By Puloma Dalal, Jayesh Gogri, Mandar telang Chartered Accountants
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Employing expatriate employees of group concerns to work in India and paying their social security benefits to the companies abroad is not liable to tax under Manpower Recruitment/ Supply Service.
Facts:
The assessee, a part of group of companies situated in US, UK and Singapore etc. hired certain expatriate employees overseas. Some employees were transferred from group companies to the assessee in India. A letter of employment was issued to the expatriate employee by the assessee from the date when the employee was transferred to India for duration of the employment in the country.
The social security benefits of the expatriate employees as per Indian laws like PF and under the foreign law was remitted to its group companies The assessee deducted tax at source treating the emoluments paid to the employees as salary and also issued Form 16 and Form 12BA. The adjudicating authority treated the entire arrangement as taxable under manpower supply services u/ss 65(105)(k) of the Act. The Tribunal decided the matter in favor of the assessee.
Held:
Analysing the requirements u/s. 65(105)(k), the High Court held that, the adjudicating authority clearly missed the requirement that the service which is provided must be by a manpower recruitment or supply agency. Moreover, such a service has to be in relation to supply of manpower. In the present case, there was no basis whatsoever to hold that, taxable service involving the recruitment or supply of manpower was provided by a manpower recruitment or supply agency. Therefore the element of taxability would not arise.
