Offshore Equipment Sales and Administrative Reimbursements Lacking ‘Make Available’ Test Are Non-Taxable in India

ORDER

Bijyananda Pruseth, Accountant Member.- This appeal emanates from the final assessment order passed u/s 143(3) r.w.s 144C(13) of the Income-tax Act, 1961 (in short, ‘Act’) by the ITO, Int. Tax, Circle 2(3)(2), Mumbai [in short, ‘AO’], dated 09.07.2024 for the assessment year (AY) 2020-21 pursuant to the directions issued by the Dispute Resolution Panel-1, Mumbai (DRP) vide order u/s 144C(5) dated 14.06.2024.

2. The grounds of appeal raised by the assessee are as under:

“1 . On the facts and in the circumstances of the case and in law, the final assessment order dated 9 July 2024 passed under section 143(3) r.w.s. 144C(13) of the Act by Ld. AO and the directions issued under section 1440(5) of the Act dated 14 June 2024 by the Ld. Dispute Resolution Panel (‘Ld. DRP’), are erroneous and bad in law.

2. On the facts and in the circumstances of the case and in law, the notice under section 143(2) of the Income-tax Act, 1961 (‘the Act’) issued by the Assistant Commissioner of Income Tax, NaFAC-1(1)(2), Delhi is without jurisdiction and thus all proceedings consequent to the aforesaid notice under section 143(2) of the Act are also bad in law and void-ab-initio and liable to be quashed.

The Assessee humbly prays that the assessment proceedings are invalid and consequently the draft assessment order as well as the final assessment order are bad in law, null and void and therefore liable to be quashed.

3. On the facts and in the circumstances of the case and in law, the final assessment order dated 9 July 2024, passed by the Ld. AO under section 143(3) read with section 144C(13) of the Act, having been passed beyond the limitation period provided in terms of section 153 of the Act, is void-ab-initio, illegal and bad in law and is therefore, liable to be quashed.

4. On the facts and in the circumstances of the case and in law, the final assessment order passed pursuant to unsigned Ld. DRP directions is invalid in law and under provisions of the Act.

5. On the facts and in the circumstances of the case and in law, the Ld. AO and Ld. DRP erred in taxing the receipts from offshore supply of goods amounting to INR 20,72,47,158 without appreciating that no income accrues or arises in India as per section 9 of the Act and hence these receipts cannot be brought to tax in India.

6. Without prejudice to Ground No. 5, on the facts and in the circumstances of the case and in law, the Ld. AO and the Ld. DRP erred in making an addition of INR 20,72,47,158 towards offshore supply of goods as ‘fees for technical services’ under the Act as well as India – USA Double Taxation Avoidance Agreement (“Tax Treaty’).

7. On the facts and in the circumstances of the case and in law, the Ld. AO and the Ld. DRP erred in making an addition of INR 9,80,42,269 towards offshore support services as ‘fees for technical services’ under the Act as well as India – USA Tax Treaty.

8. On the facts and in the circumstances of the case and in law, the Ld. AO and the Ld. DRP erred in not allowing the additional claim raised by the Assessee to exclude the certain income erroneously offered to tax in the return of income on gross basis without appreciating that credit notes aggregating to INR 99,24,586 are raised in this regard.

9. On the facts and in the circumstances of the case and in law, the Ld. AO erred in allowing short credit of the taxes deducted at source (“TDS’) aggregating to INR 3,48,78,434 which is claimed in the return of income.

10. On the facts and in the circumstances of the case and in law, the Ld. AO erred in not granting credit of regular assessment tax of INR 2,00,00,000 paid subsequent to filing return of income while arriving at the final tax liability.

11. On the facts and circumstances of the case and in law, the Ld. AO erred in levying interest of INR 50,58,735 under section 234C of the Act.

12. On the facts and circumstances of the case and in law, the Ld. AO erred in initiating penalty under section 270A of the Act.”

3. The assessee has filed additional ground on 08.06.2026, which is as under:

“Ground No. 13: On the facts and in law, the Ld. AO be directed to exclude the amounts receivable from GMR Rajahmundry Energy Ltd. And GMR Vemagiri Power Generation Limited from the total income which was initially offered to tax, as the same were subsequently reversed pursuant to settlement agreements and issuance of credit notes, and hence no income accrued to the Assessee in respect of such amounts for the year under consideration.”

4. Let us first consider the request of the assessee to admit the additional grounds raised by the assessee. The Ld. CIT-DR submitted that the additional ground may not be admitted because the claim of revision of income was not made through valid return or revised return of income. He has relied on the decision of the Hon’ble Supreme Court in case of Goetze (India) Ltd. v. CIT  284 ITR 323 (SC). On the other hand, the Ld. AR relied on the decision of the Hon’ble Bombay High Court

In case of CIT v. Pruthvi Brokers & Shareholders  349 ITR 336 (Bombay), wherein it has been held that an assessee is entitled to raise not only additional legal submissions but also fresh claims before the appellate authorities, even if such claims were not made in the original return of income. The Hon’ble Court further held that the appellate authorities have wide jurisdiction to entertain such claims, including those which were available at the time of filing the return but were not raised. The Ld. AR further submitted that the above position of law has also been explained by the Hon’ble High Court in case of Ultratech Cement Ltd. v. Addl. CIT  [2018] 408 ITR 500 (Bombay), wherein the Hon’ble Court held that the admissibility of an additional ground is a matter within the discretion of the appellate authority, to be exercised having regard to the facts and circumstances of the case. The Hon’ble Court in case of Ultratech Cement Ltd. (supra) further held that even where the additional ground requires examination of fresh evidence, the same can be admitted provided the assessee demonstrates “good and sufficient reasons” for not having raised the ground before the lower authorities. The Ld. AR also relied on the decision in case of National Thermal Power Co. Ltd. v. CIT [1998] 229 ITR 383 (SC).

4.1 We have heard both sides and considered the decisions relied upon by both sides. The Hon’ble Supreme court in case of NTPC Ltd. (supra) held that the order of Tribunal u/s 254 of the Act is expressed in the widest possible terms. There is no reason to restrict the power of the Tribunal u/s 254 only to decide the grounds which arise from the order of the CIT (Appeals). Both the assessee as well as the Department have a right to file an appeal/cross objection before the Tribunal. It was further held that if, during the pendency of an appeal, it is found that an item which is not taxable has been subjected to tax, or a permissible deduction has been denied, there is no reason why such an issue should not be allowed to be raised for the first time before the Tribunal. The Hon’ble Supreme Court in case of Jute Corpn. of India Ltd. v. CIT [1991] 187 ITR 688 (SC) held that an assessee is entitled to raise an additional ground for the first time before the appellate authority, particularly where the claim arises on account of subsequent events. Hence, following the decision of the Hon’ble Supreme Court in cases of NTPC Ltd. (supra), Jute Corporation of India Ltd. (supra) and the decision of the Hon’ble Jurisdictional High Court in case of Pruthvi Brokers and Shareholders (P.) Ltd. (supra) and Ultratech Cement Ltd. (supra), the additional ground is admitted and will be decided at the relevant place in this order.

4.2 The assessee has also filed an application u/r 29 of the ITAT Rules, 1963 which is as under:

“1. GE Vernova International LLC (formerly known as General Electric International Inc.) (hereinafter referred to as “the Assessee”) was, during the year under consideration, engaged in the business of providing plant operation and maintenance services, repair and inspection services, technical training, welding, and other skilled craft labour services to customers across various jurisdictions, for which it earned service fees.

2. The Assessee had, in the course of its business, raised invoices on GMR Rajahmundry Energy Limited (“GREL”) and GMR Vemagiri Power Generation Limited (“GVPGL”) for maintenance and repair of machinery and equipment under long-term contractual arrangements.

3. The income pertaining to the said invoices was initially recognized and offered to tax in the year under appeal, however, a portion of the same was subsequently reversed through the issuance of credit notes against four invoices.

4 The aforesaid invoices form part of a series of invoices raised under a Long Term Services Agreement dated 06 October 2010 executed between the Assessee and GREL, and similarly between the Assessee and GVPGL, in respect of maintenance services for their respective power projects (hereinafter referred to as “the Contract”). However, due to some dispute with the aforementioned parties, the payment of these invoices was not made by the parties to the Assessee.

5. Subsequently, pursuant to discussions and negotiations between the parties and the Assessee, a settlement was reached with respect to the disputed invoices by way of Settlement Agreements dated 19 August 2025 (with GREL) and 09 June 2025 (with GVPGL) (collectively referred to as “Settlement Agreements”).

6. In furtherance of the Settlement Agreements and in accordance with the commercial understanding between the parties, the Assessee issued credit notes effectively reversing the income earlier recognized and billed under four original invoices.

7. The Assessee has thus preferred additional ground before this Hon’ble Tribunal, whereby a claim has been made to exclude/reverse the income originally offered to tax on the basis of the aforesaid Settlement Agreements and corresponding credit notes. It is submitted that the said Settlement Agreements and consequential documents came into existence only after the completion of the assessment proceedings and the filing of the present appeal. Accordingly, the Assessee was prevented by sufficient cause from either raising the aforesaid claim or producing the relevant documents before the lower authorities.

8. The Assessee now seeks to place on record, by way of additional evidence, the Settlement Agreements, along with the relevant invoices and credit notes pertaining to GREL and GVPGL, in support of the aforesaid additional ground and claim. These documents are directly germane to the issue under consideration and go to the root of the matter, inasmuch as they demonstrate that the income originally recognized did not ultimately accrue to the Assessee.

9. It is respectfully submitted that the aforesaid documents are vital, relevant, and necessary for the proper adjudication of the additional ground raised by the Assessee. The non-production of the same before the lower authorities was neither deliberate nor due to any negligence, but solely on account of the fact that the said documents were not in existence at the relevant time. It is, therefore, prayed that this Hon’ble Tribunal may kindly admit the aforesaid documents as additional evidence in the interest of substantial justice.

10. The Assessee humbly seeks to place reliance on the following rulings in support of its claim for admitting the above additional evidence before this Hon’ble Tribunal

11. The Assessee most humbly prays that this Hon’ble Bench may kindly permit the Assessee to produce the aforesaid documents as additional evidence, with a view to advance the cause of justice, and pass such further orders as this Hon’ble Tribunal may deem fit.”

4.3 Having admitted the additional ground earlier, let us consider as to whether the additional evidence could be admitted by the Tribunal, which were not submitted before the lower authorities. The additional evidence is relevant to decide the case. Rule 29 permits ITAT to admit additional evidence for any substantial cause. The intention behind the rule is that substantial justice should be done and the interest of justice should be the overriding consideration. The settlement agreement and consequential agreements came into existence only after assessment proceedings and filing of present appeal. Hence, there was sufficient and reasonable cause for not raising the claim and producing the relevant documents before the lower authorities. Considering the totality of facts and in the interest of justice, the additional evidence is admitted.

5. Facts of the case, in brief, are that the assessee filed its return of income for AY 2020-21, declaring total income of Rs.2,67,71,87,860/-. The assessee is a foreign company incorporated in the USA and is a non-resident assessee. The case was selected for scrutiny under CASS and assessment proceedings were completed u/s 143(3) r.w.s. 144C of the Act. During the year under consideration, the assessee had received Rs.9,80,42,269/- from its Indian group entities towards various offshore support services, including finance and accounting, payroll management, sales support, immigration services, relocation expenses, travel and expense management and other related services. The assessee claimed that such receipts were not taxable in India under Article 12 of the India-USA DTAA as the services did not make available any technical knowledge, experience, skill, know-how or processes to the recipients. The AO, however, after examining the nature of services, relevant agreements and the applicable provisions of the Act and the India-USA DTAA, held that the services rendered by the assessee were in the nature of technical/managerial/consultancy services and constituted Fees for Technical Services taxable in India under Article 12 of the DTAA. The assessee had also received Rs.20,72,47,158/- towards offshore sale of goods to an Indian group entity. The assessee contended that the said receipts were from offshore sale of goods and were not taxable in India. The AO, however, rejected the claim and treated the receipts as taxable in India. The objections raised by the assessee before the Dispute Resolution Panel were also rejected on the substantive issues relating to taxability of the offshore support services and offshore sale of goods. Accordingly, an aggregate addition of Rs.30,52,89,427/- was made to the returned income on account of the aforesaid receipts, determining the total income at Rs.2,98,24,77,300/- u/s 143(3) r.w.s. 144C(13) of the Act.

6. Aggrieved by the order of AO u/s 144 r.w.s. 144C(13) of the Act, the assessee filed appeal before the Tribunal. The Ld. AR filed paper book and summary chart of issues and written submission. Grounds No.5 and 6 pertain to taxability of offshore supply of goods and ground No.7 pertains to taxability of offshore support services. The Ld. AR submitted that during the year under consideration, the assessee was engaged, inter alia, in providing onshore technical services, rendering offshore support services to Indian affiliates, and supplying goods from outside India. The assessee also maintained an Indian branch office engaged in personnel sourcing services. The branch office was not involved in the offshore supply of goods or offshore support services. The assessee received Rs.20,72,47,158/- from offshore supply of goods to GE India Industries Pvt. Ltd. under offshore sale arrangements. The assessee also received Rs.9,80,42,269/- from offshore support services. He submitted that the AO has given a common finding regarding offshore supply of goods and offshore support services. He submitted that the receipts could not be characterized as fees for technical services under Article 12 of India-USA DTAA or under the Act. In support of grounds No.5 and 6, he relied upon the decision of the co-ordinate Bench in case of Baker Hughes EMEA Unlimited Company v. Dy. CIT [2023]  201 ITD 43 (Mumbai – Trib.)and SoftwareONE Pte. Ltd. v. ACIT, International Taxation [2023] 108 ITR(T) 464 (Delhi – Trib.) /ITA No.1839 & 1840/Del/2022 (Delhi Trib.).

7. On the other hand, the Ld. CIT-DR relied upon the order of lower authorities.

8. We have heard both sides and perused the materials on record. We have also gone through the decisions relied upon by the parties. The AO has given a common finding on offshore supply of goods and offshore support services. The common finding of the AO is at para 8 of the draft assessment order, the same reads as under:

“Further it is seen that the support services make the personnel knowledgeable and he can handle those jobs for which the said support services has been given. By getting the said service, the said personnel become more efficient, learn the tricks of the trade, get educated by the process/system adopted by the company and utilize the same for its day-to-day work independently. Thus, the said support services which have been reimbursed to the assessee by its AE is nothing but ‘Fees for Included Services’ as envisaged in Article 12(4) of the India-USA DTAA. Also, in respect of receipt of Rs. 20,72,47,158/- the assessee has failed to establish how the same are not chargeable to tax under the head Fees for Technical Services. The assessee has not been able to distinguish whether the said goods have elements of software/technical know-how embedded in it. The assessee has merely relied on certain case laws. However, in the absence of crucial evidences submitted by the assessee, the claim of the assessee is not found to be acceptable. Accordingly, the aggregate receipts of Rs. 30,52,89,427/- (Rs. 9,80,42,269/- + Rs. 20,72,47,158/-) are taxed in the assessee’s hands as Fees for Technical Services under the Act at the applicable tax rate of 10% plus applicable surcharge and cess under section 115A read with section 90(2) of the Act.”

8.1 Grounds No.5 and 6 pertains to taxability of offshore supply of goods and fees for technical services. During the year, the assessee had supplied goods and materials aggregating to INR 20,72,47,158 to GE India Industrial Private Limited under offshore sale arrangements. The Ld. AR took us through the paper book and drew attention to the sample invoices on record. The invoices expressly identify the goods sold and state the product description, quantity and price. An invoice-wise chart was also furnished, setting out the description of the goods covered by each invoice. He submitted that the invoices and chart uniformly evidence sale of goods and do not record any separate charge for services, software licensing or transfer of technical know-how. The Ld. AR also submitted that the AO did not identify any agreement, invoice entry, technical specification or other contemporaneous material establishing that a service element was embedded in the invoiced consideration. The observation of AO that the assessee had not distinguished whether the goods contained embedded software or technical know-how is an unsupported assumption. It was submitted that the infirmity in the assessment order is the absence of an evidentiary foundation for recharacterising consideration for sale of identified goods as consideration for technical services. The Ld. AR also submitted that the issue is squarely covered by the decision of the co-ordinate Bench in case of Baker Hughes EMEA Unlimited Company(supra).

9. On the other hand, the Ld. CIT-DR supported the order of AO/DRP.

10. We have heard both sides and perused the materials on record. We have gone through the said order of the ITAT in case of Baker Hughes EMEA Unlimited Co. (supra). The relevant finding is reproduced below for ready reference:

“5. Heard both the sides and perused the material on record. During the year under consideration the assessee had supplied equipment amounting to Rs. 13,27,84,057/- as discussed supra in this order to Indian customer and claimed the same as offshore sale of goods and the revenue was accrued outside India as per the provision of Sec. 5 of the Act and same was not taxable in India. However, the A.O has taxed the receipt from offshore sale of goods of Rs. 13,27,84,057/- by treating the same as fees for technical services under the Act as well as Article 12 of the India-Ireland Double Taxation Avoidance Agreement (DTAA). In this regard, the assessee submitted that it has not earned any revenue for providing any services and the invoices were for pure offshore sale. The assessee has submitted copy of invoices and purchase order to substantiate that it has earned revenue from offshore sale of equipment, consumable, spare parts and it has not earned any revenue for providing any services. We have perused the copies of invoices raised by the assessee placed at page no. 22 to 103 of the paper book. It is noticed that in the invoices the description of sale of equipment, number of quantity, price of the item sold and detail of the buyer to whom shipment of goods were provided which demonstrate that assessee had received the amount on sale of equipment and nowhere it was mentioned that any amount was received from rendering of any services. In this regard, we find that A.O has not established that how the amount received by the assessee was related to rendering of any services by the assessee. The A.O/DRP have not controverted the facts established from the invoices on sale of equipments as discussed supra in this order. The A.O has also not brought on record any clinching evidences to substantiate that assessee has received the impugned amount for rendering of services.

In the light of the above facts and circumstances we consider that the order of the AO and directions issued by the DRP are not justified. Therefore, we allow the grounds No.2 and 3 of the assessee.”

10.1 The facts of the present appeal are similar to those of the aforesaid decision. The Ld. CIT-DR has not been able to distinguish the decision either on fact or in law. Hence, following the findings above decision, grounds No.5 and 6 are allowed.

11. Ground No.7 pertains to taxability of offshore support services of Rs.9,80,42,269/-. The breakup of Rs.9,80,42,269/- received towards offshore support services is as under:

11.1 The Ld. AR submitted that substantial portion under the above head comprising Rs.8,65,00,818/- relates to reimbursement of employee relocation and deployment expenses. These primarily comprise visa and immigration services, relocation expenses and allied costs incurred through independent providers, including Fragomen and Cartus. The appellant has enclosed sample invoices in the paper book identifying the employees and the nature of immigration, visa or relocation assistance. The balance receipts relate to recurring sales support, finance and accounting, payroll, HR and other administrative functions. The Ld. AR submitted that none of these services transfers technical knowledge, experience, skill, know-how or a process which the Indian affiliate can thereafter apply independently. The Ld. AR relied upon the decision of the Hon’ble High Court of Kerala in US Technology Resources (P.) Ltd. v. CIT 407 ITR 327 (Kerala), to submit that advice rendered by a US company to an Indian company in relation to management, financial and legal matters, on a factual basis to address issues arising from time to time, without any transfer of technical or other know-how, would not give rise to taxable income in India.

12. On the other hand, the Ld. CIT-DR relied on the orders of AO and DRP.

13. We have heard both sides and perused the materials on record. We have also carefully gone through the decision of the Hon’ble Kerala High Court in case of US Technology Resources (P.) Ltd. (supra). The relevant part of the order is reproduced below for ready reference:

“13. In the MOU, paragraph 4(a) (herein above termed clause) of DTAA was clarified and agreed to be understood in order for a service fee to be considered “ancillary and subsidiary” to the application or enjoyment of the right, property, or information; only with respect to a service related directly to such application or enjoyment. The predominant nature of the arrangement should be the application or enjoyment of the right, property or information described in paragraph 3. It was also agreed that the question as to whether such services is related to the application or enjoyment would be determined by reference to the facts and circumstances of each case. Paragraph 4(b) was agreed to be narrower than the category described in paragraph 4(a), since it excludes any service that does not make technology available to the person acquiring this service. Technology would be considered to be ‘made available’ only when the person acquiring the service is enabled to apply the technology. So there should clearly be a transfer of technology with the transferee applying it to its business. The mere fact that the provision of a service may require technical input by the service provider does not per se mean that the technical knowledge, skills, etc. are made available to the person availing such services.

19. Particularly under the DTAA, we are of the opinion that none of these aspects on which the US Company has promised advice to the Indian Company would fall under the ‘included services’ and the ‘fees for included services’ would not be taxable in India as per the DTAA. As we noticed, the business profits of a US Company would be taxable in the US. However, a portion of such business profits relating to royalty and fees for included services have been carved out to enable taxation within India also, but at a reduced rate as per Article 12 of the DTAA itself. Even before the DTAA was notified by the Central Government, a MOU was entered into between the two Governments further clarifying as to the specific services qualifying for taxation within India. A further carving out was made out of the technical and consultancy services permitting taxation only insofar as the transfer of technical know-how, which, a reading of the MOU would indicate, is clearly scientific technology not including a managerial or financial strategy.”

13.1 We find that the ratio of the above decision applies to the present case, because the assessee has merely rendered routine administrative and support services without any transfer or “make available” of technical knowledge or know-how to the Indian affiliates.

13.2 The Ld. AR has also relied upon the decision of ITAT, Delhi in case of Inter Continental Hotels Group (Asia Pacific) (Pte.) Ltd. v. ACIT  [2022] 192 ITD 497 (Delhi – Trib.), which considered recurring management and support services, including accounting, personnel, training, recruitment, visa and relocation assistance and decided as under:

“31. With regard to accounting support the Bench has posed a pertinent question as to why not the accounting support given be treated as the technical knowledge ‘made available’. It was answered that the accounting support given was in relation to the preparation of balance sheet and modalities and to advice production of reports regarding the budgets from time to time and the services are rendered repetitively based on the requirements of the clients and hence it cannot be treated as a service which was ‘made available’ to be applied independently and in times to come. We, after going through the type of services rendered, hereby concur with the explanation given by the ld. AR.

32. Similarly, the services rendered in connection with training & recruitment and manpower specification, we find that there is neither technology transfer, knowledge transfer nor transfer of any skill or know-how.

33. Hence, we hold that the provisions of Article 12(4) could not be applied to the services rendered by the assessee in the strict sense of the provisions of DTAA. Hence, we hold that the decision of the ld. CIT(A) cannot be supported.”

13.3 We also find that in a recent decision by the Coordinate Bench, similar visa and immigration-related payments have been considered in case of Adit(IT) v. General Electric Company (Mumbai – Trib.)/ITA No.1340/Mum/2009 & 1414/Mum/2009, dated 31.08.2026. The relevant findings are reproduced below:

“21. Ground No.3 in both the Revenue’s appeals concerns reimbursement of visa and immigration-related expenses amounting to Rs.10,90,789 for assessment year 2003-04 and Rs.24,85,020 for assessment year 2004-05. The assessee had initially incurred expenditure through independent immigration and visa consultants, including Fragomen, Del Rey, Bernsen & Loewy LLP, for processing visa applications, immigration documents, work permits and travel-related formalities of employees of the Indian General Electric entities who were required to travel outside India for business purposes. The corresponding expenditure was recovered from the concerned Indian affiliates without any mark-up. The sample invoices and the profile of the service providers placed in the paper book show that the underlying activities related to immigration filings, visa processing, regulatory permissions, relocation assistance and employee mobility support.

21.1 . The Assessing Officer treated the reimbursement as fees for technical services principally on the reasoning that the expenditure related to employees travelling for training or on-job assignments and was therefore incidental to training or secondment services. He also observed, without identifying any separate component, that there was a profit motive embedded in the reimbursement. In support, he referred to Hindalco Industries Ltd. v. ACIT [2005] 94 ITD 242 (Mumbai) (Mumbai), Timken India Ltd., In re  257/273 ITR 67/193 CTR 610 (AAR) and Danfoss Industries (P.) Ltd., In re 268 ITR 1/189 CTR 489 (AAR). The learned CIT(A), after referring to Article 12(4) and the Memorandum of Understanding accompanying the India-USA DTAA, held that the services did not make available any technical knowledge or process and that, in the absence of a permanent establishment, the receipts could not be taxed as business profits in India.

21.2 . On an examination of the material placed on record, we find that the very factual premise adopted by the Assessing Officer is not borne out. The visa and immigration expenses arose under an arrangement distinct from the soft-skills training and any alleged secondment arrangement considered elsewhere in the assessment order. The expenses were incurred through independent immigration professionals for processing statutory and administrative formalities and were recovered from the beneficiary entities. No material has been brought on record to demonstrate that the recovery exceeded the actual cost or contained any identifiable profit element. The statement that a profit motive existed cannot take the place of a finding, founded upon the invoices or the contractual arrangement, that an amount over and above the third-party cost was recovered. Reimbursement does not assume the character of income merely because the expenditure was centrally incurred; what is material is whether the recovery contains an income element or represents consideration for an independently rendered service, neither of which has been demonstrated here.

21.3 . Even otherwise, the receipts do not satisfy Article 12(4)(b). Assistance in obtaining visas, preparing immigration documentation, applying for work permits and facilitating employee relocation does not transmit to the Indian affiliate any technical knowledge, experience, skill, know-how or process which it can thereafter apply independently. These are administrative and professional support activities performed upon the requirements of each employee and each jurisdiction. The fact that an immigration professional may possess specialised experience does not mean that such experience stands transferred to the person for whom a visa application is processed.

21.4 . In US Technology Resources (P.) Ltd. v. CIT 407 ITR 327 (Kerala), the Hon’ble Kerala High Court explained, in the context of the India-USA DTAA and its Memorandum of Understanding, that Article 12(4) does not extend to every managerial or advisory service and is confined to technical or consultancy services satisfying the treaty conditions. Likewise, in InterContinental Hotels Group (Asia Pacific) Pte. Ltd. v. ACIT [2022] 192 ITD 497 (Delhi – Trib.), services that included assistance in obtaining visas, work permits and defining relocation requirements were held not to satisfy the “make available” condition. We, therefore, find that the learned CIT(A) reached the correct conclusion. The receipts represent reimbursement of expenditure without any established income element and, independently, do not constitute fees for included services under Article 12(4). Ground No.3 in both the Revenue’s appeals is dismissed.”

13.4 Since the nature of services do not establishes the transfer of technical knowledge or capability to the Indian affiliates, the receipts could not be characterized as fees for technical services (FTS) under the Act or Article 12 of the India-USA DTAA. The Ld. CIT-DR has not been able to distinguish the above decision, either on fact or in law. Hence, following the reasons given in the above decisions, ground No.7 is allowed.

14. Ground No.8 and additional ground No.13 pertains to claims relating to reversal of income relating to ONGC Tripura Power Company Limited (“ONGC Tripura”) and GMR Rajahmundry Energy Limited (“GREL”) and GMR Vemagiri Power Generation Limited (“GVPGL”). The additional ground and additional evidences have already been admitted in para 3 to 4.3 of this order.

14.1 The Ld. AR submitted that certain incomes initially offered to tax in the return of income was subsequently reversed pursuant to commercial settlements. The claim relates to ONGC Tripura and GREL & GVPGL of Rs.99,24,586/- and Rs.2,13,03,473/-. Copies of the relevant settlement agreements, credit notes and underlying invoices have been filed. These documents show that the amounts originally invoiced and offered to tax were not ultimately receivable to the extent covered by the settlements and credit notes. The DRP rejected the ONGC Tripura claim as a fresh claim resulting in reduction of returned income and relied on Goetze (India) Ltd. (supra). The Ld. AR submitted that the decision in Goetze India Ltd. (supra) concerns the power of the AO and does not curtail appellate jurisdiction. He submitted that the GREL and GVPGL claim has been made before the Tribunal because the settlement agreements were concluded after the appeal had been filed. The claim could not have been raised earlier and thus, there is a good and sufficient reason for making the claim before the Tribunal. The appellant has relied upon the decision of the Hon’ble Bombay High Court in Ultratech Cement Ltd. (supra), wherein it was held as under:

“27. There can be no dispute that whether or not to allow an additional ground to be raised before the appellate authority is to be decided by the appellate authority in exercise of its discretion considering the facts and circumstances of the case before it. Where only a pure question of law arises from facts which are already on record, then there is no reason why the appellate authority should not consider the question of law so as to determine the correct tax liability of an assessee in accordance with law. However, where evidence is to be examined and that is not on record, then it will be considered only if the parties seeking to raise the additional ground satisfies the authority concerned that for good and sufficient reasons, the ground could not be raised before the lower authorities. .”

14.2 The Ld. AR also submitted that the Hon’ble Bombay High Court in the case of Pruthvi Brokers & Shareholders (supra) held that the ITAT has the power to entertain additional claims, the relevant observations are reproduced below:

“23. It is clear to us that the Supreme Court did not hold anything contrary to what was held in the previous judgments to the effect that even if a claim is not made before the assessing officer, it can be made before the appellate authorities. The jurisdiction of the appellate authorities to entertain such a claim has not been negated by the Supreme Court in this judgment. In fact, the Supreme Court made it clear that the issue in the case was limited to the power of the assessing authority and that the judgment does not impinge on the power of the Tribunal under section 254.

24. A Division Bench of the Delhi High Court dealt with a similar submission in CIT v. Jai Parabolic Springs Ltd. [2008] 306 ITR 42 / 172  . The Division Bench, in paragraph 17 of the judgment held that the Supreme Court dismissed the appeal making it clear that the decision was limited to the power of the assessing authority to entertain a claim for deduction otherwise than by a revised return and did not impinge on the powers of the Tribunal. In paragraph 19, the Division Bench held that there was no prohibition on the powers of the Tribunal to entertain an additional ground which, according to the Tribunal, arises in the matter and for the just decision of the case.”

14.3 It was accordingly submitted that both claims may be admitted and examined on their merits. In the case of ONGC Tripura, the claim was made during the assessment proceedings. In the case of GREL and GVPGL, the material events occurred after the appeal had been filed, which was stated to constitute good and sufficient cause for not raising the claim earlier. The Ld. AR requested the Tribunal to admit the claims and determine the correct taxable income after examining the settlement agreements, invoices, credit notes and corresponding reversals. He has relied on the decisions in cases of CIT v. Shoorji Vallabhdas & Co. [1962] 46 ITR 144 (SC) and Tata Motors Ltd. v. Dy. CIT (Mumbai).

15. On the other hand, the Ld. CIT-DR submitted that the claim of the appellant is not found to be acceptable. Any claim of revision of income should be made through valid return of income. He relied on the decision in the case of Goetz(India) Ltd. (supra). The assessee should have filed revised return of income for its claim of revision of income in respect of amount received from GMR Rajahmundry Energy Ltd. And GMR Vemagiri Power Generation Limited. In absence of revised return of income, assessee’s claim for revision of income i.e. exclude the amounts receivable from GMR Rajahmundry Energy Ltd. And GMR Vemagiri Power Generation Limited from the total income, which was offered to tax, cannot be accepted.

16. We have heard both sides and perused the materials on record. We have also gone through the decisions relied upon by both sides. We have already admitted the additional ground as well as the additional evidence after detailed discussion in para 3 to 4.3 of this order. The revenue can tax only the real income and it cannot tax an amount that is not legally taxable. The Hon’ble Supreme Court in case of Shooji Vallabhdas & Co. (supra) has held that income-tax is a levy on income. No doubt, the Act takes into account two points of time at which the liability to tax is attracted, viz., the accrual of the income or its receipt, but the substance of the matter is the income. If income does not result at all, there cannot be a tax, even though in book-keeping, an entry is made about a “hypothetical income”, which does not materialise. Where income has, in fact, been received and is subsequently given up in such circumstances that it remains the income of the recipient, even though given up, the tax may be payable. Where, however, the income can be said not to have resulted at all, there is obviously neither accrual nor receipt of income, even though an entry to that effect might, in certain circumstances, have been made in the books of account. A mere book-keeping entry cannot be income, unless income has actually resulted. The ratio of the above decision is applicable to the facts of the present case. Further, we find that the restrictions of Goetze India binds the AO and not the ITAT. Hence, the plea of the Ld. AR is acceptable in principle. However, we find that such issue had not been considered by the lower authorities on merit. Further the additional evidence was also not before them. Considering the above facts, we deem it proper to remand the matter back to the file of AO for verification and decision of the claim of the assessee in light of the additional evidence furnished by it. The AO is at liberty to call for further evidence and explanation if he is of the opinion that the same are warranted for arriving at the proper decision in accordance with law. The assessee is also given the liberty to file submission and details in support of the impugned grounds. The assessee should be given adequate and reasonable opportunity of being heard. The grounds are allowed for statistical purpose.

16.1 We make it clear that we have not expressed any opinion on merit of the case. The AO shall independently decide the issue as per law after hearing the assessee.

17. Grounds No.1 to 4 are general and legal in nature. The Ld. AR in the written submission has submitted that they are not required to be adjudicated. Accordingly, the grounds No.1 to 4 does not require adjudication.

18. Grounds No.9 to 12 pertains to credit for TDS and regular tax paid and interest levied u/s 234C of the Act. The AO is directed to give credit for the TDS and regular tax after verification of the details filed by the assessee. Interest u/s 234C is consequential in nature. The AO is directed to re-compute the same as per law. The grounds are allowed for statistical purpose.

19. The next ground is initiation of penalty proceedings u/s 270A of the Act. The ground is premature and does not require adjudication.

20. In the result appeal of the assessee is allowed for statistical purpose.