TaxTMI 
TaxTMI 
2025 (12) TMI 346
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....d to as 'the Act') dated 27.07.2023, for Assessment Year 2020-21. 2. Shri Vishal Kalra, appearing on behalf of the assessee submits that the only issue arising in this appeal for adjudication is addition on account of payments made to seconded employees amounting to Rs. 10,76,36,392/- being treated as Fee for Technical Services (FTS) u/s. 9(1)(vii) of the Income Tax Act,1961 (hereinafter referred to as 'the Act') and Article 12(4) of the India-Japan Double Taxation Avoidance Agreement (DTAA). 3. The ld. Counsel for assessee at the outset submitted that the assessee does not wish to press ground of appeal no. 2 & 3. Thus, in light of statement made by assessee's Counsel at Bar, ground of appeal no. 2 & 3 are dismissed. 4. Further, n....
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.... Form No. 16 issued by respective Indian employers to the seconded employees; (v) Sample copy of invoices/debit note issued by the assessee to the Indian entity in relation to reimbursement of salary paid in Japan; & (vi) Sample copy of Form No. 15CA and certificate in Form No. 15CB from a Chartered Accountant evidencing payment of remittances made by Indian companies on account of reimbursement of expenses. The ld. Counsel submits that the Assessing Officer (AO) in Draft Assessment Order has recorded wrong facts after examining the appointment letter. The AO has erred in misreading the appointment letter/contract agreement that the duration of the contract is for short period and on assignment basis; that the employees....
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....sions placed reliance on the following decisions: * PCIT vs. Boeing India (P) Ltd., 146 taxmann.com 131 (Delhi); * Flipkart Internet (P) Ltd. vs. DCIT, 139 taxmann.com 595 (Karnataka); & * Advics Co. Ltd. vs. ACIT, 165 taxmann.com 716 (Delhi-Trib.). 5. Controverting findings of the AO, the ld. Counsel submitted that the reliance by the AO on the decision rendered in the case of Northern Operating Systems P. Ltd., 138 taxmann.com 359 (SC) is misplaced. The said decision was rendered in context of indirect taxation for analyzing whether service tax applies to a secondment agreement which essentially is an agreement for manpower recruitment and supply services. Hence, the said decision is distinguishable. 6. Pe....
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....ndian company and the Indian company would have right to terminate services of the seconded employee in case of breach of the terms and conditions of employment. The Form No. 16 in respect of seconded employees issued by the Indian companies show that the payment of salary made to the seconded employees is subject to TDS provisions. Thus, the tax has been deducted on the payment of salary to the seconded employees by the Indian companies. 9. The Hon'ble Delhi High Court in the case of PCIT vs. Boeing India (P.) Ltd. (supra) has held that where the reimbursements are in the nature of salary the same could not be treated as FTS. The Hon'ble High Court placed reliance on the decision rendered in the case of CIT vs. Karl Storz Endoscopy ....
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....r technical services" as per which, inter alia, any consideration which would be income of the recipient chargeable under the head "salaries", then such payment will not be considered as fees for technical services. Thus, even as per the provisions of the Act, the payment in question cannot be treated as fees for technical services. Moreover, since it is paid as salary to Mr. Laser, tax has been deducted under section 192 of the Act." 10. If we look at the India - Japan DTAA similar provisions are contained in Article 12 that deals with Royalty and FTS. FTS is defined in Article 12(4). The same reads as under: "(4) The term 'fees for technical services' as used in this article means payments of any amount to any person o....
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....ry business practice and has indicated that the traditional control test to indicate who the employer is may not be the sole test to be applied. The Apex Court while construing a contract whereby employees were seconded to the assessee by foreign group of Companies, had upheld the demand for service tax holding that in a secondment arrangement, a secondee would continue to be employed by the original employer. (ix) The Apex Court in the particular facts of the case had held that the Overseas Co., had a pool of highly skilled employees and having regard to their expertise were seconded to the assessee and upon cessation of the term of secondment would return to their overseas employees, while returning such finding on facts, the ass....