| The Tax Publishers2020 TaxPub(DT) 5004 (Del-Trib) INCOME TAX ACT, 1961
Section 195 Section 9(1)(vii)
When expatriate employees seconded to assessee had worked as employees of assessee-company, their salaries had been rightly subjected to TDS under section 192 and Explanation to section 9(1)(vii), which apparently makes it clear that salary would not fall within the expression 'fees for technical services', had no applicability. Accordingly, no TDS was called for under section 195.
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Tax deduction at source - Under section 195 - Salary paid to expatriate employees treated as fees for technical services - Expatriates working under assessee's control as employees
Assessee was engaged in providing business development, advisory and other support services to its AEs abroad for which assessee required employees having requisite skills, knowledge and experience. For carrying out its services, assessee employed expatriate employees from US and Australia on salary to be paid by assessee in India, which was accounted for as expense under 'Salaries & Wages' in books of account of assessee and appropriate taxes on such Salaries & Wages were deducted and deposited by assessee under section 192. AO held that payment made was in the nature of 'Fees for technical services (FTS)'. Assessee explained that since expatriate employees were under its control without any relation/connection with AEs and salary expenses had been borne by assessee on which tax had been deducted under section 192, the same could not be disallowed being 'fees for technical services'. Held: In terms of secondment agreement, assessee was liable to pay salary to expatriate employees employed in India and working under its control creating relationship of employer and employees between expatriate and assessee and salary payable to them was accounted for as expense under 'Salaries and Wages' in the books of account by assessee. Accordingly, when expatriate employees seconded to assessee had worked as employees of assessee-company, their salaries had been rightly subjected to TDS under section 192 and Explanation to section 9(1)(vii), which apparently makes it clear that salary would not fall within the expression 'fees for technical services', had no applicability. Accordingly, no TDS was called for under section 195.
Followed:Centrica India Offshore (P) Ltd. v. CIT, Director of Income Tax v. HCL Infosystems Ltd. (2005) 274 ITR 261 (Del.) : 2005 TaxPub(DT) 0132 (Del-HC) and Director of Income Tax (International Taxation)-II, Mumbai v. Marks & Spencer Reliance India (P) Ltd. & Coordinate Bench of the Tribunal in AT&T Communication Services (India) (P) Ltd. v. Dy.CIT.
REFERRED :
FAVOUR : In assessee's favour.
A.Y. : 2012-13 & 2013-14
Income Tax Act, 1961
Section 92C
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