Seconded employee salary reimbursement is not fees for technical services and does not trigger further withholding tax.

Reimbursement of salary paid for a seconded employee was not liable for tax deduction at source under section 195 where the salary had already been taxed in India in the employee's hands. The secondment arrangement was treated as a remittance of salary cost, not as consideration for technical services, so the same amount could not again be characterised as fees for technical services. As no separate withholding obligation arose on the reimbursement, the assessee was not an assessee in default under sections 201(1) and 201(1A).

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Issues: Whether the assessee was liable to deduct tax at source under section 195 on reimbursement of salary paid to a seconded employee of the foreign company, and whether such payment could be treated as fees for technical services so as to render the assessee an assessee in default under sections 201(1) and 201(1A).

Analysis: The payment was made under a secondment arrangement by which the foreign company deputed its employee to work in India for the assessee. The salary of the seconded employee had already been subjected to tax in India in the hands of the employee as salary, and the reimbursement to the foreign company was only a remittance of that salary cost. On the facts, the arrangement did not constitute consideration for technical services, and the same amount could not be characterised again as fees for technical services. Since the underlying salary payment had already suffered tax deduction, no separate obligation to deduct tax arose on the reimbursement to the foreign company.

Conclusion: The assessee was not liable to deduct tax at source on the reimbursement and was not an assessee in default under sections 201(1) and 201(1A); the revenue's challenge failed.

Ratio Decidendi: Reimbursement of salary paid for a seconded employee, where the salary has already been taxed as salary in India, does not amount to fees for technical services and does not attract a further obligation to deduct tax at source under section 195.

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