Bombay High Court Order: No TDS On Salaries Reimbursed Under Secondment Agreement

Bombay High Court has ruled that payment of salary under secondment agreement does not attract tax deducted at source (TDS).

Secondment agreement is an agreement between a foreign Company and its Indian counterpart wherein the staff of foreign company deputed to the Indian counterpart for a certain period of time, remains on the payroll of foreign company. The Indian company reimburses the salary and other cost to foreign company and the staff’s salary is taxable in India.

In this case the Indian counterpart cited the payments as reimbursement of their expenditure, whereas an AO(Assessing Officer) considered the payments as fee for technical services as per the provisions of the Double Taxation Avoidance Agreement (DTAA). So he passed orders holding the company to be liable for the tax and interest. Commissioner of Income Tax (Appeals), gave a counter order to that of the AO. After that the Revenue Tribunal held that the Commissioner was right.

A division bench of Justice SC Dharmadhikari and Justice PD Naik supported the findings of the tribunal in the present case and dismissed the appeal filed by the Director of Income Tax (International Taxation) against the order of the tribunal.

Click here to access the copy of the order

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