Secondment reimbursement and professional services under the India-USA DTAA fell outside technical and included services taxation.

Cost-to-cost reimbursement of salary for seconded employees deployed in India was held not to constitute fees for technical services, because the payment reflected deputation reimbursement rather than consideration for independent technical services. Amounts received for professional services were also held not taxable as fees for included services, since Article 15(2) of the India-USA DTAA is not limited to services rendered by members of a formal professional body and the make available condition under Article 12(4)(b) was not met. On both issues, the receipts were outside the relevant taxing provisions and the tax additions were deleted.

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Issues: (i) Whether reimbursement of salary expenses in respect of seconded employees deployed in India was taxable as fees for technical services. (ii) Whether amounts received for rendering professional services were taxable as fees for included services or were covered by Article 15(2) of the India-USA DTAA.

Issue (i): Whether reimbursement of salary expenses in respect of seconded employees deployed in India was taxable as fees for technical services.

Analysis: The Tribunal followed the earlier coordinate bench decision in the assessee's own case and the judicial understanding that, on the facts of the secondment arrangement, the real character of the payment had to be examined. It accepted that the arrangement was one of deputation with cost-to-cost reimbursement and that such reimbursement, in the absence of a charge for independent technical services, could not be treated as consideration for taxable technical services. The reliance placed on the nature of secondment in service-tax litigation did not alter the treaty character of the payment for income-tax purposes.

Conclusion: The reimbursement of salary expenses for seconded employees was not taxable as fees for technical services and the issue was decided in favour of the assessee.

Issue (ii): Whether amounts received for rendering professional services were taxable as fees for included services or were covered by Article 15(2) of the India-USA DTAA.

Analysis: The Tribunal held that Article 15(2) uses an inclusive description of professional services and is not confined to services rendered only by persons regulated by a formal professional body. It also accepted the coordinate bench view that the services in question did not satisfy the "make available" requirement for fees for included services under Article 12(4)(b), and that Article 12(5)(e) excluded payments for professional services covered by Article 15. On that basis, the receipts could not be brought to tax as fees for included services.

Conclusion: The amounts received for rendering professional services were not taxable as fees for included services and the issue was decided in favour of the assessee.

Final Conclusion: Both contested tax additions were deleted and the assessee succeeded on all substantive issues.

Ratio Decidendi: Cost-to-cost reimbursement for seconded employees is not taxable as technical services, and professional services under Article 15(2) of the India-USA DTAA are not confined to services rendered by members of a formal professional body; where the "make available" condition is not met, the receipts do not qualify as fees for included services.

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