TaxTMI 
TaxTMI 
TaxTMI 
2016 (5) TMI 27
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....st the order of CIT(A) deleting the disallowance of expenses on account of employee's expenses of secondment for non-deduction of TDS by invoking the provisions of section 40(a)(ia) of the Act. For this, revenue has raised following ground no.1: "1. (i) allowing the secondment expenses on which tax was not deducted at source and deleting the addition made on this account by the AO u/s.40(a)(ia) to the tune of Rs. 1,93,46,000/- and in not appreciating that non-deduction of TDS certificate was not obtained by the assessee company from the appropriate TDS authority for the year under consideration. 1. (ii) in ignoring that factually the assessee company was well aware of the TDS provisions of the Ac that "the non-deduction of TDS certific....
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....ere was no mark up in the payments made to them and according to Ld. Counsel, this is clear from secondment agreement. There is also a letter from British Gas which clearly states that all the taxes due in India of the employees seconded to the assessee i.e. Mahanagar Gas Ltd. have been deducted from salary paid to secondees and paid to the Govt. of India. Ld. counsel for the assessee drew our attention to pages 23 and 24 wherein declaration made by British Gas is that taxes due of secondee employees have been paid by them in India and relevant declaration is enclosed at pages 23 and 24 of the assessee's paper book. Ld. counsel for the assessee also drew our attention to secondment agreement enclosed at pages 25 to 38 of the assessee's pape....
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....es have been seconded to the assessee. It was explained before us that since the employers were seconded for limited time of 2 to 3 years, the remuneration payable to these seconded employees were being paid by British Gas or GAIL recoverable from assessee on cost to cost basis. It was also explained that the nature of secondment agreement explaining the duties of second employees, their liabilities towards assessee and reimbursement of actual cost of remuneration, benefits and disbursement by assessee to the joint venture partners. It was explained that these are reimbursements. Another argument taken by Ld. counsel for the assessee that the employee's remuneration was allowable to tax in India then there would be tax deduction obligation ....
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....ted to deduction of tax at source under section 194C as payment for work contract as also under section 194J as payments of fees for professional services. 2. It is hereby clarified that each section, regarding TDS under Chapter XVII, deals with a particular kind of payment to the exclusion of all other sections is this Chapter. Thus, payment of any sum shall be liable for deduction of tax only under one section. Therefore, a payment is liable for tax deduction only under one section." 6. Now we go through the case law cited by the Ld. counsel for the assessee in the case of CIT Vs. Kotak Securities Ltd. (2012) 340 ITR 333 (Bom), wherein it has been held as under: "31. The object of introducing section 40(a)(ia), as explained in the ....
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.... source, the Revenue has suffered presumably because, the stock exchange has discharged its tax liability for the assessment year in question. In any event, in the facts of the present case, in view of the undisputed decade old practice, the assessee had bona fide reason to believe that the tax was not deductible at source under section 194J of the Act and, therefore, the Assessing Officer was not justified in invoking section 40(a)(ia) of the Act and disallowing the business expenditure by way of transaction charges incurred by the assessee. 32. Accordingly, we hold that the transaction charges paid by the assessee to the stock exchange constitute "fees for technical services" covered under section 194J of the Act and, therefore, the as....
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....e to the US Company of the salary paid by the US Company was chargeable to tax as "fees for technical services" . It was held that though the US Co was the employer in a legal sense but since the services of the employee had been seconded to the assessee and since the assessee was to reimburse the emoluments and it controlled the services of the employee, it was the assessee which for all practical purposes was the employer. Accordingly, the salary reimbursed to the US Co was not chargeable to tax. Though the person deputed by the US Co was a technical person, the consideration paid under the secondment agreement was not "fees for technical services" because the fact that the seconded employee was responsible and subservient to the payer (a....