INCOME TAX ACT, 1961

Section 92C

Transfer pricing - Determination of ALP - Reimbursement of expenses to AE -

Assessee made reimbursement of expenses incurred by its AE abroad. Revenue took the view that assessee had reimbursed expenses which were the resonsibility of Ae and, therefore, transaction was not at arm's length. Therefore, TP adjustment was made. Assessee explained that reimbursement of expenses to its AE pertained to the expenses incurred by assessee company in respect of its employees on their visits for sales promotion activities in Philippines. The funds were given by company to its employees and upon submission of their travelling bills, expenses were accounted in books of account of assessee-company by adjusting advances given to the employees. The expenses were incurred for the purpose of business of assessee company. AE had also reflected such expenses in its books of account and shown as expenses reimbursed by assessee company. Held: Revenue had not categorically disproved material facts and explanation of assessee company in support of its contention that it had made only reimbursement of expenses to its AE which were incurred for the purpose of business of assessee company. The details and material facts were disclosed by assessee company and no international transaction had taken place between assessee company and its AE in respect of amount shown as reimbursement of expenses, therefore, no question of ALP determination was raised in its case.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2007-08 & 2011-12

INCOME TAX ACT, 1961

Section 14A Rule 8D

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