Home Income tax Corporate Income tax ITAT Affirms Cost Reimbursement Additions

ITAT Affirms Cost Reimbursement Additions

ITAT Affirms Cost Reimbursement Additions
Mumbai ITAT Order for Kraft Foods Group Brands LLC

On the time of making certain the additions in the direction of the price reimbursements as charges for technical providers (FTS), the Mumbai Bench of Earnings Tax Appellate Tribunal noticed that the taxpayer doesn’t have any basis for the allocation or precise value incurred for associates.

Aby T. Varkey (Judicial Member) and S. Rifaur Rahman (Accountant Member), presiding over the bench, famous that the taxpayer had entered right into a assist providers settlement to supply help via a number of value centres.

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Nevertheless, they didn’t furnish any specifics, related components, or a scientific allocation methodology for categorizing the assist service fees acquired from or supplied to numerous associates.

The appellant, a U.S. tax resident, acquired a cost of Rs. 5.18 crore from Heinz India for value allocation or expense restoration. This quantity was thought-about non-taxable, constituting a simple reimbursement with none markups.

Nevertheless, the tax division rejected this declare as a result of absence of supporting documentation for the price allocation. They emphasised that the supplied providers have been of a technical nature and met the “make out there” criterion, thereby rendering them topic to taxation as FTS.

Providers encompassed provide chain and manufacturing enterprise improvement, basic administration, inside audit, communication, human sources, finance and treasury, information processing and knowledge expertise, meals security, high quality management, and corresponding areas.

The tribunal noticed that the assessee wanted to determine that the price allocations certified as reimbursements to say an exemption underneath revenue tax or treaty provisions. This requirement was not met.

The assessee submitted a consolidated bill for all bills incurred by varied value centres. Nonetheless, the assist service settlement mandated the willpower of every allocable value via the applying of particular allocation components.

The tribunal upheld the division’s conclusions, asserting that the assessee had supplied providers to its Indian associates, categorizing some as taxable and others as non-taxable with none substantiated rationale.

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The gathering of fees indicated that they have been gathered in a complete or arbitrary method, failing to stick to the agreed-upon accounting methodology within the contract.

The absence of a correct foundation for allocation or documentation of precise prices incurred by the associates indicated that the assessee’s declare was unsubstantiated and unsupported by any paperwork.


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