S. 195: Reimbursement of share of costs towards
administrative and management support services in connection with technology
updates etc. is not taxable
DCIT vs. Ernst & Young Pvt. Ltd (ITAT Kolkata)
The assessee company is a member of the international organization of
Ernst & Yound and its several associate concerns worldwide. Ernst &
Young Global Services LLP and Ernst Young UK LLP provide administrative and
management support services in connection with technology updates, system and
methodology and upgrades, training through webs etc. to the assessee and to
other associate concerns of the Group.
The assessee and its other associate concerns share the costs. A sum of
Rs.6,88,12,554 was reimbursed to Ernst & Young Global Services LLP and a
sum of Rs.23,78,781 to Ernst & Young UK LLP by the assessee during the
current assessment year on account of its share of costs for such services. The
said concerns were set up by member firms of Ernst & Young for providing
resources to obtain best methodologies at a lower cost which in the present
days of globalisation was imperative for any professional firm. Development of
such methods by anyone concern would have been cost prohibitive apart from
lacking uniformity and mutual compatibility.
Accordingly, arrangement was arrived at for such services to be
developed in pool by the said two concerns to which the member firms would have
access to it and reimbursing their respective shares of cost incurred therefor.
Such reimbursement was agreed on the basis of respective turnover of the member
firms. These facts are not denied by revenue even now before us and these are
reimbursement of expenses.
Once these are reimbursement of
expenses the assessee is not liable to deduct TDS u/s. 195 of the Act.
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