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"33. The issue which this court has to decide is whether the overseas group company or .companies, with whom the assessee has entered into agreements, provide it manpower services, for the discharge of its functions through seconded employees.
34. The contemporary giobal economy has witnessed rapid cross-border arrangements for which dynamic mobile workforces are optimal. To leverage talent within a transnational group, employees are frequently seconded to affiliated or group companies based on business considerations, In a typical secondment arrangement, employees of overseas entities are deputed to the host entity (Indian associate) on the latter's request to meet its specific needs and requirements oF the Indian associate. During the arrangement, the secondees work under the control and supervision of the Indian company and in relation to the work responsibilities of the Indian. affiliate Social security laws of the home country (of the secondees) and business considerations result in payroll retention and salary Ae $1/41909 -- 41911/2017 payment by the foreign entity, which is claimed as reimbursement from the host entity. The crux of the issue is the taxability of the cross charge, which is primarily based on who should be reckoned as an employer of the secondee. If the Indian company is treated as an employer, the payment would in effect be reimbursement and not_chargeable to tax in the hands of the overseas entity However, in the event the overseas entity is treated as the employer, the arrangement would be treated as service by the overseas entity and taxed.

A. Nissan shail instruct the Secondee to carry out the work specified under the guidance, direction and supervision of the Host company (Appellant). The secondee shall abide by the host Co's internal Rules but shall enjoy extra holidays and leave as set out.

B. Salary of Secondee will be decided by Nissan. The amount may be revised by Nissan at the behest of Nissan's fiscal year.

C. During the period of deputation in India, the entire salary, including the home country salary and host country salary of the secondee shall be paid by the Host Company.

19.10 it is the Appellants contention that the amount paid by the Appellant directly to the seconded employees in Indian Currency is not 'charged' by Nissan on the appellant and hence will not form part of the assessable value. This is a play of semantics. It is seen from the section reproduced above that the gross amount. charged by the service provider is in the context of such service provided or to be provided by him. As stated by the Apex Court in Northern Operating Systems (supra), it would be unnatural to expect the overseas employer to not seek reimbursement of the employees' salaries, since they were, for the duration of secondment, not performing tasks in relation to its activities or business. A look at the secondee Agreement shows that the appellant company has accepted the promise of Nissan for services of skilled employees on payment of the gross amount charged by Nissan as per certain conditions including a split formula to be decided by Nissan, for payment of salary. However as per the desire of Nissan, the consideration equal to salary to the deputed employees is to be paid partly by the Appellant and partly by Nissan while the secondee remains on the rolls of Nissan. The portion paid by Nissan is reimbursed by the Appellant to Nissan in foreign currency. During the l ST/41909 -- 41911/2017 period of deputation of the secondee in India, the entire salary, including the home country salary and host country salary of the secondee shall be paid by the Host Co. (Appellant). A clause of the Agreement states that the contribution to the Japanese social security system will be borne by Nissan of the deputed employees. The contribution to the Indian social security system will be borne by the Appellant company. The Agreement also states that Nissan will have complete discretion over salary, bonus and allowances, to be paid to the deputed employees. Nissan has lien over the deputed employees. It is clear from the agreement that Nissan dictates the terms of employment, of the deputed employees to the appellant. The appellant has no discretion to vary the terms of employing the deputed employees. Hence by full filling the conditions of the Agreement and making payment / debiting the books of account to pay the secondee his full salary, bonus and allowances as per the gross amount 'charged' by the overseas supplier i.e. Nissan, service tax gets attracted.

19.10 It is the Appellants contention that the amount paid by the Appellant directly to the seconded employees in Indian Currency is not 'charged' by Nissan on the appellant -- and hence will not form part of the assessable value. This is a play of semantics. It is seen from the section reproduced above that the gross amount charged by the service provider is in the context of such service provided or to be provided by him. As stated by the Apex Court in Northern Operating Systems (supra), it would be unnatural to expect the overseas employer to not seek reimbursement of the employees' salaries, since they were, for the duration of secondment, not performing tasks in relation to its activities or business. A look at the secondee Agreement shows that the appellant company has accepted the promise of. Nissan for services of skilled employees on payment of the gross amount charged by Nissan as per certain conditions including a split formula to be decided by WNissan, for payment of salary. However as per the desire of Nissan, the consideration. equal to salary to the deputed employees is to be paid partly by the Appellant and partly by Nissan while the secondee remains on the rolls of Nissan. The portion be ST/41909-41911/2017 paid by Nissan is reimbursed by the Appellant to Nissan in foreign currency. During the period of deputation of the secondee in India, the entire salary, including the home country salary and host country salary of the secondee shall be paid by the Host Co. (Appellant). A clause of the Agreement states that the contribution to the Japanese social security systern will be borne by Nissan of the deputed employees. The contribution to the Indian social security system will be borne by the Appellant company. The Agreement also states that Nissan will have complete discretion over salary, bonus and allowances, to be paid to the deputed employees. Nissan has lien over the deputed employees. It is clear from the agreement that Nissan dictates the terms of employment, of the deputed employees to the appellant. The appellant has no discretion to vary the terms of employing the deputed employees. Hence by full filling the conditions of the Agreement and making payment / debiting the books of account to pay the secondee his. full salary, bonus and allowances as per the gross amount 'charged' by the overseas supplier i.e. Nissan, service tax gets attracted.