Tax ability of payments made to overseas group companies under secondment arrangement – AAR
It was held that personnel seconded to the Taxpayer, a group company in India, did not become its employees in the absence of an obligation undertaken by the Taxpayer to pay employment costs of such personnel. This was held despite the fact that the Taxpayer exercised control and supervision and was also responsible for the work of the personnel.
As employees continue to be the employees of the overseas entities and their employer continues to be the overseas entity concerned and employees are rendering services for their employer in India by working for a specified period for a subsidiary or associate enterprise of their employer which give rise to a service PE within the meaning of Art.5 of the India-UK Treaty, falling under Article 5.2(k) thereof. In the light of the discussion as above, our ruling on question No.1 is that the payment by the applicant under the agreement would be income accruing to overseas entities in view of the existence of a service PE in India and on question No.2 is that tax is liable to be deducted at source under section 195 of the Indian Income-tax Act.
AUTHORITY FOR ADVANCE RULINGS
(INCOME TAX)
14th Day of March, 2012
A.A.R. No. 856 of 2010
