At the time of ensuring the additions towards the cost reimbursements as fees for technical services (FTS), the Mumbai Bench of Income Tax Appellate Tribunal observed that the taxpayer does not have any foundation for the allocation or actual cost incurred for affiliates.
Aby T. Varkey (Judicial Member) and S. Rifaur Rahman (Accountant Member), presiding over the bench, noted that the taxpayer had entered into a support services agreement to offer assistance through multiple cost centres.
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However, they failed to furnish any specifics, relevant factors, or a systematic allocation method for categorizing the support service charges received from or provided to various affiliates.
The appellant, a U.S. tax resident, received a payment of Rs. 5.18 crore from Heinz India for cost allocation or expense recovery. This amount was considered non-taxable, constituting a straightforward reimbursement without any markups.
However, the tax department rejected this claim due to the absence of supporting documentation for the cost allocation. They emphasized that the provided…
