DCIT vs. Mahanagar Gas Ltd (ITAT Mumbai)

DATE: April 15, 2016 (Date of pronouncement)
DATE: April 22, 2016 (Date of publication)
AY: 2009-10
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S. 40(a)(ia)/ 192: Employees deputed pursuant to a secondment agreement are not "employees" of the assessee and so the amounts paid by way of reimbursement of their salary is not subject to TDS in the assessee's hands

The employees are not the employees of assessee Mahanagar Gas Ltd but employees of British Gas and they are working with assessee only in view of secondment agreement. As per joint venture agreement GAIL and British Gas have agreed to second, therefore, employees to the joint venture company i.e. Mahanagar Gas Ltd. on secondment basis and under secondment agreement certain employees have been seconded to the assessee. Since the employers were seconded for limited time of 2 to 3 years, the remuneration payable to these seconded employees were being paid by British Gas or GAIL recoverable from assessee on cost to cost basis. The nature of secondment agreement make clear the duties of second employees, their liabilities towards assessee and reimbursement of actual cost of remuneration, benefits and disbursement by assessee to the joint venture partners. These are reimbursements. Also the employee’s remuneration was allowable to tax in India then there would be tax deduction obligation on the employer who was responsible for making payment to the employees. In the present case, there was subsisting employer employee relation between British Gas and expatriate. British Gas was also person responsible for making payment to expatriate and application for deducting tax at source from salary was on British Gas. British Gas has deducted TDS on these remunerations paid to seconded employees and also deposited in the treasury of the Govt. of India. The TDS on salary payment to expatriate seconded employees to assessee have been given certificate to assessee stating the above fact which is available in the paper book of the assessee. All taxes have been paid by British Gas and second time TDS cannot be deducted on the same amount. CBDT Circular No. 720 dated 30.08.1995 clarifies that any sum payable shall be liable for deduction of tax only under one section.

(CIT vs. Kotak Securities Ltd. (2012) 340 ITR 333 (Bom) & IDS Software Solutions (India) (P) Ltd. vs. ITO (International Taxation) (2009) 122 TTJ 410 (Bang) followed)

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