TaxTMI 
TaxTMI 
TaxTMI 
2023 (1) TMI 922
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.... scrutiny assessment, the Assessing Officer, after calling for and examining the necessary details, found that in the year under consideration the assessee has debited an amount of Rs.1,85,20,176/-, being reimbursement of expenses to the parent company in Japan. On verifying the details, he found that a part of the payment made was classified as salary for providing services in India through certain employees of the parent company. In this regard, the Assessing Officer noticed that an amount of Rs.1,85,20,176/- was paid to four expatriate employees working in managerial position with the assessee. Being of the view that the employees of the parent company were seconded to the assessee and were rendering managerial services, the Assessing Officer called upon the assessee to explain, as to why the remuneration paid to them should not be treated as fee for technical services (FTS) under section 9(i)(vii) of the Act read with Article 12 of India - Japan Double Taxation Avoidance Agreement (DTAA), and since, the assessee has failed to withhold tax under section 195 of the Act in respect of such payment, why the payment should not be disallowed under section 40(a)(i) of the Act. In respo....
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..... ACIT (ITA No.9765/Del/2019) 3. DDIT Vs. Yum! Restaurants (Asia) Pte. Ltd. (ITA No.6018/Del/2012) 4. M/s. Faurecia Automotive Holding Vs. DCIT (ITA No.784/PUN/2015) 5. M/s. Toyota Boshoku Automotive India Pvt. Ltd. Vs. DCIT [IT(TP)A No.1646/Bang/2017] 5. Learned Departmental Representative strongly relied upon the observations of the Assessing Officer and learned Commissioner (Appeals). 6. We have considered rival submissions and perused the materials on record. We have also applied our mind to the decisions cited before us. The short issue arising for consideration is, whether the payment made by the assessee to certain persons is in the nature of salary as claimed by the assessee or FTS as held by the Assessing Officer. It is the case of the Revenue that certain employees of the parent company were seconded to the assessee for rendering managerial services, hence, the payment made is in the nature of FTS. As could be seen from the materials placed before us, an assignment agreement was executed between the assessee and its parent company on 1st April, 2014, in terms of which, four employees of the parent company were assigned to the assessee for periods ranging between t....
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....er-employee relationship between the assessee and the assigned employees. 9. In fact, the payments made to the assigned employees, either directly or through the parent company, have been treated as salary and tax at the appropriate rate has been duly deducted under section 192 of the Act by the assessee, which is evident from the TDS certificates issued in Form No. 16. Even, the assigned employees have filed their Income Tax Returns in India offering the salary received from the assessee. Thus, facts and materials placed on record, including the terms of the assignment agreement clearly establish that for all practical purposes the concerned persons assigned by the parent company to the assessee were working as employees of the assessee and receiving salary income. The primary factor which influenced the departmental authorities in treating the payment made as FTS for secondment of employees by the parent company to the assessee is the fact that the parent company made the payments to the concerned employees and the assessee reimbursed the cost against debit-notes issued by the parent company. In our view, nothing much can be read into this arrangement as such payments made by th....
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.... of Boeing India Pvt. Ltd. (supra): "30. We have given thoughtful consideration to the orders of the authorities below. We have also carefully perused the salary reimbursement agreement, which is placed at pages 296 onwards of the paper book, and as per clause1.1, it is provided that the secondees have expressed their willingness to be deputed to BIPICL [the 20 appellant] and TBC [AE] have agreed to release these employees to BIPICL. It is provided that TBC will facilitate payment of salaries in secondees home country on behalf of BICIPL. Under the head employment status, it is provided that the secondees shall be working for BICIPL and will be under supervision, control and management of BICIPL as an employee of BICIPL. 31. It is clear from the afore-stated relevant clauses that the secondees were, in fact, in employment of the appellant and as per the terms, the 'A' was paying salaries at the home country of the secondees and, therefore, there was reimbursement by the appellant. These facts clearly show that the assessee has been paying to its own employees and this fact alone clearly distinguishes the facts of the decision in the case of Centrica India Offshore Ltd [supra]. ....