Centrica India Offshore Pvt. Ltd. Vs CIT (Supreme Court of India)
Summary: The Supreme Court dismissed the special leave petition. Its supplied order contains only the sentence “The special leave petition is dismissed,” without independent reasons. The detailed discussion supplied thereafter is the Delhi High Court judgment, not Supreme Court reasoning. The Delhi High Court dismissed Centrica India Offshore Pvt. Ltd.’s writ petition against the Authority for Advance Rulings’ order dated 14 March 2012.
CIOP, an Indian subsidiary of Centrica Plc., coordinated outsourced back-office services for UK and Canadian group entities. It received costs plus a 15% markup. Overseas group entities seconded personnel during CIOP’s initial operations to supervise vendors and impart expertise. Salaries and benefits continued to be paid by the overseas entities, with CIOP reimbursing costs. CIOP asserted that it was the economic employer because it controlled work and bore operating risks, that reimbursement was not taxable income, and that tax under Section 192 had been withheld on salary. The Revenue argued that the foreign entities remained the employers and provided services through the secondees, attracting a service permanent establishment and Section 195 withholding.
The AAR held that the payments accrued as income to overseas entities through a service PE and attracted Section 195 withholding, although it did not treat the payments as fees for technical services under the specified treaty articles. The Delhi High Court examined the employment contracts, retained overseas payroll and benefits, the limited power to end secondment rather than foreign employment, and the purpose of transferring technical capabilities. It held that the foreign entities continued as real employers and supplied services through their employees. It considered the India–UK and India–Canada treaty provisions separately, including the latter’s make-available requirement, which it found satisfied by imparting skills enabling CIOP’s staff to manage vendor quality independently.
The High Court rejected the argument that cost-only reimbursement excluded taxability, as well as diversion of income by overriding title, because the foreign entities’ salary obligations were independent of CIOP’s payments for services. It distinguished substantive vendor-management work from mere stewardship, upheld the AAR and dismissed the writ petition without costs. The Supreme Court’s subsequent SLP dismissal must not be presented as a separately reasoned decision on those questions.
Related Delhi High Court Judgment: For the detailed judicial reasoning on overseas employee secondment, service permanent establishment, salary reimbursements and withholding tax under Section 195 of the Income-tax Act, 1961, read: Secondment Payments to Overseas Entities Taxable; Section 195 TDS Applicable: Delhi HC.
Cases Discussed
- Morgan Stanley and Co., In Re, 2006 (284) ITR 260 (SC) — Service PE and deputation of employees.
- CIT v. Eli Lilly and Co. India Private Limited, (2009) 312 ITR 225 (SC) — Tax treatment of expatriate remuneration.
- DIT v. E-Funds IT Solution, ITA 735/2011 (Delhi High Court) — Stewardship and deputation activities.
- CIT v. Bharti Cellular Ltd., 319 ITR 139 (Delhi High Court) — Interpretation of technical and managerial services.
- AT&S India (P) Ltd., 287 ITR 421 (AAR) — Reimbursement of seconded personnel costs.
- Intertek Testing Services India Pvt. Ltd. v. CIT, (2008) 220 CTR (AAR) 540 — Scope of technical services.
- Continental Construction Ltd. v. CIT, 195 ITR 117 (Supreme Court) — Interpretation of technical services.
- Version Data Services India Private Limited, AAR No. 865 of 2010 — Discussed in AAR extracts, with later remand noted.
FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER
The special leave petition is dismissed.
