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DELHI BENCH ‘A
‘A’ : NEW DELHI
ITA Nos
Nos.2015/Del/2008, 2435/Del/2010 & 5026/Del/2011
Assessment Years
Years : 2003-
2003-04, 2004-
2004-05 & 2005-
2005-06
M/s Brown
Brown & Sharpe INC, Vs. Assistant /Deputy Commissioner of
A-5, Sector-
Sector-4, Income Tax,
Noida, Gautam Budh Nagar, Circle, Noida.
U.P. – 201 301.
PAN : AACCB2482G.
(Appellant) (Respondent)
ORDER
PER G.D.AGRAWAL,
G.D.AGRAWAL, VP :
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High Court in the case of CIT Vs. Industrial Engineering Projects Pvt.
Ltd. – [1993] 202 ITR 1014.
6. Learned DR, on the other hand, relied upon the order of the
Assessing Officer as well as learned CIT(A) and by referring to pages 2
to 4 of the assessment order, he pointed out that the Assessing Officer
had examined in detail whether the liaison office has rendered any
services for effecting the sales of the assessee’s product or not and on
examination of the service agreement of the employees, he found that
the employees were offered the sales incentive plan by setting the
performance target for which they were allowed to receive up to 25%
of the annual remuneration as incentive. He also stated that the
liaison office had employed not only the Chief Representative Officer
but also the Technical Support Manager. The Assessing Officer had
examined the Chief Representative Officer i.e. Shri Anoop Prasad
Verma and his statement was recorded. From his statement, it was
evidently clear that the liaison office was promoting the brand
products of the assessee and the performance of the employees was
being judged by the number of orders that the company received. He,
therefore, submitted that the liaison office was not simply a
communication channel and as claimed by the assessee but it was
rendering the services for promotion and sales of the products of the
assessee company. That apart from getting permission from RBI for
opening the liaison office, the assessee company is registered with the
Registrar of Companies for establishment of place of business in India.
He referred to the certificate issued by the Registrar of Companies,
NCT of Delhi and Haryana in this regard. He also stated that the
assessee itself had filed the return of income not only for this year but
also for all subsequent years claiming the loss under the head ‘income
from business or profession’.
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10. In the case of K.T. Corporation (supra), the Authority for Advance
Rulings held as under:-
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12. Let us now see the facts of the assessee’s case so as to arrive at
the conclusion whether any of the above decisions would be applicable
to the case of the assessee. In the assessment order, at page 2, the
Assessing Officer has recorded that the liaison office of the assessee
has employed Chief Representative Officer Shri Anoop Prasad Verma
and Technical Support Manager Shri Rajeev K. Datar. The employees,
besides fixed remuneration, were offered sales incentive plan by fixing
the performance target for which they were allowed to receive up to
25% of the annual remuneration as sales incentive. Though during the
assessment proceedings Shri Anoop Prasad Verma i.e. Chief
Representative officer of the liaison office had stated that sales
incentive plan was not actually acted upon but, nevertheless, it is not
in dispute that in the employment contract between the assessee and
the employees, there was a sales incentive plan and employees were
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incentive for achieving the sales target and the performance of the
employees is being judged by the orders secured by the assessee
company. All these activities clearly establish that the liaison office of
the assessee was promoting the sales of the assessee company in
India and, therefore, the Assessing Officer was fully justified in holding
that the income attributable to liaison office is taxable in India.
15. There cannot be any dispute with the legal contention of the
learned counsel that the reimbursement of the expenses can never be
income. Hon'ble Jurisdictional High Court has also held that the
reimbursement of expenses can under no circumstances be regarded
as a revenue receipt. However, in this case, as a matter of fact, what
the Assessing Officer taxed is the amount received by the assessee
over and above the reimbursement of the expenses. In fact, from the
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amount received from the head office, the Assessing Officer had
deducted the expenses incurred by the assessee and it is only the
excess amount received by the assessee which has been treated as
income. That in the above mentioned case, Hon'ble Jurisdictional High
Court has upheld the order of the ITAT because in that case, the
amount received by the assessee from the foreign company was equal
to the expenses incurred. Thus, the actual expenditure incurred by the
assessee was reimbursement by the foreign company and no sum in
excess of the expenses incurred was reimbursed. But, the facts are
altogether different in the case of the assessee. In the case under
appeal before us, in all the three years, the liaison office received more
amount than the expenses actually incurred by the liaison office. The
Assessing Officer himself has not treated reimbursement of expenses
as income. The amount received by liaison office over and above the
expenses actually incurred, year after year, was treated as income. To
that extent, the above decision of Hon'ble Jurisdictional High Court
would in fact support the case of the Revenue rather than the
assessee.
17. In the result, all the appeals of the assessee are dismissed.
Decision pronounced in the open Court on 17th January, 2014.
Sd/- Sd/-
(I.C. SUDHIR)
SUDHIR) (G.D.AGRAWAL)
JUDICIAL MEMBER VICE PRESIDENT
Dated : 17.01.2014
VK.
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Assistant Registrar
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