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NC: 2025:KHC:6212-DB "39. Accordingly, in light of the above discussion, the impugned order at Annexure-A dated 01.05.2020 is set aside and the respondent No.1 is directed to issue a Certificate under Section195(2) of I.T.Act to the effect of 'Nil Tax Deduction at Source' as regards the petitioner's application dated 15.01.2020."

2. FACTS IN BRIEF:

2.1 Assessee, an Indian Company is a subsidiary of a foreign entity in Singapore. The said foreign entity had entered into Inter Company Master Service Agreement with Holding Company Walmart Inc, Delaware, which is a USA entity. This US entity provides services to various affiliates across the globe pursuant to Master Service Agreement and accordingly the Walmart seconded its employees to the Assessee Company. For the seconded service, the Assessee - company having deducted the TDS remitted the salary amount to the US entity by way of reimbursement.

4. Learned Sr. Advocate Mr. Tarun Gulati appearing for the Assessee-Company resisted the Appeal by making submission in justification of the impugned NC: 2025:KHC:6212-DB order and the reasoning of the learned Single Judge. He contends that his client was not required to deduct tax u/s 195 of the 1961 Act on payments made to a foreign entity towards reimbursement of salaries paid to the seconded employees; Article 12 of DTAA sums paid from being regarded as fee for Technical Services and thus, there was no income earned by Walmart Inc., from taxing in India; whatever payment the Assessee-Company has made to the foreign entity is only the actual cost of salaries of seconded employees and there is no "mark-up" retained by foreign entity namely Walmart Inc., on such costs; once such payments are demonstrably salaries, the same would fall outside the purview of FIS-fees for included service or FTS - fees for technical service. He draws our attention to certain terms of DTAA and Clause 3.1 of MSA.

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NC: 2025:KHC:6212-DB not taxable and that Section 195 is not applicable to gross receipts inasmuch as, it employs the term "any other sum chargeable under the provisions of this Act" which aspect has been discussed by GE INDIA supra. Therefore, the direction issue the Certificate perfectly accords with the law.

5.4 The contention of the Revenue that the payments made by the Assessee-Company to Walmart Inc., do qualify as FTS and therefore would be chargeable to tax as FTS or FIS rendered by Walmart Inc., to Assessee-Company, is liable to be rejected since Walmart Inc., is a tax resident of USA and therefore, the disputed transaction shall be governed by the provisions of India-US DTAA which has legal cognition u/s 90(2); Explanation 2 to Section 9(1)(vii) of the 1961 Act is not attracted. Learned Sr. Advocate Mr.Gulati appearing for the Assessee is right in contending that in terms of Article 12 of India-US DTAA, only those payments which are made for (a) rendering technical or consultancy services and (b) making the

"a. the seconded employees, while on secondment, work for and on behalf and for the benefits of the Respondent;
b. in terms of Clause 3.1 of the MSA, the Respondent is authorized to terminate the services of seconded employees in India whereas, Walmart may decide to continue their services with Walmart in US after the termination of their secondment in India;
c. the seconded employees do not report to Walmart Inc. for their work but undertake the work on behalf of the Respondent and are answerable to the employees of the Respondent who supervise and instruct them on the work performed during the secondment period;