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TMI Blog2019 (4) TMI 664X X X X Extracts X X X X X X X X Extracts X X X X ..... he issue of reimbursement of salary costs on seconded employees, the CIT(A) held, inter-alia, that the seconded temporarily employees exchanged experience and skill training by the employer. i.e. the employer in this case is the entity which is seconding and once the term of the secondment is over, they will return back to their original employer and they do not loose the employer-employee relationship of the parent organization. Since the assessee has not become employer of seconded employees, what the assessee paid to Nippon Paint Company Limited and Wuthela Holdings Pte Limited at INR 29,62,869/- is the income of those companies and not in nature of reimbursement of salary. Further, CIT (A) applied the ratios of the Apex court/ HC/AA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India (P) Limited, the AO held that the nature of the impugned salary is the income and it is not in nature of reimbursement of salary, and relying on the decision of Supreme Court in the case of Centrica India Offshore (P) Limited, held that salary reimbursement made for ₹29,62,869/- is payment for FTS. Since the assessee has not deducted TDS on the above payments u/s 195, the A O held that the assessee was in default in view of section 201(1), therefore liable to tax and interest under sections 201(1) and 201(1A) and levied accordingly. Aggrieved against that order, the assessee filed appeal before the CIT(A). The Ld CIT(A) dismissed the appeal. Aggrieved against the order of the Ld. CIT(A), the assessee filed this appeal. 3. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the visits of the personnel, the services would not have been rendered at all or at the most could not have been performed to the extent of the service requirements. These expenses have been incurred in connection with technical services agreement, they bear a clear nexus with the technical services rendered and part and parcel in the process of service of a technical character. Therefore, the expenditure has been incurred for earning royalty/ FTS. The expenditure is that of service providers and not that of the assessee company. Moreover, Article 13 of Indo Japan DTAA provides for taxation of royalty/FTS in the source country on gross basis at a concessional rate of tax. Relying on the case laws decided by the Hon ble Court in the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue to have their pay-roll processed by T but applicant is to reimburse Tfor those amounts and also pay T a service charge - Right to terminate employee is with T - Whether since applicant has not become employer of seconded employees, what applicant pays to T is income of Tand not in nature of reimbursement of salary and while paying amounts applicant has obligation to withhold taxes under section 195- Held, yes (In favour of revenue], similarly, Hon ble Supreme Court in the case of Centrica India Offshore (P) Ltd, an Indian company, entered into secondment agreement with overseas companies and sought some employees on secondment from overseas entities held that since employees of those companies used their technical knowledge and skill ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of salary costs INR 29,62,869/-, therefore I upheld the action of the AO to levy tax and interest u/s 201(1)and U/s 201(1A) of the Act. 5. We heard the rival submissions and gone through relevant material. On both the above the issues, the Ld. CIT (A) on due examination has clearly recorded the above findings and applied the law as laid down by Courts/AAR/tribunal. On the issue of the remittances of ₹15,48,340/-, the necessity of visit of such personnel is very much part of the scope of service rendered. But for the visits of the personnel the services would not have been rendered at all or at the most could not have been performed to the extent of service requirements. The expenses have been incurred in connection with technical ..... X X X X Extracts X X X X X X X X Extracts X X X X
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