RCA

Expenses reimbursement not taxable:

In CIT v. Siemens Aktiongesellschaft, 310 ITR 320 (Mumbai), the High Court held that the amount received by way of reimbursement cannot be regarded as revenue receipt particularly when the ITAT had found that the assessee company had received no sums in excess of the expenses incurred. Accordingly, the HC held that the amount was not liable to tax in the hands of the assessee company.

Fees paid as a percentage of room sales is not royalty:

In DIT v. Sheraton International Inc., 178 Taxman 84 (Delhi), the High Court observed that the entire transaction entered into between the assessee and the Indian hotels was an ‘integrated business arrangement’ the main purpose of which was to carry out advertisement, publicity and sales promotion for mutual benefi t and all other services i.e. use of trademark, trade name, computer reservations were incidental to the main purpose.The assessee company incorporated in USA entered into commercial agreement with Indian hotels for dvertising, publicity and sale promotion including reservation services. In consideration, the assessee company was to receive 3% of the room sales. The issue before the HC was whether the amount received by the assessee company is in the nature of royalty or fees for technical services under the domestic tax laws and the India-USA Tax Treaty.

The HC held that the amounts received by the assessee company were not in the nature of royalties or fees for technical services under the domestic tax laws and India-USA Tax Treaty. However, the HC having regard to the integrated business arrangement held that the amounts clearly represented business profi ts which were not liable to tax since the assessee company did not have a PE in India.

Source: "Tax Briefly"