TMI Blog2023 (11) TMI 275X X X X Extracts X X X X X X X X Extracts X X X X ..... e careful and cautious when applying the ratio of judgments relating to one tax enactment as a precedent in a case relating to another tax enactment. This rule of caution is important and should not be overlooked, more so when the language of the enactment and the object and purpose of the enactment are different. It is also well- settled that ratio decidendi of a case from one enactment, cannot be applied to an altogether different legislation. From the facts and circumstances as demonstrated by the parties, the observations made by Ld. DRP and the points as summarized in the said charts and on examination by us independently, we are of the considered view that the facts and issues involved in the cases of Centrica and Northern Operating Systems [ 2022 (5) TMI 967 - SUPREME COURT] were altogether different and distinct from the facts and issues involved in the Assessee s case, as the Hon ble Apex Court, in those cases dealt with different facts, issues and Acts and therefore dictum laid down in those case, is not applicable to the instant case. We also observe that the CBDT, vide its Circular No. 720 dated 30-08-1995(PB-703) has clarified that payment of any sum, shall be l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Y 2011-12, as involved in this case. 3. The Assessee declared its total income of Rs. 3,02,59,990/- by e-filing its return of income on dated 30.11.2011, which was subsequently revised on dated 23.03.2013 by filing revised return of income, wherein the Assessee declared total income of Rs. 3,02,59,994/-. 4. Subsequently, the case of the Assessee was selected for scrutiny through CASS and therefore statutory notices were issued, against which the Assessee attended the hearings before the Ld. AO from time to time and filed its submissions and details in support of its case. On perusing the same, the ld. AO observed that the Assessee has entered into following international transactions with its Associated Enterprises (AE) during the year under consideration. Sr. no. Type of international transaction Transfer Pricing Method Total value of transactions (Rs.) MAM PLI 1. Provision of ITes services Transactional Net Margin Method (TNMM) OP/OC 9,06,08, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice charged by Assessee 5,152,857 Percentage of services provided to AEs to total revenue Rs. 90608346/Rs. 90608346 100.00% Proportionate Difference for which adjustment is required to be made 5152857 6.2 The Ld. TPO by considering the peculiar facts and circumstances of the case and the submissions of the Assessee, vide its order dated 16.01.2015 under section 92CA(3) of the Act, proposed an upward adjustment of Rs. 51,52,857/- in the international transactions qua segment of providing ITES and accepted the ALP in the segment of Management Services . 7. Consequently, on the basis of the Ld. TPO s order dated 16.01.2015, the Ld. AO passed a draft Assessment Order dated 18.02.2015 under section 143(3) of the Act. 8. The Assessee being aggrieved against the draft assessment order dated 18-02-2015, filed its objections before the Ld. Dispute Resolution Panel (in short Ld. DRP ). 9. The Ld. DRP vide its order dated 27.11.2015, directed the AO to exclude one comparable/company namely Accentia Technology Ltd. from the list of comparables and to take c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny TPO computed margin- Adjusted Adjusted margin based on DRP Directions Accentia Technologies Ltd. 22.59% - Acropetal Technologies Ltd 7.48% 7.48% e4e Healthcare Business Services Pvt Ltd 7.21% 4.62% Eclerx Services Ltd. 52.04% 52.04% ICRA Techno Analytics Limited 19.49% 19.49% Infosys BPO Ltd. 15.03% 15.03% Jindal Intellicom Ltd. 10.24% 10.24% Microgenetic Systems Ltd. -5.72% -5.72% TCSE-Serve Ltd. 65.47% 65.47%% Average 21.54% 21.08% Accordingly, revised ALP and difference between ALP and pric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of TCS and the Assessee, which is reproduced herein below: M/s TCS E-Serve Limited A comparative chart of FAR of TCS E-Serve Limited and Assessee Company as under: S. No. Particulars TCS E-Serve Limited Serco India Private Ltd 1 Revenues (Turnover) Rs. 1,442.42 Crores (Page 73 of Annual Report) (PB-312) Rs. 24.23 Crores (More than 59 times) 2 Fixed Assets Rs. 84.94 Crores (Page 72 of Annual Report) (PB-311) Rs. 1.63 Crores (More than 52 times) 3 Brand TATA Nil 3.1 Brand Contribution Tata Brand Equity contribution Rs. 2.61 Crores (Page 87 of Annual Report) (PB-326) Nil 4 Risk The company operates full-fledged risk-taking enterprise. Minimal risk as the services provided to AEs only. 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 9.06 Crores of ITes (approx. 38 times) (Total Rs. 24.23 Crores) 2 Fixed Assets Rs. 29.54 Crores (Page 56 of Annual Report) (PB-405) Rs. 1.63 Crores (More than 18 times) 3 Risk The company operates full-fledged risk-taking enterprise. Minimal risk as 100% of the services are provided to AEs. 4 Nature of Services The company is into KPO (Knowledge Process Outsourcing) The Assessee was providing low end IT enabled services in the category of ITES/BPO. 11.6 The Assessee further, by drawing our attention to the above chart, claimed that the Assessee has provided ITES in the nature of research operations to its AEs on cost plus basis which were low and in the category of ITES/BPOs. Whereas the eClerx is into knowledge process outsourcing (KPO) and as per Annual Report, providing services in two core areas i.e. (a) financial services and (b) sales and marketing services. Even there is no segment reporting, hence, on the aforesaid consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll in various cases including in Agniky India Technologies Pvt. Ltd. (2013) 36 taxmann.com 289 (Del.) considered the identical issue and categorically held that a giant company having high turnover and high brand value, cannot be compared with smaller captive unit of the parent company. 12. On the contrary, the Ld. DR vehemently argued that huge turnover ipso facto does lead to exclusion of the company as comparable, in view of the judgment in the cases of Chryscapital Investment Advisors Pvt. Ltd. and Rampgreen Solutions Pvt. Ltd. (supra). High Turnover /Brand Value/High Fixed Assets are not the criteria for exclusion of the comparables. Even otherwise there cannot be cherry picking. There is functional similarity between the Assessee and the aforesaid companies and therefore, the same cannot be excluded from the comparable. 13. In rejoinder, the Ld. AR claimed that after Chryscapital Investment case (supra), more water flown as in Avaya India (P.) Ltd. v. Assistant Commissioner of Income Tax [2019] 108 taxmann.com 222 (Delhi)(PB-554 to 563), the Hon ble Delhi High Court has considered the high turnover companies and brand value as well, for exclusion of comparables and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parable: The objection on turnover/ scale is effectively addressed by the jurisdictional High Court in Chrys Capital and Rampgreen supra. The Taxpayer has not shown how payment of Tata Brand equity and ownership of Intangibles is leading to high profit margin given that most of the revenues are derived from a long term contract from a single customer i.e. Citigroup. Undoubtedly TCS Global Network Delivery Model is being leveraged to service clients globally, however Actis Global as per its TP Study also leverages on all the valuable intellectual property rights and other commercial or marketing intangibles owned by the group company and provides a diverse range of services that would vary in complexity, depth of analysis and time involved. There is no fixed correlation between brand and margins. A case in point is Tata Elxl, carrying the same Tata brand name as TCSe-Serve the comparable, but Tata Elxl has much lower margins. On the volatility of profits, DRP has examined taxpayers Annual Report and 10% decline in Profit after tax is explained on account of expiry of tax holiday U/s 10A. One of the key Issues when analyzing transfer prices is to refine the comparability analysi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly, include business environment; the nature and functions performed by the tested party and the comparable entities; the value addition in respect of products and services provided by parties; the business model; and the assets and resources employed. It cannot be disputed that the functions performed by an entity would have a material bearing on the value and profitability of the entity. It is, therefore, obvious that the comparables selected and the tested party must be functionally similar for ascertaining a reliable ALP by TNMM. Rule 10B(2) of the Income Tax Rules, 1962 also clearly indicates that the comparability of controlled transactions would be judged with reference to the factors as indicated therein. Clause (a) and (b) of Rule 10B(2) expressly indicate that the specific characteristics of the services provided and the functions performed would be factors for considering the comparability of uncontrolled transactions with controlled transactions. 14.6 In view of the judgments referred to above, we have to consider, as to whether there is material difference between TCS and eClerx and the Assessee, qua business model environment, the nature and functions performe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , cannot be compared with smaller captive unit of the parent company. Further in Avaya India (P.) Ltd. case (supra) the Hon ble Delhi High Court has also considered the high turnover of companies and brand value as well, for exclusion of comparables. 14.9 Considering the aforesaid facts and respectfully following the decisions of the Hon ble Courts referred to above, we are of the considered view, that the TCS and eClerx are not comparable with the Assessee in any mode such as Revenue Turnover, Fixed Assets, Brand Value, Brand Contribution, Risk, Nature of Services, Related Party Transaction etc., hence for the just decision of case and for the ends of justice, we are inclined to direct the Ld. AO, to exclude TCS and eClerx from comparables companies and determine the ALP accordingly, hence directed accordingly. 15. Coming to the addition/disallowance u/s 40(a)(i) of the Act, the Assessee claimed that the Assessee being subsidiary of Serco, UK was incorporated on 27.02.2006 as a captive centre to provide IT IT Enabled Services to Serco Group and therefore, desirous to recruit some of the employees of Serco UK, on full time basis to work exclusively for the Assessee/Serc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 Mr. David Anthony Burke Chief Finance Officer 01/09/2010 (7 months) Rs. 47,31,170/- 3 Mr. Paul Alan Gasken HR Officer 03/01/2011 (3 months) Rs. 27,09,592/- Total Rs. 2,99,20,449/- Infact the aforesaid employees, have also filed their returns of income in India, declaring inter-alia salary income received from the Assessee, as its reflect from their Income Tax Returns, produced before us by the Assessee. 15.3 The Assessee further claimed that though the Ld. AO has not proposed any disallowance under section 40(a)(i) of the Act in Draft Assessment Order, however the Ld. DRP while relying upon the decision of Hon ble Delhi High Court in the case of Centrica (supra) show-caused the Assessee, as to why reimbursement of salaries may not be treated as Fees for technical services (FTS). 15.4 In response the Assessee claimed as under: (i) The Assessee is legal and economical employer of these employees. (ii) The case of Centri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p between CIOP and the secondees since secondees could not sue CIOP for default In payment of salary. and though i CIOP was given the right to terminate the secondment, but the original and subsisting relationship with overseas entity -whose regular employees they were, could not be terminated, (page 41 para 34) Whereas, during the period of service of the Serco India Employees with Serco India, It is the understanding between the Parties to this agreement that the Serco India Employee would be entitled to remuneration In foreign currency paid to them outside or India ( Foreign Currency Salary ); Whereas, the Parties to this Agreement have agreed to adduce into writing the terms and conditions that is governing their mutual relations referred to in this Agreement and also the arrangement whereby Serco India shall bear and pay for the Foreign Currency Salary of the Serco India Employees. 4 While CIOP may have operational control over these persons in terms of the daily work, and may be responsible (in terms of the agreement) for their failures, these limited and sparse factors cannot displace the larges and establis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eleased for the period in question by the Enterprise in his state of residence. This was clearly and critically not done this case. Para 4.14 Serco UK hereby agrees to release and discharge the Serco India Employees for the period of service from all obligation and rights whatsoever, Including any lien on employment, if any, and from all actions, claims and demands towards Serco UK while they worked or will work as employees of Serco UK. Serco UK shall not enforce any kind of contractual obligation during the period of service of Serco India Employees as employees of Serco India. Source: All extracts are from Salary Reimbursement Agreement between Serco Global Services Private Limited and Serco Limited UK dated 7 January 2010 16.1 The Ld. DRP also observed as under : That aforesaid agreement is also supported by a detailed employment contract setting out the terms of employment. The employment contract and salary reimbursement agreement when read together to point out, some kinds of distinction vis-a-vis the Centrica particularly that employees have been released from their work at Serco UK and subsequently entered into a separate loca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t taken up, since the discussion now academic in view of the above decision of the Hon ble Delhi High Court, which is approved by the Hon ble Supreme Court. 17. The Assessee therefore submitted that Ld. DRP was not justified in directing the Assessing Officer to disallow the reimbursement of salary expenses u/s 40(a)(i) of the Act, on the following reasons: (A) Reimbursement of salary cannot be disallowed u/s 40(a)(i) of the Act as the Assessee has already deducted TDS u/s 192 of the Act. (B) The Assessee was legal and economical employer of these employees. (C) The reimbursement of part salary expenses of expatriate employees to Serco UK did not fall under the purview of FTS. (D) The ratio of the decision in the case of Centrica India(supra) is not applicable in this case. (E) The disallowance u/s 40(a)(i) is against the rule of consistency . 17.1 The Assessee further claimed that reimbursement of salary expenses cannot be disallowed under section 40(a)(i) of the Act as the Assessee has already deducted TDS under section 192 of the Act and therefore, the case of the Assessee does not fall under twin parameters set out in the provisions of section 40(a)(i) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de from the liability of TDS, as prescribed under section 195 of the Act. The Assessee has paid the reimbursement amount for Technical Services and therefore, liable for FTS in view of Centrica judgment (supra), which is squarely applicable to the facts of the Assessee s case. Further, even the Hon ble Apex Court in the case of C.C, CE ST Vs. Northern Operating Systems Pvt. Ltd. (2022) 101 GSTR 391 (SC) Civil Appeal No. 2289 to 2293 of 2021 also dealt with the seconded employees and according to the judgement in that case, the case of the Assessee is also covered to be Fees for Technical Services provided. The Ld. DR before us also demonstrated the facts of Centrica (supra) and the Assessee s case, in order to show the similarity. 19. In rejoinder, the Assessee claimed that in the aforesaid cases, the Hon ble Apex Court has not dealt with the issue relating to Income Tax Proceedings and infact, the judgments delivered by the Hon ble Apex Court are on facts but not on law points, hence cannot be made applicable to the instant case in view of decision of the Hon ble Apex Court in the case of Muthoot Leasing and Finance Ltd. v. Commissioner of Income-tax [2023] 146 taxmann.co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd exercise of powers, which the company may assign to Mr. Bob from time to time. c) Compensation and allowances: The salary allowance and benefits have been fixed as per para-3 of employment contract (pg. 476) (PB). d) Taxation: The emoluments/benefits mentioned herein will be liable/subject to tax in accordance with the provisions of Indian Income Tax and the Rules made thereunder, as may be in force from time to time. e) Notice period: Either party can terminate the employment by giving six months (employee/12 months (employer) notice, negotiable in both sides (i.e. either notice being served or salary payment in lieu of the notice period, paid). f) Responsibilities: The employee will be in full time employment of the company and will be obliged to devote entire time, attention and effort to the furtherance of the business of the company and to continuously develop professional skills in the interest of the company and himself. The employee (Mr. Bob) shall not during his employment with the company, directly or indirectly engaged himself in or devote any time or attention to any employment or business or possession of monetary interest, other than ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntitled to remuneration in foreign currency paid to them outside of India ( Foreign Currency Salary ); WHEREAS, the Parties to this Agreement have agreed to adduce into writing the terms and conditions that is governing their mutual relations referred to in this Agreement and also the arrangement whereby SERCO India shall bear and pay for the Foreign Currency Salary of the SERCO India Employees. 3.1 In consideration for the employment services to be provided by the SERCO India Employees, SERCO India shall be solely responsible to pay salary and other costs such as housing, transport etc. of SERCO India Employees. 3.2 For administrative convenience only and at the request of SERCO India, SERCO UK agrees to pay to the SERCO India Employees the Foreign Currency Salary on behalf of SERCO India. For this purpose, SERCO India shall inform SERCO UK, the amount of the Foreign Currency Salary that should be paid by SERCO UK to the SERCO India Employees on behalf of SERCO India for their employment with SERCO India. 3.4 SERCO India agrees to reimburse SERCO UK such Foreign Currency Salary paid by SERCO UK on behalf of SERCO India subject to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itions as laid down in Employment Contract of each SERCO India Employees with SERCO India. The terms of Employment Contract shall specifically include details with regard to terms of employment with SERCO India like period of service, nature of work, details of salary and other costs and such other terms as are customary. 4.12 SERCO UK shall not be responsible for the work of SERCO India Employees or assume any risk for the results produced from the work performed by the SERCO India Employees during the period of service with SERCO India. The SERCO India Employees shall not be regarded as employees of SERCO UK and shall also not in any way be subject to any kind of instructions or control of SERCO UK during the period of employment with SERCO India. 4.13 SERCO UK shall not have any obligation towards SERCO India with regard to the performance of SERCO India Employees. The obligation of SERCO UK would cease on entering of employment contract by the SERCO India Employees with SERCO India. 4.14 .SERCO UK shall not enforce any kind of contractual obligations during the period of service of SERCO India Employees as employees of Serco India. 4.15 During the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut not the Serco UK. The employees under consideration had employee-employer relationship with the Assessee only and therefore, these employees have no rights to act on behalf or bind Serco UK in connection with their duties in the Assessee. The Assessee was legal and economic employer of these employees. Accordingly, the payments made by the Assessee to the said employees as salary, partly by Assessee itself and remaining through Serco UK, which was subsequently reimbursed by the Assessee, was chargeable to tax as salaries in the hands of aforesaid employees but not as FTS because even otherwise there is no agreement and/or any document to show that the Serco UK, has provided any Technical Service and in consequence thereof the Assessee has paid FTS‟. Thus in our considered view, the Assessee has not paid for any FTS provided but infact paid the total amount as salaries and therefore correctly deducted tax at source (TDS) u/s 192 of the Act. 20.4 Let us also consider, as to whether the provisions of section 195 are applicable to the instant case or not. For completeness and better understanding, the provisions of section 195 of the Act are reproduced herein below: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on ble tribunal in ACIT, Circle-1(1)(1), Bangaluru vs. AON Specialist Services (P.) Ltd. [2020] 116 taxmann.com 368 (Bangalore Trib.) (PB-695 to 702)[Para 22 of the order] also dealt with the identical issue and held as under: In this case also the Assessee has reimbursed payment of salary of employees made by M/s AON Limited, UK and the Assessee had deducted tax at source on the salary expenses u/s 192 of the Act. According to the Assessing Officer, these payments were in the nature of Fees for Technical Service rendered and therefore, the Assessee ought to have deducted tax at source u/s 195 of the Act. Since, the Assessee did not deduct tax at source u/s 195, the AO disallowed the amount u/s 40(a)(i) of the Act. The DRP, however, deleted the addition made by the AO by following the decision of the Hon ble ITAT in Assessee s own case in respect similar payments in ITO vs. AON Specialist Services (P.) Ltd. [2014] 43 taxmann.com 286 (Bangalore Trib.) where it was held that the Assessee was real and economic employer of employees seconded from UK Company and reimbursement of salary cost etc. to UK company was without any profit element, it could not be regarded as income cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowance under section 40(a)(ia) of the Act is concerned, this Court finds that there is no dispute that the Assessee has deducted tax at source under section 192 of the Act. This Court is in agreement with the opinion of the ITAT that Section 195 of the Act has no application, once the nature of payment is determined as salary and deduction has been made under section 192 of the Act. 21.3 The Hon ble Courts in various cases including mentioned above, consciously held that even where tax has been deducted, under bona fide belief, under wrong provisions of TDS, the provisions of section 40(a)(i) cannot be invoked. Even if there is a difference of opinion as to the deductibility of TDS falling under different provisions, no disallowance can be made by invoking provisions of section 40(a)(i) of the Act. The Judgment passed by Calucutta High Court in the case of CIT vs. S. K. Tekriwal [2014] 46 taxmann.com 444 (Calcutta) (PB-688 to 689) is relevant on this issue, which has been subsequently followed by Hon ble high Court of Delhi in the case of Pr. CIT vs. Future First Info. Services Private Limited [2022] 447 ITR 299 (Del.) [PB 815 to 819]. 21.4 Coming to the arguments ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ather ensuring that skills set of other employees was built and these services may be continued by them without assistance. On these facts, the Hon ble High Court was satisfied that the seconded employees were making available their experience and skill in managing and applying such processes and practices and therefore, the amount reimbursed by the Assessee to overseas companies towards salaries of seconded employees amounted to fee for technical services liable to tax in India. Accordingly, the Assessee was required to deduct tax at source u/s 195 of the Act on this amount . Whereas the Assessee is not a newly formed company and was in existence since 2006 and had large number of employees who were highly qualified personnel, having professional qualifications in the field of engineering and/or management, to render services to its AEs (as mentioned in page 22 of TPO order). It is also pertinent to note that Serco UK has relieved these seconded employees and Serco India has recruited them. The salaries, perquisites and other conditions of the employment were decided by the Assessee company with the employees. The Assessee company used to inform Serco UK the amount of fore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s 192 of the Act. But the Assessing Officer treated these payments as FTS and since, the Assessee has not deducted tax u/s 195 of the Act, the Assessing Officer disallowed Rs. 1,85,20,176/- of reimbursement of salary u/s 40(a)(i) of the Act. The Hon ble ITAT held as under: 12. Thus, keeping in view the discussions made above, in final analysis, we hold that the payment of Rs. 1,85,20,176/- made by the Assessee towards reimbursement of expenses is in the nature of salary cost of the assigned employees subject to TDS under section 192 of the Act, hence, cannot be treated as FTS under section 9(1)(vii) of the Act and Article 12 of the tax treaty. Accordingly, there was no obligation on the part of the Assessee to withhold tax at source under section 195 of the Act. Resultantly, we delete the addition made by the Assessing Officer. This ground is allowed. 22.1 The Assessee at last claimed that in above cases, the Ld. Assessing Officers have treated reimbursement of salary expenses to foreign company as FTS relying on the decision of Hon ble Delhi High Court in the case of Centrica India Offshore (P.) Ltd (supra), but the Hon ble ITAT and Hon ble Courts have held that the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ility and had made available their technical know-how for future consumption. (Para 32 of judgment) The present case is not a case of initial support and appellant company already had plenty of local employees who were well qualified and possess the requisite knowledge to carry out their duties in India. (Reference: pages 21 22 of TPO order regarding Employees Profile of the Assessee‟). The expatriate employees were employed for carrying on the routine business activities as CEO, CFO and HR Officer under the exclusive control and supervision of the Appellant company. They were not rendering any technical services. The expatriate employees were recruited by the appellant company to carry on routine business activities as its employees. Pay roll In this case, the seconded employees were not specifically taken into employment by the Indian company. The employees continued to remain on the payroll of the overseas entities who used to pay and disburse the salaries. (Para 4 of judgment) The expatriate employees were taken into employment and were on pay roll of the appellant company. The appellant was sole ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it for payment to the secondees, based on its contractual relationship with them. (Para 40 of judgment) In the instant case, the appellant Indian company inform SERCO UK the amount of the part salary in foreign currency that should be paid to these expatriate employees on behalf of the appellant. Accordingly, SERCO UK paid part salary to these expatriate employees and thereafter the same would be reimbursed to Serco UK. Thus, SERCO UK was a conduit only to pay part of salary of appellant s employees and the money never accrued to SERCO UK. (Para 3.2 of Agreement) Chart Appellant - Northern Operating Systems Particulars Appellant- Serco India Pvt. Ltd Northern Operating Systems (P) Ltd 111₹ 1 Release recruitment In the instant case, the Salary Reimbursement Agreement clearly states that the expatriate employees were released by the foreign company and recruited by the appellant company and would work exclusively for the appellate company. (Para 4.2 of the Agreement). Serco UK does not have any lien on employment of Serco India Emp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erve that the Ld. DRP, after examining the points of difference of this case, has accepted the distinction between the facts of the Assessee and Centrica case by observing as under: That aforesaid agreement is also supported by a detailed employment contract setting out the terms of employment. The Employment Contract and Salary Reimbursement Agreement when read together do point out some points of distinction vis-a-vis the Centrica particularly that employees have been released from their work at Serco UK and subsequently entered into a separate local employment agreement with Serco India. However, the Ld. DRP applied the case of Centrica India by observing as under: But a cleverly drafted Agreement that attempts to adhere with the letter but not the spirit of the Centrica decision would be a case of form overriding substance . 22.5 We also observe that the Hon ble Karnataka High Court in the case of M/s Flipkart Internet Private Limited V. DCIT (International Taxation), Bangalore [2022] 448 ITR 268 (Kar) has also considered the identical situation, wherein the Revenue has relied upon the judgment of the apex court in Centrica India Offshore (P.) Ltd (supra) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the requirement of establishing that: (a) The Domestic Entity was the real employer, that there was no Service PE in the local Country. (b) That there was indeed a reimbursement in the true sense and that cost payment among related Entities was to be ignored. (c) That 'FTS' satisfied the 'make available' test. Finally, the judgment in Centrica is on the facts and material on record. 22.6 The Hon ble Karnataka High Court in M/s Flipkart Internet Private Limited (supra) also considered the applicability of decision in C.C., C.E. S.T. v. Northern Operating Systems Pvt. Ltd. [2022] 101 GSTR 391 (SC) ; Civil Appeal Nos. 2289 to 2293 of 2021, and held that this judgment was rendered in the context of service tax and hence, not applicable for Income Tax Act to determine whether the payment made is for fees for included services, by holding as under: (viii) The Revenue has relied upon the judgment of the Apex Court in C.C., C.E. S.T.-Bangalore (Adjudication) etc. v. M/s.Northern Operating Systems Pvt. Ltd.12 where the Apex Court has interpreted the concept of a secondment agreement taking note of the contemporary business practic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o of judgments relating to one tax enactment as a precedent in a case relating to another tax enactment. This rule of caution is important and should not be overlooked, more so when the language of the enactment and the object and purpose of the enactment are different. It is also well- settled that ratio decidendi of a case from one enactment, cannot be applied to an altogether different legislation. 22.8 From the facts and circumstances as demonstrated by the parties, the observations made by Ld. DRP and the points as summarized in the said charts and on examination by us independently, we are of the considered view that the facts and issues involved in the cases of Centrica and Northern Operating Systems(supra) were altogether different and distinct from the facts and issues involved in the Assessee s case, as the Hon ble Apex Court, in those cases dealt with different facts, issues and Acts and therefore dictum laid down in those case, is not applicable to the instant case. 22.9 We also observe that the CBDT, vide its Circular No. 720 dated 30-08-1995(PB-703) has clarified that payment of any sum, shall be liable for deduction of tax, only under one section and therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X
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