Page 13 - Corporate_Professional_Today

TAxAbiliTy of reimburSemenT of buSineSS exPenSeS under inCome-TAx ACT
was no element of margin, profit or value
addition by the sister concern in the purchases,
and the Indian company only reimbursed the
actual expenditure, then no TDS was required
to be made at the time of payment by the
assessee to the sister concern, which was
purely a transaction of reimbursement. ITO
(TDS) v. Vishinda Diamonds [2013] 34 taxmann.
com 163/[2014] 146 ITD 745 (Mum. - Trib.)
Even in a case where seconded employee is
regarded as employee of Indian company, as
per terms and conditions contained in the
agreement and TDS has been already made
and paid to the Indian Tax Authorities at
the time of payment of salary, no further
TDS would be required at the time of
reimbursement to the NRE. IDS Software
Solutions (India) (P.) Ltd. v. ITO [2009] 32
SOT 25 (URO) (Bangalore)
Whether reimbursement of salary or
business expenses is FTS/Royalty?
5. In order to determine whether reimbursement
of salary or business expenses falls within
the ambit of FTS, it is necessary to examine
whether there is any DTAA between India
and resident country of NRE and what is the
definition of FTS as per that DTAA? Also,
for examining the taxability of reimbursement,
it is necessary to examine the nature of
expenditure incurred by the NRE, and to
identify the party which is deriving benefit
from such expenditure. For this purpose it is
necessary to examine the agreement between
the Indian company and NRE. Asstt. CIT
v. Tractor & Farm Equipment Ltd. [2013] 39
taxmann.com 194 (Chennai - Trib.)
However, where parent NRE company agreed
to provide services of qualified technical
personnel employed by it to the Indian
company, then reimbursement by the Indian
company of salary bonus and other benefits
paid by NRE was held to be in the nature
of FTS within the meaning of the Explanation
2 to clause (vii) of Section 9(1) and Article
12 (4) of India-Austria DTAA. AT&S India
120 January 20 To January 26, 2018 u Taxmann’s Corporate Professionals Today u Vol. 41 u 14
(P.) Ltd., In re [2006] 157 Taxman 198 (AAR
- New Delhi)
Where Indian associate company rendered
investment advisory services to its foreign
associate enterprise, which seconded two
employees to Indian company whose payment
of salary, etc., was reimbursed by Indian
company, such reimbursement was held as
not FTS as per section 9(1)(vii) and article
12(4)(b) of the India Singapore-DTAA, as
assessee was rendering service to NRE, and
not vice versa. Temasek Holdings Advisors (I)
(P.) Ltd. v. Dy. CIT [2013] 38 taxmann.com
80 (Mumbai - Trib.)
Where assessee, an Indian company, entered into
an agreement with M&S Plc. of UK whereby
the assessee was provided personnel to carry
out the functions in the area of management,
for setting-up of business, property selection
and retail operation, product and merchandise
selection, it was held that “make available”
as contained in article 13(4)(c) of the Indo-
UK DTAA was not satisfied as assessee was
not enabled to apply technology at its own
independently, therefore, reimbursement of
expenditure of salary, etc., of the personnel
deputed could not be held as FTS and, hence,
not taxable in India. Addl. DIT v. Mark &
Spencer Reliance India (P.) Ltd. [2013] 38
taxmann.com 190/[2014] 147 ITD 83 (Mumbai
- Trib.); CIT v. De Beers India Minerals (P.)
Ltd. [2012] 346 ITR 467/208 Taxman 406/21
taxmann.com 214 (Kar.)
Where the assessee, an NRE, agreed to
supervise the construction of roads, provide
consultancy services in the formation of
Golden Quadrilateral for four laning and
strengthening of the existing two lanes
structure in the States of Orissa and West
Bengal, on the condition of reimbursement of
expenditure, such reimbursement was not held
as part of Fee for Technical Services payable
to it separately. Asstt. CIT v. Louis Berger
International Inc. [2010] 40 SOT 370 (Hyd.)
Similarly, lease line charges recovered from
Indian company without any mark-up will