The New Delhi Bench of the Income Tax Appellate Tribunal ( ITAT ), ruled that reimbursement of Social Security, Insurance, Relocation Expenses for Employees and is not Fees for Technical Services (FTS).
The assessee in the present appeal is Michlin Global Mobility SA C/o SRBC & Associates.
The Grievances of the Revenue is that the CIT(A) has erred in not appreciating the facts the reimbursement made by the Indian Company Michelin Switzerlandrelated to social security/insurance/relocation commitments for employees who now become the sole employees of Indian companies having no lien marked with the employment of parent company, is in the nature of Fee for Technical Services.
The Revenue also questioned s to whether the CIT(A) has erred in holding that the reimbursement cost paid by the Indian company to overseas entity is not taxable as FTS under the Michelin Global Mobility (Parent Employer) for insurance social security benefit in the home country of the personnel employed in India.
The assessee explained with respect to the activities in India the assessee made available expatriates to Miscelin Group Entities in India i.e. AIMPL and MITC. This group entities in India required experienced employees familiar with the Michelin Group methodology and processes to be employed on their local payrolls in India.
Since, the expatriates were employed by the Indian entities their remuneration cost was fully borne by the respective Indian entities and applicable taxes thereon has been withheld as per the provisions of the Act.
It was explained by the assessee that cost to cost reimbursements from Indian entities towards social security, contributors, relocation expenses etc with respect to the expatriate personnel who are the employees of such Indian entities is not in the nature of income of the assessee.
The Bench comprising NK Billaiya, Accountant Member and Kul Bharat, Judicial Member relied on the ruling of the Authority for Advance Ruling wherein it was observed that “The social security, insurance, relocation expenses which are in the nature of committed and obligated payments are in the nature of reimbursements and not fee for technical services.”
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