TaxTMI 
TaxTMI 
TaxTMI 
2015 (10) TMI 477
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....Rs. 4,09,77,678 to M/s. Cerner Corporation, USA as reimbursement of expenses. He observed that the assessee has not made any TDS from such payments on the ground that they were in the nature of reimbursement of expenses and do not constitute income in the hands of the non-resident. The A.O. asked the assessee to explain as to why TDS was not made, as according to him, it constitutes 'fees for technical services'. Vide letter dated 21.10.2011, the assessee company submitted that during the financial year relevant to A.Y. 2008-2009, Cerner India i.e., assessee herein, had incurred certain expenses in foreign currency aggregating to Rs. 4,09,04,600 being in the nature of salaries paid to its employees, staff welfare expenses, communication expenses, travelling expenses, legal and professional charges and other miscellaneous expenses and that Cerner Corporation, USA, had made these payments to the respective parties on behalf of the assessee herein purely for administrative convenience and assessee had reimbursed Cerner Corporation, USA at cost without any mark-up thereon. It was also stated that only for the month of April, 2007, the salary of the employees of Cerner India amounting t....
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....e case. 2. The Ld. CIT(A) has erred in deleting the addition made under secion 40(a)(i) amounting to Rs. 4,09,77,678, when the payments made by the assessee to, the US company were in the nature of income and therefore fell within the ambit of sec 195. 3. The Ld. CIT(A) erred in deleting the disallowance u/s 40(a)(i) when the decision of the ITA T in the assessee's own case for the AY 2006-07 in ITA No.627/(Bang)/2011 has not been accepted by the department and the same has been appealed against under s 260A. 4. The Ld. CIT(A) was not justified in directing the AO to re-compute the deduction u/s.10A after reducing the telecommunication expenses of Rs. 1,49,65,548 and travelling expenses of Rs. 83,87,831 from the total turnover also. 5. The CIT(A) ought to have appreciated that there is no provision in sec 10A which requires the concerned expenses to be reduced from the total turnover. 6. The Ld. CIT(A) erred in allowing the relief, relying on the decision of the Hon'ble High Court in the case of CIT Vs Tata Elxsi and others in the consolidated order dated 30.8.2011 in ITA No. 70/2009 & others (2012) reported in 247 CTR 334, which has not been accepted by the department....
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.... hands of the non-resident and therefore, TDS provisions are not applicable. Further, it has also been held that it is also not in the nature of fees for technical services. For the sake of convenience and ready reference, the relevant paragraphs are reproduced hereunder. "11. The secondment agreement as we have already held, constitutes an independent contract of service in respect of the employment of Dr. Sundararajan with the assessee company. It may be true that IDS, the US company is the employer of Dr. Sundararajan in a legal sense but since his services have been seconded to the assessee company under the secondment agreement and further since the assessee company is to reimburse the emoluments paid by IDS to Dr. Sundararajan, it is the assessee company which for all practical purposes is to be looked upon as the employer of Dr. Sundararajan during the relevant period. In this behalf we were referred to the views expressed by Professor Klaus Voegel in his treatise on Double Taxation Conventions under the heading "International Hiring Agreements" at page 885. The view put forth by him is reproduced hereunder "The question of who is the employer arises particularly in situ....
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....e tax has been deducted and paid to the Indian Income-tax authorities. 13. The next question is whether the amount can be considered as fees for technical services within the meaning of Explanation 2 below section 9(l)(vii) of the Income-tax Act Under this Explanation fees for technical services means any consideration including lumpsum consideration for the rendering of any managerial. technical or consultancy services, including the provision of services of technical or other personnel, but does not include consideration for any construction, assembly, mining or like project undertaken by the recipient or consideration which would be income of the recipient chargeable under the head "salaries". It is not denied before us on behalf of the assessee that Dr. Sundararajan is a technical person. What is however submitted is that Article II and VI of the secondment agreement would be out of place in a contract for providing technical services. Article II as we have already seen contains eight clauses outlining the duties and obligations of the seconded employee. Article VI provides for indemnification which has also been earlier noticed by us. We are inclined to agree with the submis....
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....ny to offer the services of its technical experts to the assessee for working on the project that was being executed. There was another agreement called the secondment agreement between the Indian and Austrian companies and it inter alia provided that the Austrian company can at any time remove the seconded person and replace him with similarly qualified persons. Referring to the secondment agreement, the AAR observed that a plain reading of the above clause would show that the Austrian company retained the right over the seconded personnel and had the power to remove any seconded personnel from the assessee subject only to the condition that a suitable replacement should be made. In the present case under the secondment agreement it is the assessee company which has control and supervision of the work of the seconded employee namely, Dr. Sundararajan. He was appointed as Managing Director by the Board of Directors of the assessee company and not by IDS. In fact, the assessee company could even terminate the services of Dr. Sundararajan as Managing Director during the period of eight months during which he was to serve the assessee company. There was no separate foreign collaborati....