TaxTMI 
TaxTMI 
2017 (12) TMI 1143
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....tter dated 28/01/2011 issued by the appellant, namely, Mr. Marcelo Virgilio de Carvalhoof Schaeffler Brazil Ltd., Brazil, which read as under: a) They are pleased to appoint him in the position of Manager - Automotive CRB Project in the assessee's company for two years; b) He will be placed at the manufacturing location in INA Bearings India Pvt. Ltd. located at Talegaon c) During the tenure of service he will be assigned responsibilities as decided by his superiors; d) He will be paid a consolidated remuneration as per separate contract entered. 2.1 The show-cause notice also pointed out that the said Mr. Mr. Marcelo Virgilio de Carvalho and the appellant foreign associated company, namely, Schaeffler Brazil Ltd., Brazil had a contract. Mr. Marcelo Virgilio de Carvalho's contract with Schaeffler Brazil Ltd., included following conditions: i) Tasks: a) On 27/02/2011, you shall begin your assignment at INA Bearings India Pvt. Ltd., in India, as a Manager - Automotive CRB Project Expat. b) You must complete the duties defined in your employment contract in the host country by considering legal limits and the customs of the country of assignment at ....
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....ssociated foreign company. Ld. Counsel argued that part of money paid to the foreign associates as reimbursements are only on account and for the convenience of the foreign employees. Ld. Counsel took us through agreement entered between the employee of their foreign associate and the said employee assigned to them. Ld. Counsel pointed out that the salary paid to the employees deputed in India is assessed to Income Tax in India by the said employees. In support of the said assertion he brought out attention to para 130 & 131 of the appeal memorandum where computation of Income Tax deducted at source, in one such case has been made. He further produced one such IT return filed by the said employee. Ld. Counsel further took us through the appointment letter issued by the appellant to one such employee in terms of the appointment letter as follows: i) We are pleased to appoint you in the position of Manager - Automotive CRB Project in our company for 2 years with effect 28th January, 2011. ii) You will be placed at the manufacturing location in INA bearings India Pvt. Ltd. located at Plot No.A3, Talegaon Industrial and Floriculture Area, Navalakh Umbre, Taluka-Maval, Talegaon Da....
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....s is not considered or accounted as business income by the said foreign companies and therefore, the said payment cannot be considered as consideration for any service. Ld. Counsel argued that no purchase or work order which has been placed on any of the foreign associated companies, by appellant on them, for provision of service in the form of supply of manpower. He further argued that such foreign personnel are at the disposal of the appellant as direct employees and such foreign personnel function as whole time employees during their tenure of work and work solely under the control, direction and supervision of appellant. Ld. Counsel argued that the salary (including other entitlements) of such foreign personnel during the period of work is the liability and borne by the appellants. 2.7 Ld. Counsel argued that the said foreign employees appointed by the appellant have financial commitments outside India (including but not limited to insurance, mortgage, social security, retirement contributions, etc). In order to facilitate these payments and for administrative convenience, the said payments are routed through the foreign associated companies. Such payments are made on the ba....
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....y for your assignment. Working Hours: The weekly working hours in India are 48 hours. Vacation: Irrespective of the specific number of vacation days in the country of assignment, you shall be entitled to 30 days of vacation per year. Right to Request Early Return: We reserve the right to terminate your assignment early by observing an adequate time limit and in agreement with the host company, including during the term of the long term assignment agreement, and to request your return if this is in the interest of the company or should become necessary as a result of your personal conduct. In the event of an early return request you must end your employment with the company of assignment at the same time. Unavoidable costs incurred in conjunction with your early return from the assignment shall be paid by the company of assignment provided that proof of such costs is submitted. An early return shall end your assignment including all conditions agreed herein. Insurance: Private Group Insurance: You shall be provided with additional group life insurance plan for the duration of your assignment abroad with coverage of BRL 280.000 in case of natural death or permanent inv....
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.... We find that the facts are not disputed. The employees are deputed by the foreign associated company to the appellant. The employees deputed to appellant continues to be an employee of the foreign associated company, though suspended for this duration. This is apparent from the following clauses in the agreement between the foreign associated company and the employee: Tasks: For the duration of your assignment, your employment contract with us shall be suspended and the conditions of this agreement shall apply. The stipulations of the foreign assignment guideline dated are part of this agreement as far as specific rights and duties have been defined between you and us. 4.1 It is also seen that the duration of such deputation is decided in consultation with the foreign associated company and the employee is not free to decide on his own. It is apparent from the following clauses in the agreement: Duration: The assignment shall be for a limited time beginning on 27/01/2011 and ending on 27/01/2013. The assignment shall end or the end date and no further notice shall be required. We reserve the right to consider extending the assignment beyond 27/01/2013 by mutual agreeme....
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....up Insurance: You shall be provided with additional group life insurance plan for the duration of your assignment abroad with coverage of BRL 280.000 in case of natural death or permanent invalidity and BRL 560.000 in case of accidental death. Compulsory Social Insurance: You shall be subject to the Brazilian laws on social security during your temporary assignment in India in order to ensure full insurance coverage in the social insurance (person, unemployment-health and nursing system) Company Pension Plan: You shall continue to be included in the regulations of the company pension plan applicable to you. (if any). During your assignment, your continued shadow salary shall be used as the basis for calculating your prospective entitlement. 4.5 The employee deputed to the appellant continues to lien with the foreign associated company and on his termination with the appellant, he automatically takes up his position in the foreign associated company as is apparent from the clauses of the agreement: Continued Employment: Upon your return at the end of your assignment, we shall offer you a position corresponding to the position you held before your assignment within our op....
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....in the foreign assignment guideline for the Schaeffler Group version 4/2008 apply for your assignment. It can be seen that there are regulations in the foreign assignment guideline for the Schaeffler Group of companies and they apply to such assignments. It is apparent that the said foreign associated companies are engaged in the regular practice of supplying manpower and have also evolved guidelines to regulate such foreign assignments in the shape of version 4/2008. 5 The appellants have relied on the decision in the case of Lear Automotive (I) Pvt. Ltd. - 2015-TIOL-851-CESTAT-MUM. In the said case following were the terms of employment: "5.4 Further, it is noticed that clause No.3 of the agreement talks of the disbursement of remuneration of he employees who are deputed. Reading of the clause indicates that Lear India has extended all the benefits to the deputed personnel as an employee in India. Further reading of the clause No.4 specifically indicates that sole obligation of Lear Corporation, USA is to depute employees and the said obligation would cease on actual deputation of the employees to Lear India and it is specifically mentioned in the said agreement that Lea....
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.... Communication Ltd. (supra). Moreover, in the said case it was undisputed that the said employees, who were deputed did not exclusively work under direction/supervision and control of the subsidiary company. Thus, the facts of the said case are significantly different from the instant case. The appellant has placed reliance in the case of Samsung India Electronics Pvt. Ltd. - 2015-TIOL-393-CESTAT-DEL. In the said case, the decision was taken relying on the decision in the case of Paramount Communication and Arvind Mills Ltd. (supra) wherein the facts were significantly different from the instant case. In the said case, reliance has also placed on the decision of the Tribunal in the case of Bain & Co. India Pvt. Ltd. - 2014 (35) STR 553 (Tri-Del) wherein apart from the payment of amount towards social security contribution in respect of expatriate employees, no other issue involving of the foreign associated company was found. In the instant case, it is seen that the foreign associated company has totally involved in all aspects of the deputation of its own 'suspended' employee. 5.4 In these circumstances the appeal is dismissed in so far as merits are concerned. 5.5 In suppor....