The AO treated it as FTS per the provision of India-UK DTAA and held that the company was liable for non-deduction of TDS.
Bombay High Court has on 3rd May 2017 upheld the order of ITAT that the reimbursement of salary for seconded employees was not FTS under India-UK DTAA and Section 195 for deducting tax at source not applicable.
The Tribunal had noted that the service agreement drawn up for providing this service between the companies was essentially a joint venture and that there was no rendering of service within the meaning of the DTAA.
The officials / employees had been deputed for the promotion of the business of the assessee which is Indian arm of overseas AE. Since the said payment to the employees was already subjected to tax in India, there was no non-compliance as regards TDS.