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2021 (1) TMI 712 - CESTAT BANGALOREManpower Recruitment and Supply of Manpower Agency Service or not - secondment charge - amount reimbursed or reimbursable by the applicant to Target Corporation, USA under the terms of the secondment agreement - whether in the nature of income accruing to Target USA in respect of which, tax is liable to be deducted at source by the applicant under the provisions of Income Tax Act, 1961? - payroll processing charges - payment proposed to be made by the applicant towards payroll processing charges - applicability of provisions of Double Taxation Avoidance Agreement (DTAA) entered into between India and USA. HELD THAT:- It is found from the definition of “Manpower Recruitment or Supply Agency” seeks to bring under its ambit, two types of activities i.e. recruitment of manpower and supply of manpower and further the service becomes the taxable service only if provided by a manpower recruitment or supply agency but in the present case, we are concerned only with the supply of manpower - Further, we find that post July 2012, the definition of service specifically incorporated seeks to exclude certain transactions from the ambit of service and provision of service by an employee to the employer in the course of or in relation to his employment stands excluded from the definition of service. We also note that the legal position post negative list regime does not make any departure from the settled position of law as existed before 2012 with respect to the service tax implications on deputation of employees. In fact, the above exclusion in the definition of service amplifies the position of law to keep employees providing service to the employer in the course of their employment out of the purview of service tax. The persons seconded to the appellant working in the capacity of employees and payment of salaries etc is made to such employees by group companies only for disbursement purposes and hence employee-employer relationship exist and such an activity cannot be termed as “manpower recruitment or supply agency” and the whole arrangement between the appellant and its group companies does not fall under the taxable service of manpower recruitment or supply agency service as defined under the Finance Act, 1994. We also find that there is no service provider-recipient relationship in the present case, as required by Section 65(105)(k). The Division Bench of this Tribunal recently in the case of Northern Operating Services Pvt. Ltd. [2020 (12) TMI 1018 - CESTAT BANGALORE] has allowed the appeal of the assessee and set aside the demand raised by the Department under the category of manpower recruitment or supply agency service. Further, the charge of service tax @ 15 dollar per employee per pay role cycle for processing pay role of the seconded employee by the Target USA cannot fall under the category of manpower recruitment or supply of manpower agency service as per the definition provided in Section 65(68) of the Finance Act, 1994. Further the ruling given by advance ruling authority was under the Income Tax Act, 1961 and the said ruling is not having any binding precedent under the Service Tax Laws. We also note that in the advance authority ruling, there is no finding to the extent of pay role processing. Appeal allowed - decided in favor of appellant.
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