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TMI Blog2023 (6) TMI 932X X X X Extracts X X X X X X X X Extracts X X X X ..... Book in light of Rule 18(6) of ITAT Rules and have also perused the judicial decisions relied upon by both the sides. 4. Grievance relating to the validity of notice u/s 143(2) of the Act was not pressed by the ld. counsel for the assessee and hence the same is dismissed as not pressed. 5. The only issue that survives which needs adjudication is whether cost to cost reimbursement on account of secondment of employees was Fees for Technical Services [FTS] as defined under Article 12 of the India-USA Double Tax Avoidance Agreement [DTAA] and whether arrangement between the assessee and Indian entities constitutes the 'provision of services' by the assessee through seconded personnel. 6. The assessee is a limited liability partnership firm, incorporated under the laws of United States of America and is engaged in the business of providing professional services in the field of assurance, tax, transaction and business advisory services etc to its clients across the globe including India. The assessee is eligible for availing treaty benefits as per the treaty between India and USA. 7. During the year under consideration, the assessee has offered its income to tax as per section 115A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trative convenience. 15. The ld. counsel for the assessee further explained that the invoices raised with respect to seconded personnel are not chargeable to tax in India as the said invoices are towards mere reimbursements of expenses incurred by the assessee on behalf of Indian entities having no profit element to it. The ld. counsel for the assessee further explained that the invoices so raised are with respect to reimbursement of salary costs and do not fall within the ambit of Article 12 FTS and Article 15 IPS under India - USA tax treaty. 16. The ld. counsel for the assessee emphatically stated that the invoices raised are for amounts which have already been subjected to tax as per provisions of Section 192 of the Act as the same is income in the hands of the seconded personnel. 17. Per contra, the ld. DR strongly supported the findings of the Assessing Officer and placed strong reliance on the decision of the Hon'ble Supreme Court in the case of M/s Northern Operating Systems Pvt Ltd Civil Appeal No. 2289 - 2293 of 2021. The ld. DR read the relevant part of the judgment to buttress his contention that there is no error in the findings of the Assessing Officer. 18. We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... overseas entity and taxed." XXXXX 53. Facially, or to put it differently, for all appearances, the seconded employee, for the duration of her or his secondment, is under the control of the assessee, and works under its direction. Yet, the fact remains that they are on the pay rolls of their overseas employer. What is left unsaid and perhaps crucial, is that this is a legal requirement, since they are entitled to social security benefits in the country of their origin. It is doubtful whether without the comfort of this assurance, they would agree to the secondment. Furthermore, the reality is that the secondment is a part of the global policy - of the overseas employer loaning their services, on temporary basis. On the cessation of the secondment period, they have to be repatriated in accordance with a global repatriation policy (of the overseas entity). 21. And finally, the Hon'ble Supreme Court concluded as under: "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 deputati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dee would continue to be employed by the original employer. (ix) The Apex Court in the particular facts of the case had held that the Overseas Co., had a pool of highly skilled employees and having regard to their expertise were seconded to the assessee and upon cessation of the term of secondment would return to their overseas employees, while returning Civil Appeal Nos.2289-2293/2021 such finding on facts, the assessee was held liable to pay service tax for the period as mentioned in the show cause notice. (x) It needs to be noted that the judgment rendered was in the context of service tax and the only question for determination was as to whether supply of man power was covered under the taxable service and was to be treated as a service provided by a Foreign Company to an Indian Company. But in the present case, the legal requirement requires a finding to be recorded to treat a service as 'FIS' which is "make available" to the Indian Company. (xi) Accordingly, any conclusion on an interpretation of secondment as contained in the M.S.A. to determine who the employer is and determining the nature of payment by itself would have no conclusive bearing on whether the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ful consideration to the orders of the authorities below. We have also carefully perused the salary reimbursement agreement, which is placed at pages 296 onwards of the paper book, and as per clause1.1, it is provided that the secondees have expressed their willingness to be deputed to BIPICL [the 20 appellant] and TBC [AE] have agreed to release these employees to BIPICL. It is provided that TBC will facilitate payment of salaries in secondees home country on behalf of BICIPL. Under the head employment status, it is provided that the secondees shall be working for BICIPL and will be under supervision, control and management of BICIPL as an employee of BICIPL. 31. It is clear from the afore-stated relevant clauses that the secondees were, in fact, in employment of the appellant and as per the terms, the 'A' was paying salaries at the home country of the secondees and, therefore, there was reimbursement by the appellant. These facts clearly show that the assessee has been paying to its own employees and this fact alone clearly distinguishes the facts of the decision in the case of Centrica India Offshore Ltd [supra]. 32. The co-ordinate bench in the case of AT & T Communication ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... verseas entity. 13. In Director of Income Tax (IT)-I vs. A.P. Moller Maersk A S, the Supreme Court in Civil Appeal No.8040/2015 decided on 17th February, 2017 has held as under:- "11. Aforesaid are the findings of facts. It is clearly held that no technical services are provided by the assessee to the agents. Once these are accepted, by no stretch of imagination, payments made by the agents can be treated as free for technical service. It is in the nature of reimbursement of cost whereby the three agents paid their proportionate share of the expenses incurred on these said systems and for maintaining those systems. It is reemphasized that neither the AO nor the CIT(A) has stated that there was any profit element embedded in the payments received by the assessee from its agents in India. Record shows that the assessee had given the calculations of the total costs and pro-rata division thereof among the agents for reimbursement. Not only that, the assessee have been submitted before the Transfer Pricing Officer that these payments were reimbursement in the hands of the assessee and the reimbursement was accepted as such at arm's length. Once the character of the payment is found ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being paid to the foreign company. Assuming for the sake of argument that it was in the nature of technical fees paid to the foreign company; then, as rightly pointed out by the learned ITA No.71/2022 Page 8 of 9 counsel, Article 12.4 was applicable and not Article 13.4 as contended by the learned DR. Even if Article 12.4 was applicable, the said Article specifically excludes payments mentioned in Article 15. Article 15 states that salaries, wages and other similar remuneration derived by a resident of a Contracting State (Germany) in respect of an employment shall be taxable in the other Contracting State (Indian) only if the employment is exercised there. In other words, salaries paid to such personnel like Mr. Laser are taxable in India and they cannot be considered to be fees for technical services. Further, even as per Section 9 of the Act, the payment cannot be treated as fees for technical service. Explanation 2 to Section 9(1)(vii) gives the meaning of the expression "fees for technical services" as per which, inter alia, any consideration which would be income of the recipient chargeable under the head "salaries", then such payment will not be considered as fees for techni ..... X X X X Extracts X X X X X X X X Extracts X X X X
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