Secondment reimbursements under cost-to-cost recovery were not fees for technical or included services, with no withholding duty.

Reimbursements for salaries and related costs of seconded employees were held not taxable as fees for technical services or fees for included services under the Act and the India-USA DTAA. The seconded personnel worked under the Indian entity's direction and control, while the foreign entity only facilitated salary disbursement and recovered actual costs without any mark-up. Because the payments were cost-to-cost reimbursements for services already subject to tax deduction at source in India, they did not constitute consideration for technical, managerial or consultancy services, and the treaty's make-available requirement was not met. The addition on that basis was therefore unsustainable, and no withholding obligation arose on the reimbursement.

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Issues: Whether reimbursements received from the Indian group company towards salaries and related costs of seconded employees were taxable as fees for technical services or fees for included services under the Act and the India-USA DTAA.

Analysis: The secondment arrangements showed that the secondees worked under the direction and control of the Indian entity, while the foreign entity merely facilitated salary disbursement on an administrative basis and recovered the actual cost. The salary payments had already suffered tax deduction at source in India, and the reimbursements were on a cost-to-cost basis without any mark-up or independent service element. On these facts, the payment was not consideration for rendering technical, managerial or consultancy services, and the make-available requirement under the treaty was also not satisfied.

Conclusion: The reimbursements were not assessable as fees for technical services or fees for included services, and the addition made on that basis was not sustainable.

Ratio Decidendi: Where seconded employees work under the Indian entity's control and the foreign entity receives only a cost-to-cost reimbursement of salary already subjected to tax in India, the payment is not fee for technical or included services and no withholding obligation arises on that reimbursement.

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