June 2022

S. 9(1)(vi) of the Act; Article 12 of India-Singapore DTAA – Reimbursement of part of expat salary who worked under control and supervision of assessee is not FTS and no TDS is required to be deducted

By Geeta Jani | Dhishat B. Mehta | Bhaumik Goda
Chartered Accountants

Reading Time 3 mins

4 M/s Toyota Boshoku Automotive India Pvt. Ltd vs. DCIT [[2022] 138 taxmann.com 166 (Bangalore - Trib.)] ITA No: 1646/Bang/2017 & 2586/Bang/2019 A.Ys.: 2013-14 to 2015-16; Date of order: 13th April, 2022

S. 9(1)(vi) of the Act; Article 12 of India-Singapore DTAA – Reimbursement of part of expat salary who worked under control and supervision of assessee is not FTS and no TDS is required to be deducted

FACTS
The assessee is a licensed manufacturer carrying out manufacturing activities using technology and knowhow obtained from T, Japan. The assessee entered into secondment agreement with T. In the course of assessment, TPO made certain transfer pricing adjustments and, the AO further disallowed certain charges by treating it as capital expenditure. On appeal, while upholding adjustments and disallowance made by AO/TPO, DRP further directed enhancement of the income by treating reimbursement of expat salary to T as FTS since the assessee had not deducted tax, section 40(a)(ia) was triggered.

Being aggrieved, assessee appealed to ITAT.

HELD
ITAT perused secondment agreement, independent employment contract entered by assessee with seconded employees and correspondence between seconded employees and assessee relating to payment of salary in India and outside I

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