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TMI Blog2020 (12) TMI 570X X X X Extracts X X X X X X X X Extracts X X X X ..... ax (Appeals), it is evident that the seconded employees have to work at such place as the assessee may instruct and the employees have to function under the control, direction and supervision of the assessee and in accordance with the policies, rules and guidelines applicable to the employees of the assessee. The employees in their capacity as employees of the assessee had to control and supervise the activities of Msource India Pvt. Ltd. Therefore, the assessee for all practical purposes has to be treated as employer of the seconded employees. There is no obligation in law for deduction of tax at source on payments made for reimbursement of costs incurred by a non resident enterprise and therefore, the amount paid by the assessee was not to suffer tax deducted at source under Section 195. Similar view has been taken by High Court of Delhi in HCL INFO SYSTEM LTD. [ 2004 (1) TMI 16 - DELHI HIGH COURT] in respect of salaries paid to foreign technicians on behalf of the assessee. - Decided in favour of assessee. - I.T.A. NO.214 OF 2014 - - - Dated:- 1-12-2020 - HON BLE MR. JUSTICE ALOK ARADHE AND HON BLE MR. JUSTICE H.T. NARENDRA PRASAD APPELLANTS (BY SRI. K.V. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in which the aforesaid substantial questions of law arise for our consideration needs mention. The assessee is an Indian company incorporated on 22.01.2004 under the Companies Act, 1956. It is a subsidiary of ANITCO Ltd. a group company of Abbey National Plc, UK (hereinafter referred to as 'ANP' for short). ANP had entered into a agreement on 07.11.2003 with Abbey, India to outsource the provision of certain process and call centers to M/s Msource India Pvt. Ltd. Under the agreement, Msource India Pvt. Ltd was required to provide high quality services which supports the position of ANP and its affiliates as well as to customers in UK in order to ensure that high quality services were provided by Msource India Pvt. Ltd, ANP entered into a consultancy agreement with the assessee on 04.02.2004 in which description of services to be provided by the assessee has been mentioned and for which the assessee was to be compensated at cost plus 12% which included depreciation but excluded exchange fluctuation loss. In order to facilitate outsourcing agreement between ANP and Msource India Pvt. Ltd. an agreement for secondment of staff was entered into between ANP and the assessee on 04 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further held that there was no obligation on the part of the assessee to deduct the tax at source on the payments made to ANP and therefore, the assessee cannot be treated as 'assessee in default' under Section 201(1) of the Act. Accordingly, the order levying interest under Section 201(1A) of the Act was quashed. In the result, the appeal preferred by the assessee was allowed. Being aggrieved by the order passed by the tribunal, the revenue has approached this court. 5. Learned counsel for the revenue submitted that the assessee is rendering technical services and substance of the agreement instead of the form of the agreement has to be seen and from perusal of the agreement, it is evident that the payment in question has been made under Fee for Technical Services (FTS). It is further submitted that reimbursement is only a manner of computation for consideration towards FTS and the finding recorded by the tribunal is contrary to the judgment of the High Court of Delhi in M/S CENTRICA INDIA OFFSHORE PVT. LTD. VS. COMMISSIONER OF INCOME TAX-I ORS., W.P.(C) No.6807/2012 dated 25.04.2014, in which similar agreement and similar services rendered by the assessee were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. It is further submitted that the dispute in this appeal is limited only to the extent of expenses incurred by the assessee for hotel and traveling expenses to the tune of ₹ 10.96 Crores and whether the same can be treated as expenses for providing technical services. It is also urged that decision rendered by High Court of Delhi in M/S CENTRICA INDIA OFFSHORE PVT. LTD. supra does not apply to the facts of the case for two reasons, firstly, the court dealt with the issue of permanent establishment in the aforesaid decision, secondly, the issue involved in the aforesaid decision was whether expenses incurred towards salary can be treated as expenses for providing technical services. It is also urged that High Court of Delhi while passing the aforesaid judgment has not considered the decision rendered by it in 'DIT VS. HCL Info SYSTEM LTD.', 274 ITR 261 (DELHI). 8. It is also submitted that mere deputation of the employees doesn t amount to making available technical Know-How. Learned counsel has also invited our attention to Articles 5, 7 and 13 of DTAA. It is urged that no substantial question of law arises for consideration in this appeal and the matter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... going proviso, an agreement made on or after the 1st day of April, 1976, shall be deemed to have been made before that date if the agreement is made in accordance with proposals approved by the Central Government before that date. Explanation 2.- For the purposes of this clause, fees for technical services means any consideration (including any lump sum consideration) for the rendering of any managerial, technical or consultancy services (including the provision of services of technical or other personnel) but does not include consideration for any construction16, assembly, mining or like project undertaken by the recipient16 or consideration which would be income of the recipient chargeable under the head Salaries . 195(1) Any person responsible for paying to a non-resident, not being a company, or to a foreign company, any interest (not being interest referred to in section 194LB or section 194LC) or section 194LD or any other sum chargeable under the provisions of this Act (not being income chargeable under the head Salaries ) shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by the issue o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... function under the control, direction and supervision of the assessee and in accordance with the policies, rules and guidelines applicable to the employees of the assessee. The employees in their capacity as employees of the assessee had to control and supervise the activities of Msource India Pvt. Ltd. Therefore, the assessee for all practical purposes has to be treated as employer of the seconded employees. There is no obligation in law for deduction of tax at source on payments made for reimbursement of costs incurred by a non resident enterprise and therefore, the amount paid by the assessee was not to suffer tax deducted at source under Section 195 of the Act. Similar view has been taken by High Court of Delhi in HCL INFO SYSTEM LTD. supra in respect of salaries paid to foreign technicians on behalf of the assessee. 12. So far as reliance placed by learned counsel for the revenue on the decision of M/s. CENTRICA INDIA OFFSHORE PVT. LTD. supra is concerned, from perusal of paragraph 29 of the aforesaid decision, it is evident that the High Court of Delhi considered the issue whether the secondment of employees by BSTL and DEML, the overseas entities fall within Arti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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