Faurecia Automotive Holding Vs DCIT (ITAT Pune)
ITAT Pune Rules in Favor of Faurecia Automotive Holding on Taxability of Reimbursements and Support Services
The Income Tax Appellate Tribunal (ITAT), Pune Bench, has delivered a significant judgment in the case of Faurecia Automotive Holding, a tax resident of France, against the Deputy Commissioner of Income Tax (DCIT) for the assessment year 2011-12. The Tribunal overturned parts of the Assessing Officer’s (AO) final assessment order, specifically concerning the taxation of a seconded employee’s salary reimbursement and fees for global support services.
Issue I: Reimbursement of Expatriate Salary – Whether Taxable as Fees for Technical Services (FTS)?
The primary dispute centered on a sum of Rs. 47,30,250 received by Faurecia Automotive Holding (hereafter, “the assessee”) from its Indian subsidiary, Faurecia Technology Center India Limited (hereafter, “Faurecia India”). The assessee had not offered this amount for taxation, claiming it was a pure reimbursement of salary costs for an expatriate, Mr. Franck Euvrard, seconded to Faurecia India, with no mark-up.
The AO, however, deemed this amount as “Fees for Technical Services” (FTS) under Section 9(1)(vii) of the Income-tax Act, 1961 (the Act), arguing that the assessee provided technical services through its staff. The Dispute Resolution Panel (DRP) concurred, stating that Mr. Euvrard “made available” his technical knowledge, making it FTS under the Act and potentially Royalty under Article 13 of the India-France Double Taxation Avoidance Agreement (DTAA).
