Flipkart Internet Private Limited Vs DCIT (Karnataka High Court)
TDS not deductible u/s 195 as the petitioner only seeks to make payment to ‘Walmart Inc.’ of its payment to the seconded employee which is stated to be by way of reimbursement
Facts-
In the course of its business, the petitioner is stated to have made payments in the nature of “pure reimbursements” to M/s.Walmart Inc. for AY 2020-2021 and in that regard had requested the Department for issuance of a ‘Certificate of No Deduction of Tax at Source’. The payment of salaries to the deputed expatriate employees were stated to have been made by ‘Walmart Inc.’ for administrative convenience and the petitioner had made reimbursements to ‘Walmart Inc.’ With respect to such payments, the petitioner had sought for granting of Certificate under Section 195 of the I.T. Act.
It is also submitted that ‘Indo-US Double Taxation Avoidance Agreement (‘DTAA’ for brevity) would be of relevance, as double taxation at source where a non-resident earns income in India and is liable for being taxed for such income in the Country of residence, is to be avoided.
However, the said application came to be rejected while directing the petitioner to deduct tax at source as applicable.
Conclusion-
‘FIS’ in terms of the ‘DTAA’ would not include any payment towards provision of mere rendering of service and there must be a sine qua non of ‘make available.’
The mere payment by ‘Walmart Inc.’ to the seconded employees would not alter the relationship between the petitioner and the seconded employees, as the petitioner only seeks to make payment to ‘Walmart Inc.’ of its payment to the seconded employee which is stated to be by way of reimbursement.
Accordingly, the findings in the impugned order and the conclusion regarding the employer-employee relationship is based on a wrong premise and is liable to be set aside. As observed by this Court in Director of Income Tax (International Taxation) v. Abbey Business Services India (P.) Ltd., “it is also pertinent to note that the Secondment Agreement constitutes an independent contract of services in respect of employment with assessee .” Hence, the DCIT in the impugned order has missed this aspect of the matter and has proceeded to consider the aspect of rendering of service as to whether it was ‘FIS’.
FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT
