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2012 (3) TMI 243 - AAR - Income TaxIndia – Canada convention – applicant being wholly owned subsidiary of UK company - outsourcing of back office support functions by overseas entities – assignment of employees of overseas entity to perform the duties at the location of the applicant for the period stipulated and to report to the applicant – salary paid by overseas entity – reimbursement of salary by applicant to overseas entity – whether reimbursement of salary to overseas entity is income accrued to overseas entity – withholding of taxes – Revenue also questioned regarding it to be FTS – Held that:- In present case, secondee employees are all rendering managerial services and there is no indication that any technical functions or consultancy functions is performed, therefore, it cannot be held to be fees for technical services. Further, employees continue to be the employees of the overseas entities and are rendering services for their employer in India by working for a specified period for a subsidiary or associate enterprise of their employer. This gives rise to a service PE within the meaning of Art.5 of the India-UK Treaty, falling under Article 5.2(k) corresponding to provision in paragraph 2(l) of Article 5 of India-Canada Convention. Hence, reimbursement of salary by the applicant under the agreement would be income accruing to overseas entities in view of the existence of a service PE in India and tax is liable to be deducted at source u/s 195
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