Document Fragment View

Matching Fragments

3.1. The ld. CIT(A) observed that this issue has been considered by Hon'ble Delhi High Court in the case of Centrica India Offshore Pvt. Ltd. Vs. CIT reported in 364 ITR 336 (Del.), wherein held as under:

• "Whilst the agreement between the Indian company and the overseas entity granted the Indian company the right to terminate the secondment, the Indian company had no right to terminate the original underlying employment relationship between the secondee and the overseas entity;
• The payment was not in the nature of reimbursement, but rather, payment for services rendered. The employment relationship between the overseas entity and the Indian taxpayer from which the overseas entity's independent obligation to pay the secondees arose continued and the overseas entity was under no obligation to use payments - received from the Indian company to pay the secondees.
The SLP against the above judgment of the Delhi High Court, having been dismissed, the legal position is now clarified. The facts of the appellant's case are identical with that of Centrica discussed above.
3.2 Further, the ld. CIT(A) observed that the Centrica decision, extracted below, also addresses the issue raised by the assessee that the payment received by it was mere reimbursement and on cost-to-cost basis with no profit element involved:
38.The mere fact that CIOP, and the secondment agreement, phrases the payment made from CIOP to the overseas entity as 'reimbursement' cannot be determinative. Neither is the fact that the overseas does not charge a mark-
"Karnataka HC allows Flipkart's writ petition challenging rejection of its application under Section 195(2) for 'NIL' TDS on payment to Walmart Inc. for reimbursement of salaries to seconded employees; Directs Revenue to grant 'Nil' TDS certificate; HC observes that finding under Section 195 is tentative and even if Revenue orders that no deduction of tax be made, the question of taxability of recipient still remains to be decided; Thus, the question of prejudice to Revenue at the stage of Section 195 is unavailable to it; Elaborately distinguishes Delhi HC ruling in Centrica India Offshore relied upon by the Revenue and also holds that the Revenue missed the Karnataka HC Division Bench's dicta in Abbey Services that "secondment agreement constitutes an independent contract of services in respect of employment"