Decision on taxability of reimbursements of expenses as part of technical service fees

The Income Tax Appellate Tribunal (ITAT) delivered a ruling dated 31 January 2008 in the case of Ashok Leyland Ltd. v. Deputy CIT (2008-TIOL-205-ITAT-MAD), in which it held that the reimbursement of travel expense made to a foreign company pursuant to a technical assistance agreement, was chargeable to tax as part of fees for technical services (FTS) and therefore liable to withholding tax in India.

(a) Facts. The Taxpayer (i.e. Ashok Leyland Ltd.) was a company manufacturing motor vehic…