Dispute Over Employee Reimbursements in India-Japan Tax Treaty Resolved: Payments Deemed Salary, Not Fees for Services.

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....Taxability of employee cost reimbursements as Fee for Technical Services (FTS) under the India-Japan tax treaty. The assessee, a Japanese company, seconded employees (expats) to its Indian associated enterprises (AEs). The Revenue contended that the expats rendered managerial/technical services, and the reimbursements received were taxable as FTS. However, the assessee argued that the expats worked as employees of the Indian AEs, and the payments were pure salary reimbursements. The Tribunal examined the terms of the secondment agreements and memorandums of understanding, which indicated that the expats worked under the direct control and supervision of the Indian AEs. The Tribunal held that no evidence was provided to substantiate the Reve.........