Salary reimbursement for deputed employee was not fees for technical services where payment was at cost and taxed as salary.

Payments made to a foreign parent company for a deputed employee's remuneration were treated as salary reimbursement where the amount was recovered at cost without any mark-up, had consistently been reflected as salary reimbursement in earlier years, and tax was deducted under the salary provisions. On those facts, the payment did not fall within fees for technical services under the Act. The Delhi HC noted that the Tribunal had already accepted the same characterisation for an earlier year on identical facts, and the payment was therefore rightly assessed as reimbursement of salary, not technical service fees.

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Issues: Whether the amount paid by the assessee to its foreign parent company towards the deputed employee's remuneration was to be treated as reimbursement of salary or as fees for technical services.

Analysis: The payment related to an employee deputed to the Indian company for its business, was made at cost without any mark-up, and had consistently been treated in earlier assessment years as salary reimbursement. The Tribunal had already held in the assessee's favour for an earlier year on the same facts, noting that such payment fell within the salary stream and could not be characterised as fees for technical services under the Act, particularly where tax had been deducted under the salary provisions.

Conclusion: The payment was rightly treated as reimbursement of salary and not as fees for technical services. The issue was answered in favour of the assessee.

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