HENCE TDS NEED TO BE DEDUCTED. ACCORDINGLY THE AMOUNT OF RS.17,76,496/- WAS ADDED TO THE TAXABLE INCOME OF THE ASSESSEE U/S.40(A)(I) OF IT ACT, 1961 . 7.1 AGGRIEVED BY THE ORDER OF THE AO THE ASSESSEE PREF ERRED AN APPEAL BEFORE THE CIT(A) AND THE LD.CIT(A) DELETED THE ADD ITION OBSERVING THAT THE REIMBURSEMENT WILL NOT ATTRACT THE TDS. AGGRIE VED BY THE ORDER OF THE LD.CIT(A) THE REVENUE IS IN APPEAL BEFORE US. 7.2 APPEARING FOR REVENUE THE LD.DR SUPPORTED THE ORDE RS OF THE AO AND ON OTHER HAND THE LD.AR ARGUED THAT THE OTHER EXPENSES AMOUNTING TO RS.17,76,496/- WHICH IS PART & PARCEL OF TOTAL F REIGHT PAYMENTS REMITTED TO FOREIGN PARTIES WAS DISALLOWED BY THE AO WITHOUT ANY BASIS. THE AO HIMSELF HAS ACCEPTED IN HIS ORIGINAL ASSESSMENT ORD ER (REFER PARA NO.4), THAT THE FREIGHT PAYMENTS MADE TO AIR OPERATORS ARE COVERED UNDER ARTICLE-7 OF DTAA AND HENCE THESE PAYMENTS ARE OUTS IDE THE PURVIEW OF WITHHOLDING OF TAX. HAVING ACCEPTED THIS, THE AO HA S WRONGLY DISALLOWED THE OTHER EXPENSES AMOUNTING TO RS.17,76,496/- ON H IS OWN ASSUMPTION THAT THESE PAYMENTS COULD INCLUDE TECHNICAL CHARGES , OR EVEN INTEREST WHICH FALLS UNDER THE PURVIEW OF TAXATION U/S.9(1) OF THE IT ACT 1962. ITA NO.1181/MDS/2016 :- 8 -: THE AO HAS FAILED TO APPRECIATE THAT THE ASSESSEE HAS SUBMITTED A DETAILED BREAKUP OF THE TOTAL FREIGHT PAYMENTS COUN TRY-WISE AND THE SAME HAS BEEN FURTHER CLASSIFIED INTO DIFFERENT SUB HEAD INGS LIKE: 1. FREIGHT PAYMENTS 2. FUEL & SECURITY CHARGES 3. TERMINAL FEE 4. CUSTOMS DUTY 5. TRANSPORT PICKUP CHARGES 6. AIRPORT DELIVERY CHARGES 7. FOB CHARGES 8. INSURANCE 9. RISK SURCHARGE THERE ARE SO MANY MINOR EXPENSES UNDER EACH OF THE INVOICES OF THE RESPECTIVE FREIGHT PARTIES WHICH COULD NOT BE CLASS IFIED INTO THE ABOVE HEADINGS & HENCE IT WAS CLASSIFIED UNDER THE HEADIN GS OTHER REIMBURSEMENTS. THE LD.A.R SUBMITED THAT JUST BECA USE IT WAS CLASSIFIED UNDER THE HEAD OTHER REIMBURSEMENTS THE NATURE OF SERVICES CANNOT CHANGE. CONSIDERING THE ABOVE, THE LD.AR ARGUED THAT THE ABOVE PAYMENTS ARE DIRECTLY REMITTED TO NON-RESIDENT, WHICH ARE NO T TAXABLE AS NO PARTS OF THEIR INCOME ARISES IN INDIA AND ALSO SECTION 195 I S NOT APPLICABLE IN SUCH PAYMENTS. ITA NO.1181/MDS/2016 :- 9 -: LD AR FURTHER SUBMITTED THAT IT IS SETTLE D LAW THAT THE TDS IN NOT APPLICABLE ON REIMBURSEMENTS OF EXPENSES. THE AR RE LIED ON THE DECISION OF THE CALCUTTA HIGH COURT IN THE CASE OF DUNLOP R UBBER CO LTD (142 ITR 493) WHICH HELD THAT EXPENSES RECOUPED BY THE RECEI VER WAS PART OF THE EXPENSES INCURRED BY THEM AND IT WAS HELD THAT THE TECHNICAL DATA AND OTHER RESEARCH COST PAID BY DUNLOP INDIA TO ITS OVE RSEAS HEAD OFFICE WAS A MERE RECOUPMENT OF EXPENDITURE AND HENCE NOT TAXABL E. 7.3 WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MAT ERIAL PLACED BEFORE US. THE AO ACCEPTED THAT THE PAYMENT WAS TOWARDS REIMB URSEMENT OF EXPENSES. THE REIMBURSEMENT OF EXPENSES DOES NOT I NCLUDE ANY PROFIT ELEMENT AND REIMBURSABLE ON ACTUAL EXPENDITURE BASI S. SEC.195 ATTRACTS ONLY IN THE CASE OF PROFITS INVOLVED IN THE PAYMENT . THE LD.AR ARGUED THAT THE BROAD HEADS OF FREIGHT PAYMENTS IS CATEGORIZED IN NINE DIFFERENT SUBJECTS, WHICH COULD NOT BE INCLUDED UNDER THE ABO VE CLASSIFICATION AS OTHER REIMBURSEMENT AND THE SAME WERE NEITHER ROYAL TY NOR MANAGEMENT AND TECHNICAL SERVICES. THE AMOUNTS ARE PAID TO TH E NON-RESIDENTS TOWARDS THE RECOUPMENT OF EXPENSES INCURRED ON BEHA LF OF THE ASSESSEE. THE SERVICES WERE RENDERED OUTSIDE INDIA AND THE PA YMENT WAS MADE OUTSIDE INDIA AND THERE WAS NO PERMANENT ESTABLISHM ENT IN INDIA OR BUSINESS CONNECTION IN INDIA. THEREFORE, THE REASO NING AND FINDING GIVEN FOR AIR FREIGHT EQUALLY APPLIES TO THE CASE OF REIM BURSEMENT OF EXPENSES. ITA NO.1181/MDS/2016 :- 10 -: CONSEQUENTLY, NO DISALLOWANCE U/S.40(A)(I) IS CALLE D FOR AND WE DO NOT FIND ANY ERROR IN THE ORDER OF THE LD.CIT(A) AND THE REV ENUES APPEAL IS DISMISSED. 8.0 IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON JUNE 08, 201 7, AT CHENNAI. SD/- SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER ( ! . . $ ) (D.S.SUNDER SINGH) /ACCOUNTANT MEMBER /CHENNAI, 5 /DATED: JUNE 08, 2017. TLN 0 .$6 76 /COPY TO: 1. - /APPELLANT 4. 8 /CIT 2. ./- /RESPONDENT 5. 6 . /DR 3. 8 ( ) /CIT(A) 6. * /GF