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2012 (8) TMI 466 - AAR - Income TaxDTAC between India and USA - secondment of the employees by the U.S. Principal based on the U.S. principal's global mobility policy to applicant being fully owned Indian subsidiary - chargeability to tax of secondment charges paid by Indian subsidiary to its US Principal which applicant contends to be reimbursement of charges - taxability of payroll processing charges under relevant DTAA - withholding of taxes - Held that:- It is observed that seconded employees even after providing their services to the applicant, their salaries and other service benefits are paid by the US company. The right of dismissal rests or continues to rest with the US Principal. The relationship of the employees with the US Principal never ceased so as to enable them to claim that they have become the employees of the applicant. The absence of a right to terminate the employment as distinct from the right to terminate the secondment is significant. The applicant having no obligation to pay the salaries, what the US Principal collects from the applicant cannot be reimbursements. It is compensation or fees paid by the applicant to the US Principal for making available to it the services of the employees of the Principal. Therefore, the same is income in hands of US Principal subject to withholding of taxes u/s 195 Payroll processing charges - Held that:- It is seen that the employees seconded to the applicant are required to have a particular level of expertise in their respective roles. Neither the agreements nor the application, specified what are the duties to be performed by the seconded employees in India. In the absence of adequate material, it will be hazardous to give a ruling, hence this question is left open for a decision by the assessing authorities as and when called upon to do so.
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