Reimbursement of salary for seconded employee cannot be taxed as FTS

Juniper Networks Inc Vs ITO (ITAT Bangalore)

ITAT Bangalore held that reimbursement of salary for seconded employee cannot be regarded as ‘Fee for technical services’ (FTS) under India-US Tax Treaty (DTAA).

Facts- The assessee, Juniper Networks Inc. is a company headquartered in the United States. The assessee had entered into an agreement for secondment of its personnel with the Indian entity Juniper Networks India Pvt. Ltd. (henceforth Juniper India). During the year under appeal, two of the assessee’s employees were seconded to Juniper India. as Engineering Services Managers. The salary of the seconded employees was paid by the assessee and reimbursed to it by Juniper India.

CIT(A) sustained the addition stating that the payment received by the assessee was for the rendering of services in the nature of FTS and as the income arose in India, where the services were rendered, such payment was to have been included in the assessee’s income for the year under appeal.

Conclusion- In the case of Goldman Sachs Services Pvt. Ltd. it was held that the reimbursement made by the assessee in India to overseas entity, towards the seconded employees cannot be regarded as “Fee For technical Services”.

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