In DIT (International Taxation) v. M/s Marks and Spencer Reliance India Pvt Ltd, the division bench of the Bombay High Court held that TDS cannot be charged on payment of salary under a secondment agreement.
Assessing Officer, in the instant case, found the respondent-assessee had paid Rs.4.83 crore to Marks & Spencer’s PLC London, which, according to him, constitutes fee for technical services as per the provisions of the Double Taxation Avoidance Agreement (DTAA).
The first appellate authority found that the assessee cannot be treated as assessee-in-default since the payment was towards salary expenditure of four employees deputed to the assessee for providing assistance in the area of management, to setting up of business, property selection and retail operations etc. On appeal, the Tribunal confirmed the view taken by the first appellate authority. The Tribunal also noted fact that there is no rendering of service within the meaning of the double tax avoidance treaty.
The Revenue took the matter on appeal before the High Court. The bench noted that there was a service agreement drawn up and for providing such assistance between these two companies, which was essentially a joint venture.
Dismissing the departmental appeal, Justices S.C Dharmadhikari and Prakash Naik noted that “this was a clear case of deputing the officials / employees for the promotion of the business of the assessee which is Indian arm of M/s. Marks & Spencer PLC, UK. Since the said payment to the employees is already subjected to tax in India, therefore there is no question of treating the assessee in default for non deduction of tax at source.”
Read the full text of the Judgment below.
