Ernst and Young U.S. LLP Vs ACIT (ITAT Delhi)
ITAT Delhi held that cost to cost reimbursement on account of secondment of employees cannot be treated as Fees for Technical Services (FTS) as defined under Article 12 of India USA-DTAA. Thus, appeal of the assessee allowed.
Facts- Ernst and Young U.S. LLP is a limited liability partnership. Further, the assessee is tax resident of United States of America (USA). The assessee is in the business of providing professional services in the field of assurance, tax, transaction and business advisory services etc. to its clients across the globe including India. The assessee received an amount of Rs.18,28,95,723/- on account of reimbursement of costs with respect to employees seconded to Indian Member firm and an amount of Rs.65,20,12,778/- on account of receipts from Indian based clients for services performed in and from USA for such clients.
Conclusion- Co-ordinate bench in assessee’s own case has held that cost to cost reimbursement on account of secondment of employees cannot be treated as FTS as defined under Article 12 of India USA-DTAA and seconded personnel are employees of EY India firms whose income has been taxed as salary in their respective hands. Therefore, the very same amount could not, in law, be subjected twice – firstly in the hands of the seconded employees working in India and secondly again the hands of the assessee. The Assessing Officer is accordingly, directed to delete the impugned addition.
