Expatriate secondee remuneration was treated as salary, while delayed provident fund deposit remained disallowable.

Reimbursement of remuneration paid to expatriate secondees retained the character of salary where the assignment agreements placed the personnel under the assessee's full control, required exclusive work for the assessee, and treated them as employees during the assignment. On that footing, tax deduction was governed by section 192 rather than section 195, so the amount was not fee for technical services and the disallowance under section 40(a)(i) was deleted. By contrast, employees' provident fund contribution deposited after the statutory due date was not allowable merely because payment was made before filing the return, and the disallowance was sustained.

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Issues: (i) Whether reimbursement of remuneration paid to assigned expatriate employees was salary subject to tax deduction under section 192 of the Income-tax Act, 1961, or fee for technical services attracting section 195 and disallowance under section 40(a)(i); (ii) Whether delayed deposit of employees' contribution to provident fund, though paid before filing the return, was allowable as a deduction.

Issue (i): Whether reimbursement of remuneration paid to assigned expatriate employees was salary subject to tax deduction under section 192 of the Income-tax Act, 1961, or fee for technical services attracting section 195 and disallowance under section 40(a)(i).

Analysis: The assignment agreements showed that the concerned personnel were placed under the assessee's full control and supervision, were required to work exclusively for the assessee, and were treated as employees of the assessee during the tenure of assignment. The remuneration, whether paid directly or through the parent company on a reimbursement basis, was treated as salary and tax was deducted under section 192. On these facts, the arrangement reflected an employer-employee relationship rather than rendition of technical services. The factual matrix was found materially different from the precedent relied on by the Revenue.

Conclusion: The payment was salary and not fee for technical services. No obligation to deduct tax under section 195 arose, and the disallowance under section 40(a)(i) was deleted in favour of the assessee.

Issue (ii): Whether delayed deposit of employees' contribution to provident fund, though paid before filing the return, was allowable as a deduction.

Analysis: It was undisputed that the employees' contribution was not deposited within the time prescribed under the relevant provident fund law. The claim for allowance on the basis of payment before the due date for filing the return was rejected in view of the binding Supreme Court ruling on the point.

Conclusion: The disallowance was upheld against the assessee.

Final Conclusion: The addition relating to salary reimbursement was deleted, but the disallowance for delayed provident fund deposit was sustained, resulting in a partial allowance of the appeal.

Ratio Decidendi: Where secondees are placed under the assessee's effective control and employment for the assignment period, reimbursement of their remuneration retains the character of salary and does not constitute fee for technical services for withholding purposes.

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