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TMI Blog2012 (2) TMI 550X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee is engaged in the business of providing back office services to Caterpillar group of companies. Its back office services include Inventory Management Support Services, Facility Design and Layout Support services and Information Technology Support and Development Services. During the relevant financial year the ITO, Int.Taxation, Ward-19(1), Bangalore noticed from the assesee s record that the assessee has remitted USD 517,074/- to M/s Caterpillar Asia Ltd., (M/s CAL) vide a CA s certificate dated 25-06-2007. He noticed that the remittance has been made without deduction of tax at source. In view of the same, the ITO, Int,.Taxn. Ward-19(1) initiated proceedings u/s 201 for non-deduction of TDS on the said remittance. The assessee submitted its explanation dated 24-03-2008 along with certain details. From the said details the ITO, Int.Taxn. Ward-1(2), noticed that the M/s CAL has deputed one of its employees namely Mr. Graham J.Lythgoe, to the assessee company in India and for the said purposes, the assessee has made the remittance on account of salary cost of the said ex-patriate employee which was actually paid by M/s CAL, Hongkong and the salary cost of the said empl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red to be made u/s 195 of the IT Act, the ITO (Int.Taxn.) held that the TDS made by the assesee is actually towards employees tax liability in India and not of M/s CAL for the fees received by it for the technical services rendered by its employee Mr. Graham J Lythgoe. He accordingly, held the assessee as an assessee in default u/s 201(1) of the IT Act and also held that the assessee to be liable to pay interest u/s 201(1A) of the IT Act and levied the same accordingly. 4.1 Aggrieved, the assessee preferred an appeal before the CIT(A) stating that the expatriate employee of M/s CAL was deputed to the assessee company in India based on the secondment agreement between the two companies to discharge his functions in accordance with the directions of the assessee company and therefore, there was an employer/employee relationship between Mr. Graham J Lythgoe and the assessee company. The CIT(A) however, was not convinced with the said arguments and confirmed the order of the AO both on the employer/employee relationship as well as the nature of services as technical services. Aggrieved, the assessee is in second appeal before us on both the issues. 4.2 The learned counsel for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntions under the heading International Hiring Agreements at page-885. The view put forth by him is reproduced hereunder; The question of who is the employer arises particularly in situations in which the employee is sent abroad to work for a foreign enterprise as well. In such cases, the determination of employer rests on the degree of personal and economic dependence of the employee towards the enterprise involved. Accordingly, the foreign enterprise does not qualify as an employer merely because the employee performs services for it or because the enterprise was issuing to the employee instructions regarding his work, or places tools, etc., at his disposals (of Hinnekens.L.Interfax 331 (1988). The situation is different if the employee works exclusively for the enterprise in the State of employment and was released for the period in question by the enterprise in his State of residence (BFH 114 (1986) re Germany s DTC with Spain) . If this view is applied to the present case, the assessee company can be considered as the economic employer because the services are rendered by Dr. Sundarrajan to it, the salary is met or borne by it. Be that as it may, the person who a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion which has also been earlier noticed by us. We are inclined to agree with the submission that these two articles are out of place in a contract for providing technical services. For example, clauses (A) to (C) of Article II make the seconded employee responsible and subservient to the assessee companywhich cannot be the case if the agreement is for providing technical services by IDS to the assessee company. Similarly, clause(E) which requires the seconded employee to also act as officer or authorized signatory or nominee or in any other lawful personal capacity for the assessee company, would also be out of ace in agreement for rendering technical services as it cannot be imagined that a technical person would also be required to act in non-technical capacities under an agreement for rendering technical services. Clause(H), on which considerable reliance was placed by the department to contend that the agreement is one for rendering technical services, is merely a clause ensuring secrecy and confidentiality of the information accessed by the seconded employee in the course of his employment with the assessee company. Such confidentiality extends not only to technical informati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n and the Austrian companies in the ruling of the AAR. It appears to us on a reading of the ruling of the AAR that in that case the secondment agreement was subservient to the foreign collaboration agreement. These are thus the features which distinguish the present case from the decision of the AAR. We are, therefore, unable to apply the said decision to the present case. 15. The department has also relied on another ruling of the AAR in South West Mining Ltd., In Re (2005) 278 ITR 233. This is a clear case of technical consultants visiting India for collecting random samples for the purpose of sending reports from abroad on the basis of the analysis of the samples. The question was whether the fees paid to the non-resident consultant were fees for technical services. There can be no doubt that the services rendered by the non-resident consultants were technical and consultancy services. In this case there was no secondment agreement. It was a clear and simple case of rendering technical services. This case has nothing in common with the present case. 16. For the above reasons, we are also not able to hold that the payment to IDS represented fees for technical services ..... X X X X Extracts X X X X X X X X Extracts X X X X
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