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Tax Publishers Secondment fees reimbursed from India whether Fee for included services as per Indo-US DTAA *Facts:* Assessee a US based LLP entity had seconded some of its employees to India on tax advisory, assurance and other business advisory services to its Indian counterparts. Revenue's plea was that the secondment fees reimbursed/received by the assessee from its Indian entity was subject to tax as per Article 12 of the Indo-US DTAA as fee for included services. Assessee's counter was that these were only reimbursement and there were no services which were provided which fell in the scope of Article 12 and Article 15 (Independent Personal Services) of the Indo-US DTAA. TDS was done by the paying entities under section 192 of the Income tax act for such seconded employees. On appeal DRP upheld the views of the AO. On higher appeal by the assessee - Held in favour of the assessee that the seconded fees is not fee for technical services as per the DTAA. Dissented - Explained - Northern Operating Systems Pvt Ltd. [Civil Appeal No. 2289 2293 of 2021, dt. 19-5-2022] : 2022 TaxPub(ST) 149 (SC) 65. It is held, for the foregoing reasons, that the assessee was the service recipient for service (of manpower recruitment and supply services) by the overseas entity, in regard to the employees it seconded to the assessee, for the duration of their deputation or secondment. Furthermore, in view of the above discussion, the invocation of the extended period of limitation in both cases, by the revenue is not tenable. 66. In light of the above, the revenues appeals succeed in part; the assessee is liable to pay service tax for the periods spelt out in the SCNs. However, the invocation of the extended period of limitation, in this courts opinion, was unjustified and unreasonable. Resultantly, the assessee is held liable to discharge its service tax liability for the normal period or periods, covered by the four SCNs issued to it. The consequential demands therefore, shall be recovered from the assessee. 67. The impugned common order of the CESTAT is accordingly set aside. The commissioners orders in original are accordingly restored, except to the extent they seek to recover amounts for the extended period of limitation. The demand against the assessee, for the two separate periods, shall now be modified, excluding any liability for the extended period of limitation. *Ed. Note:* Above was a decision rendered under service tax which the revenue pressed for Income tax purposes. The ITAT did not concur on the same and applied the Flipkart verdict of Karnataka high court where in the above decision of the Apex court was also discussed and the principle what is true for Service tax (indirect taxes) need not apply mutatis mutandis for income tax was upheld. *Applied:* Flipkart Internet [P] Ltd (2022) 448 ITR 268 (Kar) : 2022 TaxPub(DT) 4365 (Karn-HC) Boeing India [P] Ltd (2020) 121 Taxmann.com 276 (Del) : 2020 TaxPub(DT) 3204 (Del-Trib) Commissioner of Income Tax, Delhi II v. Karl Storz Endoscopy India (P) Ltd., [ITA No.13/2008, dt. 13-9-2010] *Case:* Ernst & Young U.S. LLP v. ACIT 2023 TaxPub(DT) 3711 (Del-Trib)

Tax Publishers

Secondment fees reimbursed from India whether Fee for included services as per Indo-US DTAA

Facts:

Assessee a US based LLP entity had seconded some of its employees to India on tax advisory, assurance and other business advisory services to its Indian counterparts. Revenue's plea was that the secondment fees reimbursed/received by the assessee from its Indian entity was subject to tax as per Article 12 of the Indo-US DTAA as fee for included services. Assessee's counter was that these were only reimbursement and there were no services which were provided which fell in the scope of Article 12 and Article 15 (Independent Personal Services) of the Indo-US DTAA. TDS was done by the paying entities under section 192 of the Income tax act for such seconded employees. On appeal DRP upheld the views of the AO. On higher appeal by the assessee -

Held in favour of the assessee that the seconded fees is not fee for technical services as per the DTAA.

Dissented - Explained -

Northern Operating Systems Pvt Ltd. [Civil Appeal No. 2289 2293 of 2021, dt. 19-5-2022] : 2022 TaxPub(ST) 149 (SC)

65. It is held, for the foregoing reasons, that the assessee was the service recipient for service (of manpower recruitment and supply services) by the overseas entity, in regard to the employees it seconded to the assessee, for the duration of their deputation or secondment. Furthermore, in view of the above discussion, the invocation of the extended period of limitation in both cases, by the revenue is not tenable. 66. In light of the above, the revenues appeals succeed in part; the assessee is liable to pay service tax for the periods spelt out in the SCNs. However, the invocation of the extended period of limitation, in this courts opinion, was unjustified and unreasonable. Resultantly, the assessee is held liable to discharge its service tax liability for the normal period or periods, covered by the four SCNs issued to it. The consequential demands therefore, shall be recovered from the assessee. 67. The impugned common order of the CESTAT is accordingly set aside. The commissioners orders in original are accordingly restored, except to the extent they seek to recover amounts for the extended period of limitation. The demand against the assessee, for the two separate periods, shall now be modified, excluding any liability for the extended period of limitation.

Ed. Note: Above was a decision rendered under service tax which the revenue pressed for Income tax purposes. The ITAT did not concur on the same and applied the Flipkart verdict of Karnataka high court where in the above decision of the Apex court was also discussed and the principle what is true for Service tax (indirect taxes) need not apply mutatis mutandis for income tax was upheld.

Applied:

Flipkart Internet [P] Ltd (2022) 448 ITR 268 (Kar) : 2022 TaxPub(DT) 4365 (Karn-HC)

Boeing India [P] Ltd (2020) 121 Taxmann.com 276 (Del) : 2020 TaxPub(DT) 3204 (Del-Trib)

Commissioner of Income Tax, Delhi II v. Karl Storz Endoscopy India (P) Ltd., [ITA No.13/2008, dt. 13-9-2010]

Case: Ernst & Young U.S. LLP v. ACIT 2023 TaxPub(DT) 3711 (Del-Trib)