GOLDMAN SACHS SERVICES PRIVATE LIMITED,BANGALORE vs. JOINT COMMISSIONER OF INCOME TAX, CIRCLE-3(1)(1), BANGALORE

Per Chandra Poojari, Accountant Member This appeal by the assessee is directed against the OGE order of JCIT (OSD), Circle 3(1)(1) passed u/s. 254 r.w.s. 144C r.w.s. 143(3) of the Income-tax Act, 1961 [the Act] dated 20.1.2023 for the assessment year 2015-16.

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exempted income nor dividend income in the financial year and the LdAr referred to the disclosures in the Paper Book, financial statements at page 20 Schedule 3.17,were there is no dividend nor exempted income received as per profit and loss account. Further similar disallowance was deleted in assessee own case for the Assessment Year 2014-15 as no dividend income has been earned on investments. The learned Authorized Representative relied on the decision of Hon'ble Delhi High Court in the case of Cheminvest Ltd. Vs. CIT 378 ITR 33 (Del) where the Hon'ble High Court has held that unless and until exempted income is received for the concerned assessment year, the provisions of Section 14A of the Act are not applicable.we find the co-ordinate Bench of the Tribunal in assessee own case in IT(TP)ANo.3244/Bang/2018 for the Assessment Year 2014-15 has dealt at pages 46 & 47 para 8 of the order as under : “8. Ground No. 4 raised by assessee is in respect of disallowance made by Ld.AO under section 14 A of the Act. 8.1. At the outset Ld.AR submitted that there is no exempt income during the year under consideration and therefore no disallowance could be computed under section 14 A by applying rule 8D. In support of his contentions he placed reliance on a recent ruling by Hon’ble Madras High Court in case of CIT vs Chittinad Logistics Ltd reported in (2018) 18 Taxmann.com 221. It is also been submitted that Hon’ble Supreme Court has dismissed SLP filed by revenue in this case which has been reported in (2018) 95 Taxmann.com 250. 8.2. Ld.CIT DR placed reliance upon orders passed by authorities below. 8.3. We have perused submissions advanced by both sides in light of records placed before us. Admittedly, there is no exempt income earned by assessee during the year, as has been noted by Ld.AO in impugned order. Under such circumstances, ratio of Hon’ble Madras High Court which has been approved by Hon’ble Supreme Court in case of Chittinad Logistics Ltd (supra) is squarely applicable. Respectfully following the same we direct Ld.AO to delete addition made under section 14 a read with rule 8D for year under consideration. Accordingly this ground raised by assessee stands allowed.” We found that there is no exempted income earned by the assessee company in the current financial year. We accordingly, follow the judicial precedence and direct the A.O. to delete the addition and allow the ground of appeal of the assessee.”

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and eligible for deduction under Section 37 of the Act and alternatively under Section 80G of the Act. We found the DRP has dealt at page 81 of the order and observed that, the claims are in the nature of CSR Policy expenditure and hence does not qualify for deduction under Section 80G of the Act. The learned Authorized Representative demonstrated in Paper Book Vol.II at pages 882 & 883 the list of deductions claimed under Section 80G of the Act with a statement of donees along with PANand address and donation receipts. Further the donation receipts are self- explanatory and are eligible for deduction under Section 80G of the Act. We find that the CSR expenses are required to be incurred by companies as per Section 135 of the Companies Act and the deduction u/s. 37(1) of the Act, is not available fromAssessment Year 2015-16 as per the Explanation 2 to Section 37(1) of the Act inserted by the Finance Act No.2. 2014.Whereas, the assessee company has made a claim for deduction of CSR expenses u/s. 80G of the Income Tax Act,1961.But the assessing officer has rejected the assesses claim without verifying the nature of contributions and observed that it is not a donation, and was not spent voluntarily for the eligibility of claim u/s.80G of the Act but due to legal obligation prescribed u/s. 135 r.w. Schedule VII of Companies Act, 2013.We find that the A.O has allowed deduction u/s.80G of the Act in respect of contribution made to PM Relief Fund which is not disputed. We are of the opinion that the A.O. has not made his observations clear that no CSR expenses are eligible for deduction u/s. 80G of the Act. We consider it appropriate to refer to the Clauses (iiihk) & (iiihl) of sub- section 2 of Section 80G of the Act which are read as under : “(iiihk) the Swachh Bharat Kosh, set up by the Central Government, other than the sum spent by the assessee in pursuance of Corporate Social Responsibility under sub-section (5) of Section 135 of the Companies Act, 2013 (18 of 2013); or (iiihl) the Clean Ganga Fund, set up by the Central Government, where such assessee is a resident and such sum is other than the sum spent by the assessee in pursuance of Corporate Social Responsibility under sub-section (5) of Section 135 of the Companies Act, 2013) (18 of 2013).” Where these two exceptions are provided in Section 80G of the Act, it can be inferred that the other contributions made u/s.

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135(5) of the Companies Act are also eligible for deduction u/s. 80G of Income Tax Act subject to assessee satisfying the requisite conditions prescribed for deduction u/s.80G of the Act. In the present case the A.O. has not dealt on these aspects, prima facie, considered the contributions as not voluntary but a legal obligation and has accepted the genuineness of the contributions. We are of the opinion, that the matter has to be considered for examination and verification of facts subject to the assessee satisfying the requirements of claim u/s.80G of the Act. Accordingly, we restore the entire disputed issues to the file of A.O. for fresh examination and verification as discussed above and the assessee should be provided adequate opportunity of hearing and shall co-operate in submitting the information and we allow the ground of appeal of the assessee for statistical purposes.” 10. After hearing both the parties, we direct the AO to pass the consequential order in compliance of the direction of the Tribunal as reproduced above.

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assessee’s own case for the very same assessment year i.e., AY 2015-16 has deleted the addition in this regard in ITA Nos. 362 to 369 & 338 to 345/Bang/2020 for the AYs 2011-12 to 2018-19.

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entity imposes obligation of compliance with tax deduction at source as per the Act, on salaries paid to the seconded employees on the assessee in India. 26.4 A reading of article 2, of the Agreement between the assessee and Laura May, shows that the control and supervision of the seconded employee is with the assessee in India. 26.5 As per article 4 of the Agreement between the assessee and Laura May, 75% of the salary of expatriate employee will be paid by the overseas entity, that sends the employee on deputation, and that, overseas entity, continues to be the de jure employer. The assessee in India, to which the employee is sent on deputation is the de facto employer pays the balance 25%. The salary paid by the de jure employer is reimbursed by the assessee in India, to the overseas entity. 26.6 As per Article 13 f the Agreement between the assessee and Laura May shows that, the assessee in India as well as the seconded employee shall not disclose confidential information of the other party. 26.7 Thus the Agreement between assessee in India with the seconded employee, contains following features :- 1. She is employee of overseas entity and during his assignment to assessee India, his employment responsibilities with overseas entity will remain suspended. 2. That, she will be under the control and supervision of the assessee in India. 3. That, she was appointed as an Associate, by the assessee in India and that during her employment in India she would be exclusively working for the assessee in India. 4. That, during the assignment period, part of the salary after deducting grossed up income tax, under the Act, on the total salary, will be paid in India and the balance salary payable in New York, by overseas entity on behalf of assessee which shall be reimbursed by assessee to overseas entity against a debit note. 5. That, during the period of assignment with the assessee in India, all other terms and conditions as per polices of the assessee company would be applicable.

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26.8 The assessee is thus required to make following payments as salary package to the seconded employees :

Para Context Description No 2 Employer GSSPL (Indian company) is the employer 2.2 Exclusivity Employee works exclusively for GSSPL 4.1 Compensation Compensation is decided and fixed by GSSPL in US$, 25% of this is paid in India and 75% will be paid through the New York payroll. Overall 100% compensation responsibility is that of the Indian company and not the overseas company (as wrongly noted by CIT(A)) 4.2 Bonus Bonus amount is decided by GSSPL 4.4 Increment Increments and bonus entitlements are decided by GSSPL, in its sole discretion 5.1 Place of Work Place of work is in Bangalore (India) 7 Leave policy Leave is decided as per GSSPL's local policy 9.1 Notice period Either the employee or GSSPL can give notice (mutual) to end the employment with one month's notice 9.2 Termination Firm has right to terminate the employment for a cause ("firm" is defined as GSSPL at para 2.1 and hence it is GSSPL which has the right to terminate the employment) 11 Discipline and Employee is bound by the Employee Handbook Grievance of GSSPL (and not of overseas companies as noted by CIT(A) at para 23 of his order) 16 Miscellaneous The contract is governed by the laws of India 17 Signatures The contract of employment is signed both by the expatriate employee and GSSPL

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26.9 Admittedly, the assessee deducted tax at source u/s.192 of the Act, on the 100% salary paid to the seconded employees, and paid the same to the credit of the Central Government. The assessee only reimbursed part of the salary cost of the seconded employee to overseas entity that has already subjected to TDS under section 192 of the Act. And therefore, at the time of making such reimbursement, to overseas entity, no taxes were deducted at source by the assessee in respect of reimbursements made as, according to the assessee, it was in the nature of cost-to- cost reimbursement, and, no element of income was involved. 26.10 The assessee in India does the TDS on 100% salaries u/s 192 and pay the same to the credit of the Central Government. Form 16 at page 228- 230 issued to Christopher Roberts of PB Vol I, by the assessee in Indian, Certificate under section 203 of TDS having deducted at source and further indicates the following -

• Employee has a PAN number in India • Total taxable salary is Rs. 9,761,581 (this corresponds to the US$ 130,000 as total compensation indicated in the local employment contract at para 4 • The Indian company does full TDS on 100% of the salaries, although 25% is paid in India and balance 75% outside India • TDS done is Rs. 2,834,300/-, which translates to 30.8% of Rs. 9,761,58 • Employee also contributes to Indian provident fund Rs. 2,57,885/- 26.11 From conjoint reading of article 15 of the OECD Model Convention and the articled referred to herein above, there is no doubt in our minds that the assessee in India is the economic and de facto employer of the seconded employees. It is an admitted fact that all the seconded employees are in India for more that 183 days in a 12 month period. Further all the seconded employees have PAN card as well as file their returns in India in respect of the 100 % salary, though the assessee pays only part of the salary in India.

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26.12 The definition of FTS under the Act is given in Explanation 2 to sec.9(1)(vii) of the Act that reads as follows :- 'Income deemed to accrue or arise in India. 9. (1) The following incomes shall be deemed to accrue or arise in India :-(i) to (vi) (vii) income by way of fees for technical services payable by— (a) the Government ; or (b) a person who is a resident, except where the fees are payable in respect of services utilised in a business or profession carried on by such person outside India or for the purposes of making or earning any income from any source outside India ; or (c) a person who is a non-resident, where the fees are payable in respect of services utilised in a business or profession carried on by such person in India or for the purposes of making or earning any income from any source in India : Provided that nothing contained in this clause shall apply in relation to any income by way of fees for technical services payable in pursuance of an agreement made before the 1st day of April, 1976, and approved by the Central Government. Explanation 1.—For the purposes of the foregoing proviso, an agreement made on or after the 1st day of April, 1976, shall be deemed to have been made before that date if the agreement is made in accordance with proposals approved by the Central Government before that date. Explanation 2.—For the purposes of this clause, "fees for technical services" means any consideration (including any lump sum consideration) for the rendering of any managerial, technical or consultancy services (including the provision of services of technical or other personnel) but does not include consideration for any construction, assembly, mining or like project undertaken by the recipient or consideration which would be income of the recipient chargeable under the head "Salaries".'

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26.13 The definition of FTS under the Act excludes "consideration which would be income of the recipient chargeable under the head salaries." If the seconded employee is regarded as employee of the assessee in India, then the reimbursement to overseas entity, by the assessee in India would not be in the nature of FTS, but would be in the nature of 'salary', and therefore, the reimbursements cannot be chargeable to tax in the hands of overseas entity, and therefore there would be no obligation to deduct tax at source at the time of making payment u/s.195 of the Act. 26.14 Article 12(4)-(5) of India USA, DTAA deals with "Fees for technical services', as under : "4. For purposes of this Article, "fees for included services" means payments of any kind to any person in consideration for the rendering of any technical or consultancy services (including through the provision of services of technical or other personnel) if such services : (a) are ancillary and subsidiary to the application or enjoyment of the right, property or information for which a payment described in paragraph 3 is received; or (b) make available technical knowledge, experience, skill, know- how, or processes, or consist of the development and transfer of a technical plan or technical design. 5. Notwithstanding paragraph 4, "fees for included services" does not include amounts paid :

(a) for services that are ancillary and subsidiary, as well as inextricably and essentially linked, to the sale of property other than a sale described in paragraph 3(a); (b) for services that are ancillary and subsidiary to the rental of ships, aircraft, containers or other equipment used in connection with the operation of ships or aircraft in international traffic; (c) for teaching in or by educational institutions; (d) for services for the personal use of the individual or individuals making the payment; or

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(e) to an employee of the person making the payments or to any individual or firm of individuals (other than a company) for professional services as defined in article 15 (Independent Personal Services)." 27. Rendering of managerial, technical and consultancy services is governed by Article 12 on 'Fees for included services' of the Double Tax Avoidance Agreement, between India and US. Payments made to 'individual or firm of individuals for service rendered by them in independent professional capacity are specifically excluded since they are covered by article 15 on Independent Personal Services. Likewise, Article 12 specifically excludes payments made towards services rendered by an 'employee' of the enterprise since services rendered under employment are covered by article 16 on Dependent Personal Services. 28. The relevant portion of para 5(e) of Article 12 of the DTAA between India and US reads as follows : — "Fees for included services does not include payments made - to an 'employee' of the person making the payment or - to any individual or firm of individuals (other than a company) for professional services as defined in article 15 (Independent Personal Services)." The payments made by the Indian entity to the overseas entity is towards reimbursement of salary paid by the overseas entity to the seconded personnel. As discussed in para 14.2 to 14.7 above, for the purpose of Article 15 of the OECD Model Commentary (corresponding to Article 16 of the DTAA between India and US), the seconded personnel are employees of the Indian entity, being the economic employer. It is to be noted that the understanding as to who is the 'employee' in order to be excluded from, "fees for technical services", cannot be inconsistent with the understanding of employee for the purpose of article 15 on income from employment, especially when article 15 is an anti- abuse provision. 29. The Ld.DCIT placed reliance on the decision of the Hon'ble Delhi High Court in the case of Centrica India Offshore (P.) Ltd. (supra) concluded that the reimbursement was FTS and that

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services provided make available technical skill or knowledge for use by the assessee. 29.1 In case of the decision of Hon'ble Delhi High Court in the case of Centrica India Offshore (P.) Ltd (supra) dealt with identical case of reimbursement of salaries paid to expatriate employees. The Hon'ble Court held that, overseas entities had, through seconded employees, undoubtedly provided 'technical' services to Centrica India and that, the expression rendering technical services expressly includes provision of services of personnel. The Hon'ble Court held that the Seconded employees, were provided by overseas entities and work conducted by them thus, i.e. assistance in conducting business of assessee of quality control and management was through overseas entities. The Hon'ble Court also held that, mere fact that secondment agreement, phrases payment made by Centrica India Offshore (P.) Ltd. case (supra) to overseas entity as 'reimbursement' could not be determinative. It was also held that, the fact that overseas entity did not charge mark-up over and above costs of maintaining secondee could not negate nature of transaction. 29.2 Hon'ble Pune Tribunal in case of Faurecia Automotive Holding (supra) has observed as under : "4.10. We have gone through the facts of the case obtaining in Centrica India (supra). The assessee therein contended that payment to foreign party towards seconded employees was only reimbursement and hence, no income was chargeable to tax in its hands. The Authority for Advance Ruling (AAR) held that payment made by the petitioner to the overseas entity was in the nature of income in view of the existence of Service Permanent establishment (PE) in India and hence liable for tax withholding. Overturning the view of the AAR that Service PE was constituted, the Hon'ble High Court held that the payment to AE was in the nature of `fees for technical services' and not reimbursement of expenses and further laid down that the nomenclature of reimbursement was not decisive. It noted that: 'Money paid by assessee to overseas entity accrues to overseas entity, which may or may not apply it for payment to secondees, based on its contractual relationship with them.' It is perceptible that in that case money paid by the Indian entity accrued to overseas entities only, which could or could not have been paid to

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the secondees depending upon the terms of contract. Per contra, we are confronted with a situation wherein the money never accrued to the assessee. It initially paid money to Mr. Franck in advance and then M/s.Faurecia Automotive Holding recovered the same from the Indian entity without any mark-up. There can be no question of the assessee receiving money in its own independent right. Rather, it is a case of discharge by the Indian entity of its own liability towards salary payable to Mr. Franck. It is thus manifest that this decision has no application to the facts of the instant case." 29.3 We also note that, reliance is placed on the decision of Hon'ble Madras High Court in case of Verizon Data Services India (P.) Ltd. (supra), wherein it is held that, the reimbursement of salary of expatriates to foreign co by Indian company results in taxable income in the hands of the foreign company. Hon'ble High Court also upheld the observations of AAR, wherein it characterized the secondment of personnel as provision of managerial services. However, the Hon'be Court set aside the ruling of Hon'ble AAR, wherein it held that, the reimbursement of salary of expatriates constitutes fees for included services in terms of Article 12(4) of India USA DTAA. Therefore, reliance placed on this decision is of no assistance to revenue. 29.4 There is another decision of Hon'ble Supreme Court in case of DIT (IT) v. Morgan Stanley & Co. [2007] 162 Taxman 165/292 ITR 416, wherein, it is held that, in case of deputation, the entity to whom the employees have been deputed cannot be regarded as employer of such employees as the employees continue to have lien on his employment with the entity which deputes him. Entity seconding the employee is the employer as it retained the right over seconded employee is also held by Hon'ble AAR in case of AT & S India (P.) Ltd., In re [2006] 157 Taxman 198/ 287 ITR 421. 29.5 The observations of the Hon'ble Supreme Court in the case of Morgan Stanley & Co. (supra) were in the context of existence of service PE. This is clear from a reading of the relevant portion of the judgment of the Hon'ble Supreme Court, which is as follows :—

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"As regards the question of deputation, an employee of MSCo when deputed to MSAS does not become an employee of MSAS. A deputationist has a lien on his employment with MSCo. As long as the lien remains with the MSCo the said company retains control over the deputationist's terms and employment. The concept of a service PE finds place in the UN Convention. It is constituted if the multinational enterprise renders services through its employees in India provided the services are rendered for a specified period. In this case, it extends to two years on the request of MSAS. It is important to note that where the activities of the multinational enterprise entail it being responsible for the work of deputationists and the employees continue to be on the payroll of the multinational enterprise or they continue to have their lien on their jobs with the multinational enterprise, a service PE can emerge. Applying the above tests to the facts of this case, it is found that on request/requisition from MSAS the applicant deputes its staff. The request comes from MSAS depending upon its requirement. Generally, occasions do arise when MSAS needs the expertise of the staff of MSCo. In such circumstances, generally, MSAS makes a request to MSCo. A deputationist under such circumstances is expected to be experienced in banking and finance. On completion of his tenure he is repatriated to his parent job. He retains his lien when he comes to India. He lends his experience to MSAS in India as an employee of MSCo as he retains his lien and in that sense there is a service PE (MSAS) under art 5(2)(l). There is no infirmity in the ruling of the AAR on this aspect. In the above situation, MSCo is rendering services through its employees to MSAS. Therefore, the Department is right in its contention that under the above situation there exists a service PE in India (MSAS)." 29.6 Per contra, in the present facts of the case there is no finding, of their existing PE, in any form by the revenue and therefore is of no assistance to the revenue. 29.7 As far as the decision of Hon'ble AAR in the case of AT & S India (P.) Ltd. (supra) is concerned, the facts of the said case were that AT&S, a company incorporated in Austria, offered services of technical experts to applicant, a resident company, pursuant to a foreign collaboration agreement on the terms and conditions contained in secondment agreement. Under the

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secondment agreement the applicant is required to compensate AT&S for all costs directly or indirectly arising from the secondment of the personnel, and the compensation is not limited to salary, bonus, benefits, personal travel, etc. but also includes other items. On the above facts, Hon'ble AAR ruled that the Contention that the payments are only in the nature of reimbursement of actual expenditure is not supported by any evidence and there is no material to show what actual expenditure was incurred by AT&S and what was claimed as reimbursement. A part of the salary of seconded personnel is paid by the applicant in Indian rupees and the remaining part is paid by the applicant to AT&S in Euro. While working with the applicant, the seconded personnel are required to comply with the regulations of the applicant, but they would go back to the AT&S on the expiry of assignment. Aforesaid terms and conditions show that the seconded personnel in effect continue to be employees of AT&S. Recipient of the compensation is AT&S and not the seconded employees. Further contention was that AT&S is not engaged in the business of providing technical services in the ordinary course of its business is also not tenable. Therefore, payments made to AT&S by the applicant are for rendering "services of technical or other personnel" and are in the nature of fees for technical services within the meaning of Explanation 2 to sub clause (vii) of section 9(1) and article 12(4) of the relevant DTAA and are subject to deduction of tax at source under section195. 30.1 The ruling of Hon'ble AAR is on the factual finding that payments were not only reimbursement of actual salary, bonus etc., but was also included other sums. 30.2Per contra in the present facts of the case, it is not at all the contention of the revenue that, something over and above what was paid as salary, bonus etc. 30.3 Liability under section 195 to deduct tax at source when making payment to a non-resident arises, only if, sum paid is chargeable to tax in India. Payment of salaries is not covered under section 195. Thus, it is necessary to take into consideration following aspect to determine Payments to enterprise seconding employees, the Indian entity has an obligation to deduct tax source u/s 195 :

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(i) Payment of fees by an enterprise (Indian entity) to foreign entity for seconding employees; (ii) Reimbursement of salaries to the entity seconding the employees (foreign entity) from the entity to whom employees have been seconded (Indian entity). 31. Payment for supplying skilled manpower cannot be regarded as payment towards managerial, technical and consultancy services as per dictionary meanings of these terms. Hon'ble AAR in Cholamandalam MS General Insurance Co. Ltd.'s case (supra), took the view that, merely supplying technical, managerial or personnel with managerial skills cannot be regarded as rendering technical services by the person supply such personnel. The following were the relevant observations of Hon'ble AAR :— "It is debatable whether the bracketted words - "including provision of services of technical or other personnel" is independent of preceding terminology - "managerial, technical or consultancy services" or whether the bracketted words are to be regarded as integral part of managerial, technical or consultancy services undertaken by the payee of fee. In other words, is the bracketted clause a stand alone provision or is it inextricably connected with the said services? HMFICL itself does not render any service of the nature of managerial, technical or consultancy to the applicant and it has not deputed its employee to carry out such services on its behalf. There is no agreement for rendering such services. In this factual situation, it is possible to contend that merely providing the service of a technical person for a specified period in mutual business interest not as a part of technical or consultancy service package but independent of it, does not fall within the ambit of S.9(1)(vii)." 32. Hon'ble Mumbai Tribunal in case of Mark & Spencer Reliance India (P.) Ltd., (supra) upheld the view of Hon'ble Mumbai Tribunal which held that, payment towards reimbursement of salary expenditure without any element of profit, would not be taxable under the provisions of the Act. Hon'ble Court also held that, when the entire salary has been subjected to tax in India at the highest average tax rate, the

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assessee could not held to be in default for not without tax under the provisions of the Act. 33. Hon'ble Delhi High Court in the case of HCL Infosystems Ltd. (supra) upheld the order of Hon'ble Delhi Tribunal which held that, when an Indian company had already deducted and remitted taxes under Sec.192 of the Act on salaries paid abroad to the technical personnel and when such salary is reimbursed on a cost to cost basis without any profit element, the provisions of Sec.195 of the Act cannot be applied to reimbursement of salaries made to foreign company, once again. 34. Coordinate bench of this Tribunal in case of IDS Software Solutions India (P.) Ltd. (supra), Abbey Business Services India (P.) Ltd.'s case (supra), took the view that expats are deputed to work under the control and supervision of the Indian company and that the oversees entity is not responsible for the actions of the expatriate employees. Thus, oversees entity does not render any technical service to the Indian company, since such payment are towards reimbursement of salary cost borne by oversees entity, and that, no income can be said to accrue to oversees entity in India. The decision of this Tribunal in case of Abbey Business Services India (P.) Ltd (supra), has been upheald by Hon'ble Karnataka High Court in Abbey Business Services India (P.) Ltd.'s case (supra). 35. Hon'ble Ahmedabad Tribunal in the case of Burt Hill Design (P) Ltd. v. Dy. DIT(IT) [2017] 79 taxmann.com 459/164 ITD 697, on identical facts, as in the case of the present assessee before us, took the view that, there was no liability to deduct tax at source u/s.195 when payments were made by way of reimbursement. Based on the above detailed analysis of various contrary decisions on the issue, we are of the view that the decisions relied by revenue are distinguishable with the present facts of the case. Further, in the present facts we note that, the concept of make- available is not satisfied in the instant case. As per para 4(b) of Article 12 of the India-US DTAA on 'Royalties and fees for included services':

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"4. For purposes of this Article, "fees for included services" means payments of any kind to any person in consideration for the rendering of any technical or consultancy services (including through the provision of services of technical or other personnel) if such services a. …. b. make available technical knowledge, experience, skill, know-how, or processes, or consist of the development and transfer of a technical plan or technical design." Thus, even if, the rendering of service by the seconded personnel constitutes a contract for service, in the absence of making available any technical knowledge or skill to the Indian entity, the same shall not constitute fees for technical services. In support we refer to the decision of Hon'ble Karnataka High Court in the case of CIT v. De Beers India Minerals (P.) Ltd. [2012] 21 taxmann.com 214/208 Taxman 406/346 ITR 467, on the concept of 'make available', observed and held as under : "What is the meaning of 'make available'. The technical or consultancy service rendered should be of such a nature that it 'makes available' to the recipient technical knowledge, know-how and the like. The service should be aimed at and result in transmitting technical knowledge, etc., so that the payer of the service could derive an enduring benefit and utilize the knowledge or know-how on his own in future without the aid of the service provider. In other words, to fit into the terminology 'making available', the technical knowledge, skills, etc., must remain with the person receiving the services even after the particular contract comes to an end. It is not enough that the services offered are the product of intense technological effort and a lot of technical knowledge and experience of the service provider have gone into it. The technical knowledge or skills of the provider should be imparted to and absorbed by the receiver so that the receiver can deploy similar technology or techniques in the future without depending upon the provider. Technology will be considered 'made available' when the person acquiring the service is enabled to apply the technology. The fact that the provision of the service that may require technical knowledge, skills, etc., does not mean that technology is made available to the person purchasing the service, within the meaning of

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paragraph (4)(b ). Similarly, the use of a product which embodies technology shall not per se be considered to make the technology available. In other words, payment of consideration would be regarded as 'fee for technical/included services' only if the twin test of rendering services and making technical knowledge available at the same time is satisfied." 36. The Ld.AR has placed before this Tribunal a decision rendered by Hon'ble CESTAT, Bangalore, wherein the Hon'ble CESTAT was deciding, whether the assessee in India, was required to pay service tax demand (on reverse charge basis) on the secondment reimbursements, on the basis that the same amounts to "manpower recruitment & supply agency services", placed at page 66-86. The Hon'ble CESTAT, Bangalore, held that employer-employee relationship exist between the seconded employee and the assessee in India in para 14 of the order passed by Hon'ble CESTAT, Bangalore. The Hon'ble CESTAT, Bangalore, further held that, there is no manpower supply services since assessee in India is the real employer by reason of the employment contract. Service tax demand was deleted. The relevant extracts are below — 6. Submitting on the demand of Service Tax under the category "Manpower Recruitment & Supply Agency Service", the learned counsel states that the employer-employee relationship exists between the Appellant and Seconded Personnel who have been sent on secondment to the Appellant; the Appellant has entered into separate employment contract with the Seconded Personnel. The seconded Personnel, during the period of secondment, work under the control and supervision of the Appellant; In terms of the employment contract, the appellant is under obligation to pay salary (including other entitlements) to the Seconded Personnel during the period of secondment in foreign exchange in his home country; for administrative convenience, the Appellant remits the salary payable to the Seconded Personnel in his home country in Foreign Exchange through the Seconder Company; the Seconded Personnel, as required under the Income-tax Act, 1961, files their respective returns under Section 139 of Income-tax Act, 1961 and shows the entire salary paid by the Appellant (including part of

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the salary paid in Foreign Exchange) as his/her income as salaries and pays the income tax thereon…..

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Pronounced in the open court on this 25th day of May, 2023.

Sd/- Sd/- ( MAHAVIR SINGH ) ( CHANDRA POOJARI ) VICE PRESIDENT ACCOUNTANT MEMBER

Bangalore, Dated, the 25th May, 2023.

/Desai S Murthy /

Copy to:

Assistant Registrar ITAT, Bangalore.