The assessee, being the Indian project office of a Spanish company, made payments to its foreign AE towards professional fees and reimbursement of expatriate salary costs. The AO disallowed the payments under section 40(a)(i) on the ground that they constituted Fees for Technical Services (FTS) on which tax was deductible under section 195. The Hon’ble Tribunal held that the professional fees represented reimbursement of costs incurred by the foreign AE in relation to joint NHAI contracts and did not involve making available any technical knowledge, know-how or skill to the assessee or the Indian service providers. It further held that reimbursement of expatriate salary costs was made strictly on a cost-to-cost basis without any mark-up and, therefore, contained no income element chargeable to tax in India. Consequently, no tax was deductible under section 195, and the disallowance under section 40(a)(i) was deleted. The appeal was allowed. [AY: 2018-19]